Tesla should reconsider its production plans

Tesla, the world’s biggest manufacturer of electric vehicles, revealed a quarterly deliveries decline for the first time in two years on Tuesday, prompting Wall Street analysts to predict that Tesla would need to reconsider its production plans to safeguard its profitability.

Elon Musk, the head of the firm and the wealthiest man in the world, said on Saturday that 254,695 cars were delivered in the second quarter, nearly 18% from the first quarter. In April and June, Tesla manufactured 258,580 automobiles.

Beijing’s zero-COVID policy impacted production at Tesla‘s main facility in Shanghai. This contributed to a bleak quarter, along with supply chain snarls at its more recent operations in Texas and Germany, a rise in the price of battery metals, and other factors.

JP Morgan analysts reduced their price objective on the stock of the business by $10 (almost Rs. 800) to $385, saying that “expansion into bigger volume areas with lower price points looks laden with increased risk related to demand, execution, and competition” (nearly Rs. 30,500).

Refinitiv statistics show that the stock’s median price target is $950 (about Rs. 75,200), down from $1,088.50 (roughly Rs. 86,100) in April.

Before Tuesday’s bell, shares of Tesla decreased by 1.6 per cent to $671 (just about Rs. 75,200).

According to JP Morgan analysts, there may be cause to suspect that company-specific execution challenges at the company’s new plants in Austin and Berlin also influence production and financial outcomes.

Both facilities, according to Musk, are “gigantic money furnaces” that are losing billions of dollars each year.

However, other experts predict that production and delivery quantities will increase at the end of the year.

Garrett Nelson, senior equities analyst at CFRA Research, said: “We warn that the Austin and Berlin factories are likely to be a drag on bottom line results until they acquire greater utilization rates, although we expect overall volumes recovering substantially in the second half of the year.”