U.S.-China trade wars strike at the heart of Tesla’s growth plans
Monday’s market jitters brought Tesla Inc. shares to their lowest since January 2017, with trade-war fears striking at the heart of the auto maker’s China expansion plans.
Tesla TSLA, +0.79% stock lost 5.2% to close at its lowest close since Jan. 5, 2017. The shares extended their losing streak to a fifth straight session, down 11% in the period and more than 30% so far this year.
The broader market was rattled by U.S.-China entrenched in trade-war talk.
“Fundamentally, there are heightened concerns surrounding China and that a prolonged trade dispute could have a significant negative impact on Tesla’s auto sales and margins after their request for a tariff exemption was recently denied,” said Garrett Nelson, an analyst with CFRA.
Nelson also cited a Monday analysis in The Wall Street Journal that argued Tesla was about to run out of cash even after recently tapping the markets. That “really spooked investors,” he said.
Auto sales data in China, a key market and growth driver for Tesla, furthered such concerns.
Analysts at Evercore ISI called the sales trend in China “horrific.”
Paired with “steady negative” growth in Europe and lower U.S. sales, “global production is tracking significantly weaker than many realize,” they said in a note Monday. Expectations of a recovery later in the year are “baseless,” the analysts said, calling for a “volatile summer trading” for auto, auto parts and related stocks.
Tesla last month reported a wider-than-expected first-quarter adjusted loss and a revenue miss. In addition, it pushed back promises of a return to profitability to the third quarter, citing recent price tweaks that put pressure on margins.
Tesla shares have lost 25% in the past 12 months, versus gains around 3% for the S&P 500 index SPX, -2.41%