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Tesla plays 'whack-a-mole' with snags as deliveries fall for first time in two years

Stock Markets Jul 05, 2022 04:33PM ET
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© Reuters. FILE PHOTO: Model Y cars are pictured during the opening ceremony of the new Tesla Gigafactory for electric cars in Gruenheide, Germany, March 22, 2022. Patrick Pleul/Pool via REUTERS

By Eva Mathews

(Reuters) - Tesla (NASDAQ:TSLA) Inc faces a series of hurdles ranging from production snags to rising inflation that may hit profits, Wall Street analysts said on Tuesday, as the electric-car maker reported a fall in deliveries for the first time in two years.

Stung by China's COVID-19 lockdowns and soaring costs, Tesla said on Saturday it delivered 254,695 vehicles in the second quarter, down about 18% from the first quarter.

(Graphic: Tesla's production and delivery numbers since 2020: https://graphics.reuters.com/TESLA-DELIVERIES/akpezlkedvr/chart.png)

Supply chain snarls at the company's newer facilities in Texas and Germany also hurt production, with analysts warning that these issues may crimp Tesla's profits.

The world's largest electric-car maker's shares fell more than 3% but reversed course to close up 2.6%, benefiting from a rally in growth stocks.

So far this year, the stock has lost about a third of its value.

(Graphic: How markets reacted to Tesla's delivery numbers: https://graphics.reuters.com/TESLA-DELIVERIES/xmvjowmjjpr/chart.png)

"Tesla's luster has dimmed yet again with this latest drop in deliveries coming in lower than expectations," Hargreaves Lansdown (LON:HRGV) analyst Susannah Streeter said, adding that this was a setback to the carmaker's ambitions to stay at the front of the EV pack.

"Tesla is faced with a whack-a-mole scenario, the faster one problem is fixed, another pops up."

J.P Morgan analysts, who cut their PT on the company's shares by $10 to $385, said Tesla's production and financial results could be hurt by company-specific execution issues at the carmaker's new factories in Texas and Berlin.

Tesla CEO Elon Musk recently described both factories as "gigantic money furnaces" that are losing billions of dollars.

Streeter cautioned that the cost-of-living squeeze around the world due to red-hot inflation could have a knock-on effect on demand down the line.

Some analysts, however, expect a recovery toward the end of the year.

The Austin and Berlin plants are likely to remain a drag on results until they attain higher utilization rates, but expect volumes to rebound strongly in the second half of the year, Garrett Nelson, senior equity analyst at CFRA Research, said.

Tesla plays 'whack-a-mole' with snags as deliveries fall for first time in two years
 

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Comments (3)
John Berry
John Berry Jul 05, 2022 4:49PM ET
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Still up 3%
Lilly snow
Lilly snow Jul 05, 2022 12:07PM ET
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jason xx
jason xx Jul 05, 2022 9:20AM ET
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dropped because of covid not demand
Lilly snow
Lilly snow Jul 05, 2022 9:20AM ET
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Hello
 
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