From Barron's, January 12:
Tesla Halts Production at German Factory. Red Sea Disruptions Begin to Bite.
Tesla is planning to halt production at its German factory for two weeks as attacks on Red Sea shipping lengthen transport times from Asia to Europe.
It’s an example of how the disruption is hitting global supply chains and threatening to derail the fight against inflation.
Tesla said Friday it would stop nearly all production at its factory near Berlin from Jan. 29 and resume production on Feb. 12 as longer shipping times caused a lack of needed components, The Wall Street Journal reported, citing a company statement.
Tesla shares were down 1.6% in early trading Friday at $223.56 apiece, while the S&P 500 and Nasdaq Composite were both up about 0.5%.
The delay, however, isn’t the most likely reason for the drop. Instead, Tesla cut prices on its electric vehicles in China by roughly 3% to 6%. More price cuts will spur additional concerns about competition and pressures on profit margins. Tesla reported operating profit margins of almost 17% in 2022. Profit margins in 2023 should come in at about 10%. Wall Street expects profit margins to improve in 2024, but lower prices will make that hard.
”The [Berlin plant] shutdown is temporary and any volume shortfall can be made up late this quarter, so [it] shouldn’t impact valuation,” says Future Fund Active ETF co-founder Gary Black. He isn’t too worried about the price cuts in China, and doesn’t think they will be followed by significant cuts around the globe. The cuts will, however, create more worry about the direction of profit margins, he adds....
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