Tesla shares drop 5% on Panasonic battery warning

Electric car maker stocks Tesla It fell as much as 5% on Monday afternoon message Panasonic, a long-time partner and supplier to the electric car maker, has reduced battery production in Japan in the period to September 2023.

The updates raised investor concerns about weak demand for electric vehicles, particularly for higher-priced vehicles that may not qualify for tax breaks or other incentives from government programs in the U.S. and abroad. Panasonic batteries are already used in Tesla’s older and more expensive Model X SUV and Model S sedan.

During Tesla’s third-quarter earnings call on October 18, Chief Executive Elon Musk warned shareholders that interest rates were putting pressure on the company to drive down electric vehicle prices and could discourage future purchases by consumers. Or the ability to rent an electric vehicle.

Musk also said many times during that call that Tesla faces serious challenges when it starts production of the long-awaited Cybertruck. Tesla’s CEO lamented, “We dug our own grave with the Cybertruck.” He also said on the third-quarter conference call, “I just want to lower my expectations for the Cybertruck. This is a great vehicle. Great product, but from a financial perspective it will take a year to 18 months to become a significant positive cash flow contributor.”

The company’s stock has fallen about 18% since its earnings call on Oct. 18. Tesla short sellers had made $3 billion in profits from that day to Friday’s close, according to Ortex, a London-based financial information services company. According to Ortex data, as of October 27, the dollar value of Tesla’s short interest was approximately $18.08 billion, accounting for 3.21% of the free float.

Bernstein’s Toni Sacconaghi wrote in a note released on Monday that his firm expects Tesla to experience “lower margins and disappointing sales” in fiscal 2024. Bernstein currently has a price target of $150 on Tesla stock.

Although the market expects Tesla to deliver 2.3 million vehicles next year, an annual increase of about 500,000 vehicles, Sacconaghi wrote: “To promote growth of 500,000 vehicles this year, Tesla will have to lower prices. About 16%, which puts pressure overall.” “Operating margins fell 750 basis points. It’s unclear whether Tesla can cut prices further to drive sufficient demand elasticity while avoiding negative free cash flow. We believe Tesla will likely have to deliver below consensus next year and face lower margins.”

Bernstein is pessimistic about Tesla, predicting that Tesla will deliver 2.15 million vehicles next year and earn $2.59 per share, while the market consensus is that it will deliver 2.3 million vehicles and earn $3.30 per share.

Bearish sentiment is spreading across various parts of the EV market: ON SemiconductorShares of the company that supplies chips for electric vehicles fell 20% on Monday after the company issued disappointing fourth-quarter guidance.