Tesla (TSLA) shares slumped to the lowest levels in more than two years Tuesday, extending declines in its worst annual performance on record, following weekend reports that the carmaker had halted production at its key Shanghai plant amid weakening demand in the world's biggest car market.
Reuters reported the shutdown, first mooted in November, that will halt production over the final week of the year for its Model Y sedan and ultimately reduce output of the sedan by around 30% from November levels.
The move would mark the first time Tesla has voluntarily lowered output levels since the factory was opened in 2018, although Covid restrictions and scheduled maintenance clipped production earlier this year.
China's recent loosening of Covid restrictions is expected to boost growth in 2023, but the damage from its draconian policies has left a lasting scar on the world's second-largest economy, with EV rival Nio (NIO) slashing the higher-end of its fourth quarter delivery target by around 18%, to 39,500 units, amid what it called delivery, production and supply chain constraints.
"With China the core linchpin to the Tesla bull thesis, worries are growing around what the softening demand picture looks like for 2023 given the dark macro clouds and increasing domestic EV competition," said Wedbush analyst Dan Ives, who trimmed his fourth quarter delivery targets for Tesla to around 410,000 units from a prior target of around 450,000.
"At the same time that Tesla is cutting prices and inventory is starting to build globally in face of a likely global recession, (CEO Elon) Musk is viewed as 'asleep at the wheel' from a leadership perspective for Tesla at the time investors need a CEO to navigate this Category 5 storm," he added.
Tesla shares were marked 11.05% lower in late Tuesday trading to change hands at $109.53 each, the lowest since early August 2020 and a move that extends the stock's 2022 decline to around 72.6%.
Short interest in Tesla shares remains elevated, as well, with bets around the group pegged at around $12.4 billion, according to recent data from S3 Partners, a figure that represents around 2.72% of the group's outstanding shares.
The bulk of Tesla's 2022 decline, however, has come since early April, when Musk first made his intention to buy Twitter public. The deal, which was contested by Musk but ultimately forced through just days prior to a hearing in the Delaware Chancery, priced the social media group at $44 billion.
Musk borrowed around $13 billion from the banking group that included a $3 billion chunk of unsecured debt that carries and annual interest rate of 11.75%, Bloomberg reported earlier this year. The rest of the debt package is comprised of $6.5 billion in term loans and $3 billion in secured bonds.
Once the world's richest man, Musk has also been forced to sell large chunks of his Tesla shares over the past year to satisfy both U.S. tax liabilities and, ostensibly, his own commitment to the overall purchase of Twitter.
Musk has sold around $40 billion of Tesla shares so far this year, including 22 million over the second week of December, paring his stake in the group to around 13.4%, or $46.9 billion.
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