Tesla Stock Plummet On China's Production Cut

Tesla ( TSLA ) has reduced production at its Shanghai factory amid slowing EV demand in the world's largest auto market. The move to cut production in China also comes as the global EV giant is heading towards a likely first-quarter delivery miss and has announced vehicle prices will begin to increase.

Tesla ( TSLA ) is reducing production at the China plant to five days a week. The output cuts started earlier in March and could continue through April, Bloomberg reported Friday.

The action comes amid slowing EV growth in China and with Tesla's Shanghai facility already not producing at full capacity. Tesla ( TSLA ) observers have repeatedly said in recent weeks that global inventory appears high.

This week, local media reported Tesla ( TSLA ) will slightly raise China list prices on Model Y vehicles starting on April 1, following similar plans in the U.S. and Europe. Tesla ( TSLA ) is also offering discounts between $1,000-$1,500 in China on inventory Model Y vehicles. Inventory discounts are more significant in the U.S. and Europe.

First-Quarter Deliveries Below Expectations
The global EV company ended 2023 on a high in China. However, the EV dynamic in China has changed early in 2024. Tesla Chief Executive Elon Musk has also said China's EV companies are Tesla's main competition — with BYD (BYDDF), Nio (NIO), Li Auto (LI) and others all making inroads in the EV market.

Tesla China delivered 60,365 in February, down around 19% compared to last year, according to the China Passenger Car Association (CPCA). Chinese New Year ran for two weeks in February, from Feb. 10-Feb. 24. Tesla deliveries of China-made vehicles in January and February totaled 131,812, down 6% compared to 2023.

Cutting Shanghai production would be further confirmation of weakening demand not only in China, but in Europe and other key markets. Shanghai exports to Europe have waned over the past several months, while the Tesla Berlin factory is running well below capacity.

Meanwhile, with the first quarter ending soon, Tesla ( TSLA ) appears to be heading for a delivery miss. Wall Street consensus currently still has Q1 deliveries of 481,000 units, according to FactSet, but many analysts have cut predictions in recent days. Tesla is expected to report Q1 deliveries in early April.

Tesla Stock Performance
TSLA shares fell 3.3% to 167.14 during market action Friday. Tesla ( TSLA ) shares has a weak Relative Strength Index (RSI) of 38.26 indicating selling pressure.

Last week, Tesla ( TSLA ) stock dropped 6.7% to 163.57, hitting new 2024 lows and levels not seen since May 2023. TSLA is down more than 14% in March and the biggest loser on the S&P 500 index so far in 2024.

UBS last week cut its Tesla stock price target to 165, from 225, and maintained a neutral rating on the shares. UBS lowered its Q1 delivery forecast to 432,000 units, from its previous 466,000 view. The firm also cut full-year deliveries to 1.96 million units, from 2.02 million previously.

With 2023 in retrospect, analyst consensus now has 2024 Tesla earnings below 2023's level. That signals another year of earnings declines for this growth stock. Wall Street expects Tesla earnings per share of just $2.96 a share in 2024, according to FactSet. That would be around a 5% decline vs. last year's $3.12.