You can blame China for that. Image source: Getty Images.
So what
Tesla’s problems in China began about a month ago, when a re-igniting coronavirus forced the local government to quarantine Shanghai, where Tesla’s Chinese factory is located. In cooperation with the quarantine, Tesla stopped production at its plant in Shanghai, then reopened and then closed again at the end of the month. This second closure has now continued for more than two consecutive weeks, as confirmed today by Reuters. As a result of the shutdown, Tesla ended up with basically stable production numbers between February and March, and the March report of 55,462 electric cars assembled fell 18.5% from 68,117 in January.
And now what
That’s why this is important to Tesla investors – and why it can provide a glimpse of what might happen next. According to Reuters, “Chinese buyers rushed to place orders, worrying that Tesla may raise prices further after announcing price increases in November and March due to higher raw material costs.” So if and when the Shanghai plant reopens, you can expect delays to be met quickly, sparking an explosion in Tesla production and deliveries – perhaps later this month. However, if buyers buy heavily to cope with the expected price increases, then these orders, this production and these deliveries will most likely boost sales of electric cars that would otherwise have happened in May or later. Result: You can expect to see Tesla’s Chinese numbers improve as soon as the lockdowns in Shanghai are gone – but they will probably drop again later. This will make it difficult for long-term investors to discern any particular trend in Tesla sales in China. As always, investor warning. This article represents the opinion of the author, who may disagree with the “official” position of setting up a Premium Motley Fool consulting service. We are motley! Challenging an investment dissertation – even our own – helps us all think critically about investing and make decisions that help us become smarter, happier and richer.
