Tesla shares fall sharply on demand concerns, logistical issues

Las Tesla stock they started 2023 with a drop of close to 10%, extending last year’s sharp decline, due to growing concerns about weak demand and logistical problems that have hampered deliveries.

Tuesday’s drop followed the announcement that the world’s most valuable automaker missed fourth-quarter delivery estimates, despite shipping a record number of vehicles.

At least four brokerages cut their price targets and earnings estimates, pointing to lower after the stock suffered its biggest annual loss since it went public in 2010.

The result “comes at the cost of higher incentives, which suggests lower prices and margins,” JP Morgan said in a note, lowering its $25 price target to $125.

Shares of the electric vehicle maker were trading at $111.82, after losing 65% of their market value last year. The firm had a peak market capitalization of more than $1 trillion and now has one of about $390 billion.

Tesla is still the world’s most valuable automaker, even though its production is a fraction of that of rivals like the Japanese Toyota Motor Corp.

“Demand in general is starting to crack a bit for Tesla and the company will need to adjust and lower prices especially in China, which remains the key to the growth story,” said Dan Ives, an analyst at Wedbush Securities.

In recent months, global automakers have struggled over a drop in demand in chinawhere the spread of Covid-19 has affected economic growth and pressured consumer spending.

Tesla has tried to weather the pressure by offering deep discounts in the country, as well as a subsidy for insurance costs.

The company also plans a reduced production schedule in January at its Shanghai plant, extending the cuts – which began in December – until 2023, Reuters reported.