Why Tesla shares are falling after the latest production report

Tesla faces a range of hurdles from production issues to rising inflation that could hurt profits, Wall Street analysts said on Tuesday, as the electric car maker reported lower deliveries for the first time in two years.

Stung by COVID-19 lockdowns in China and soaring costs, Tesla said Saturday it delivered 254,695 vehicles in the second quarter, down about 18% from the first quarter.

Supply chain issues at the company’s new facilities in Texas and Germany have also hurt production, with analysts warning the issues could weigh on Tesla’s earnings.

Shares of the world’s largest electric car maker fell 3.4% to $658.50 by midday Tuesday.

« Tesla’s sheen has dimmed further with this latest drop in deliveries below expectations, » said Hargreaves Lansdown analyst Susannah Streeter, adding that it was a setback for the automaker’s ambitions to stay in business. leading the pack in electric vehicles.

« Tesla is faced with a molestation scenario, the faster one problem is solved, the more another appears. »

JP Morgan analysts, who cut their PT on the company’s shares by $10 to $385, said Tesla’s production and financial results could be hurt by company-specific execution issues in the the automaker’s new plants in Texas and Berlin.

Tesla CEO Elon Musk recently described the two factories as « gigantic money furnaces » that are losing billions of dollars.

Streeter warned that squeezing the cost of living around the world due to runaway inflation could have a knock-on effect on demand down the line.

However, some analysts expect a recovery towards the end of the year.

The Austin and Berlin plants are expected to remain a drag on results until they achieve higher utilization rates, but expect volumes to rebound strongly in the second half, Garrett Nelson said, senior analyst at CFRA Research.