Tesla Stock Forecast: TSLA shares gain despite setback on Model Y production in China


  • Tesla stock gains on Friday despite Model Y news.
  • Reuters reports that Model Y production is down 20% since March.
  • Elon Musk comes out in opposition to Biden administration's Chinese EV tariffs.
  • Recent news regarding Nio and XPeng have been positive for the Chinese EV industry.

 

Tesla (TSLA) has trimmed Model Y production at its Shanghai factory by 20%, according to a new report from Reuters. The news outfit says that anonymous insiders say the cuts have been gaining steam since March and will likely run through June.

This may be a setback for Tesla’s demand outlook, which already took a hit during the most recent earnings call. But the market is giving TSLA the benefit of the doubt on Friday as equities claw back some ground from the broad sell-off on Thursday.

Thursday’s poor outing, the Dow Jones’ worst performance in more than a year, followed hawkish FOMC Minutes and economic activity data showing the US economy is expanding at a steep pace that might prolong a high interest rate policy from the Federal Reserve (Fed). Goldman Sachs CEO David Solomon predicted this week that the central bank won’t make a single interest rate cut this year.

Tesla stock news

Data from the Chinese Association of Automobile Manufacturers shows that Tesla’s Model Y output dropped nearly 18% annually to  49,498 units in March and fell 33% YoY in April to 36,610 units.

However, this data needs to be read in conjunction with Model 3 output in China rising 10% from the prior year during the January through April period.

These production cuts come as XPeng (XPEV) reports a 20% increase in deliveries during the first quarter, and Nio (NIO) announces a new in-house brand called Onvo. Both EV makers are small but demonstrate the impressive competition available in the Chinese market.

Elsewhere, US President Joe Biden has bowed to internal pressure for automotive market protections and raised tariffs on Chinese-made EVs from 25% to 100%. The administration said the tariffs were necessary owing to “substantial risks of overcapacity”. The tariff on lithium-ion EV batteries will also rise from 7.5% to 25%.

For his part, Tesla CEO Elon Musk said he is against the tariffs, which could end up hurting Tesla if China decides to match US trade aggression. Just on Thursday, the energy storage segment of Tesla broke ground on a $200 million factory in Shanghai with the capacity to build 10,000 Megapacks per year. Each Megapack can store enough energy for grid operators or utilities to power 3,600 homes for one hour.

Demand growth for EVs may be waning as well in the US. The J.D. Power US Electric Vehicle Consideration Study last week showed that shoppers who were “very likely” to purchase an EV dropped from 26% in 2023 to 24% this year.

EV stocks FAQs

Electric vehicles or EVs are automobiles that use rechargable batteries and electric motors to accelerate rather than internal combustion engines (ICEs). They have been around for more that 100 years, but battery technology research & development was meager for much of the 20th century. Lithium-ion battery technology became advanced enough to produce EVs at scale in the late 1990s and 2000s, and sales have been steadily increasing since then Tesla’s Roadster was unveiled in 2008. EVs are viewed as a means of reducing carbon emissions since battery electric vehicles (BEVs) themselves produce zero emissions. Other vehicles called plug-in hybrid electric vehicles (PHEVs) utilize both battery electric power and ICEs as a backup.

EVs are growing from a small base, but they rose from 9% of global new auto sales in 2021 to 14% of the total in 2022. This was a 65% YoY growth rate, and the industry delivered 10.2 million EVs worldwide in 2022. Projections show this number climbing above 16 million in 2023. Across the world, market shares differ greatly among nations. Nearly 88% of Norwegian new car sales in 2022 were EVs. On the other hand, the United States, where much of the modern innovation in EVs was forged, had less than 8% of new vehicle sales go to EVs in 2022. The largest EV market in the world, China, saw 30% of the market go to EVs that year.

We know you’re thinking Elon Musk, but he’s probably more like the father of the mass-market, contemporary EV. All the way back in 1827, a Hungarian priest named Anyos Jedlik invented the electric motor and used it the following year to power a vehicle of sorts. French scientist Gaston Planté invented the lead-acid battery in 1859, and German engineer Andreas Flocken built the first true electric car for the public in 1888. EVs made up about 38% of all vehicles sold in the US around 1900. They began losing market share rapidly after 1910 when gasoline-powered vehicles grew much more affordable. They largely died off until new research programs in the 1990s led to gradual private sector investment in the 2000s.

China’s BYD is by far the largest manufacturer of EVs in the world. In 2022 it sold 1.8 million EVs and in the second half of the year made up 20% of the global market. The asterisk given to BYD is that the vast majority of these vehicles are hybrids. Tesla’s 12% market share is often treated as more significant than BYD, because it only sells BEVs and is the most famous EV brand in the world. Volkswagen, BMW and Wuling then round out the top five. As a new sector with heavy investment though, many startups have flooded the market. These include China’s Nio, Li Auto and Xpeng; a Swedish-Chinese manufacturer called Polestar; and Lucid and Rivian from the US.

Tesla stock forecast

Tesla stock is losing its grip after rallying hard in late April. TSLA stock is now trading beneath the 20-day Simple Moving Average (SMA) and might soon fall below the 50-day SMA as well. Support sits at $164 and $154.

Bulls need to push TSLA back above the $186.88 range high from May 21 to initiate a positive technical outlook on the stock.

TSLA daily stock chart

 

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