Tesla earnings may come under pressure from Shanghai factory halt

Tesla Shanghai shut down added an uncertainty to 2022 deliveries

Elon Musk stated in January that Tesla’s volume growth will grow by 50% more than last year. It would mean Tesla targets 1.4 million vehicle deliveries this year. Recently Tesla’s most crucial production in China, Giga Shanghai was shut down. This brings uncertainty to reaching its 2022 deliveries as planned.

Tesla earnings may come under pressure from Shanghai factory halt
Image credits- Times Live

Tesla reports quarterly results and analysts are also asking whether CEO Elon Musk will discuss his $43 billion proposal to buy Twitter. This brings the question, of whether he will use some of his Tesla shares to help fund the deal. The COVID-19-related suspension of Tesla’s Shanghai factory, the costs of ramping up new factories in Berlin and Texas, and rising supply chain costs are likely to have weighed on its first-quarter earnings, analysts said. Musk said in January that Tesla’s volume growth would comfortably exceed 50% from last year, meaning that Tesla expects to deliver more than 1.4 million vehicles this year.

Tesla navigated the global supply chain crisis better than other rivals, posting record deliveries and earnings for several quarters. But its factory in Shanghai was shut for more than three weeks after the city rolled out lockdown measures to combat a surge in COVID-19 cases. Tesla resumed production at its Shanghai plant on Tuesday, according to a news report, but a source said this may not mean a return to full production.

Uncertainty

“The Shanghai restart cadence (and) the Berlin/Austin ramp add an element of uncertainty to 2022 deliveries,” Credit Suisse analyst Dan Levy said in a client note, cutting its delivery estimates by 100,000 to 1.42 million this year. He forecast “a reversal from Tesla’s recent run of lofty margins, driven by cost inflation and production inefficiencies.” Tesla raised its prices in China and the United States and other countries after Musk said in March the U.S. electric carmaker was facing significant inflationary pressure in raw materials and logistics amid the Ukraine crisis.

The Austin, Texas-based company is expected to report $17.80 billion revenue for the January-to-March quarter, up over 70% from a year earlier, but largely unchanged from the previous quarter, according to Refinitiv data. Refinitiv’s mean analyst estimate for Tesla is for earnings of $2.26 per share. This is up from 93 cents per share a year earlier, but on a quarter-on-quarter basis, marks the first quarterly fall in two years. Musk delivered Tesla’s first Texas-made Model Y vehicles at a glitzy event earlier this month, but no Texas vehicles are listed on Tesla’s order website yet.

Credits- Reuters