Tesla analysts cut EV delivery forecast after turbulent Chinese quarter

Tesla started the second quarter with a tear after starting 2022 with its biggest profit and highest vehicle deliveries in company history, fueled by booming business in China. But a severe Covid-related lockdown there that continued until this month, along with start-up difficulties at the electric carmaker’s new factories, caused analysts to cut their forecast for the numbers. worldwide delivery he should report in the next few days.

The Austin-based company, which typically releases delivery and production numbers a day or two after the end of the quarter, can say it delivered about 258,000 electric vehicles to customers around the world, the average of analysts polled by Forbes. While that would be up 28% year-over-year, it’s down 17% sequentially from a record 310,048 first-quarter shipments, despite adding new factories in Germany and Texas. It is also 18% below a consensus estimate of 315,000 deliveries at the start of the quarter.

“Covid is impacting its Shanghai plant and the fact that its new Austin and Berlin plants are still operating at fairly low capacity utilization rates,” says Nelson Garrett, equity analyst for CFRA “So the key question is the extent of the decline and whether the Fremont plant was able to help sustain volumes.

The slowdown in China, Tesla’s most profitable market, comes after a period of relative stability in profit and production growth at Elon Musk’s powerhouse. Along with a slower pace of deliveries, the quarter also brought Tesla’s first large-scale job cuts which Musk, who expects the US economy to fall into recession, will affect about 3.5 % of employees worldwide. This week, those layoffs included the elimination of about 200 jobs for people working with Tesla’s Autopilot team in San Mateo, Calif., including the media. Musk also recently complained about harsh start-up conditions at new Gigafactories in Berlin and Austin that are costing the company “billions”.

“The factories in Berlin and Austin are gigantic furnaces of money right now,” Musk said in a May 31 interview with Tesla Owners Silicon Valley fans. “Berlin and Austin are losing billions of dollars right now because there’s a ton of expenses and hardly any production.”

Musk was much more bullish on the company’s first-quarter earnings call, initially anticipating that the current three-month period could see shipments remain just as robust.

“Notwithstanding the new issues that arise, I believe we will see record weekly production from Giga Shanghai this quarter, even if we are a few weeks short,” the billionaire entrepreneur told analysts and investors on April 20. will be similar to Q1, maybe slightly lower. But it is also possible that we pull a rabbit out of the hat and are slightly higher.

Neither he nor Tesla has provided an updated guidance for the quarter since then.

Current delivery forecasts vary between relatively bearish expectations of 232,000 vehicles from Mizuho Securities analyst Vijay Rakesh and 245,000 from Deutsche Bank’s Emmanuel Rosner. More optimistic quarterly forecasts include 277,000 deliveries from Dan Ives of Wedbush Securities and 270,000 from Adam Jonas of Morgan Stanley and Nelson of CRFA.

The extent to which the slowdown in production and sales in China, which saw demand for electric vehicles plummet in April and May, will be a key factor to watch when Tesla reports results next month. This is due to the higher margins enjoyed by the company in this market due to lower production costs.

“Second-quarter production and margins set to disappoint as Shanghai hampers production,” Barclays analyst Brian Johnson said in a research note this month. He now expects Tesla to report delivering 251,000 vehicles for the quarter.

The Shanghai plant is also expected to be briefly inactive in July to accommodate changes to the assembly line that will allow it to ramp up production later this year beyond its current capacity. Likewise, as operations stabilize in Texas and Germany, the company should see production gains as 2022 progresses.

“The good news is that Tesla’s operational challenges appear to be well understood by investors and volumes should rebound strongly in the second half,” Nelson said.

Tesla shares fell 3% to $677.37 during Nasdaq trading on Wednesday afternoon. The stock has fallen about 38% this quarter.

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