Tesla stock down on Red Sea delays, price cuts

shares Tesla The stock fell 3% on Friday morning as the Red Sea crisis caused supply chain delays and further price cuts in China. In the U.S., rising labor costs and car rental company Hertz’s decision to sell off much of its electric vehicle fleet also added to Tesla’s woes.

Shares recovered somewhat by 10 a.m. ET, when they were down about 1.5%.

Reuters reported late Thursday that Tesla plans to suspend most production at its Grunheide, Germany, factory outside Berlin from around January 29 to February 11 as the Red Sea conflict disrupts global trade.

The Iran-backed Houthi militia has been attacking cargo and commercial ships in the Red Sea in response to the ongoing war in Gaza. The attacks drew condemnation from global leaders.

“Shipping times have been significantly extended, causing gaps in the supply chain,” Tesla said. told Reuters in a statement.

Baird analysts estimate Tesla is producing 5,000 to 7,000 vehicles per week at its German auto assembly plants, which would mean first-quarter deliveries would be “10,000 to 14,000 units lower,” according to a report on Thursday.

Baird analysts wrote that they remain “alert” to further impacts on Tesla’s supply chain and are “closely monitoring” any impact on the company’s routes from China. “No delays were mentioned, but we speculate that disruptions in the Red Sea may result in longer wait times as supply chains change,” they wrote.

Analysts are also concerned about Tesla’s continued price cuts, including new discounts in China. In a report on Friday, Morgan Stanley analysts noted that Model 3 and Model Y vehicles have just been discounted, but the price reductions are “more modest than the market expected.”

Price cuts over the past year have impacted Tesla’s ability to continue selling large volumes of all-electric vehicles to rental companies like Sixt hertz.

Hertz CEO Stephen Scherr said Thursday on CNBC’s Squawk on the Street that the company will eliminate 20,000 electric vehicles from its fleet, which is mostly composed of Tesla vehicles.

Schell said Hertz is trying to “align supply with demand” and “address the cost issues associated with EVs in the context of damage and damage costs” and depreciation in EV values.

Meanwhile, Tesla’s business and reputation in Europe remain under pressure due to ongoing strikes in Sweden and across Scandinavia.

The electric car maker will start raising wages for workers at its U.S. factories this month, a move seen as a ploy to thwart workers’ desire to unionize. The wage hike follows a historic victory for the United Auto Workers over Tesla rivals in Detroit in 2023 and an announcement by the UAW that its goals is an organization that transcends the Big Three, including Tesla, Toyota and others.