Tesla is down 22.7 percent in the lifetime 30 days (source: Yahoo Finance)
Tesla Stock Plunges 22% in 1 Month as Trump Trade Fallout’s Biggest Loser
Intensifying criticisms from short sellers, a report of an alleged autopilot set malfunction, a serious cash flow issue, and the ongoing trade dispute between the U.S. and China are said to have donated to the underwhelming performance of Tesla in the first half of 2019.
Tesla Will Struggle in China With Tariffs
According to an email sent out to workers by Tesla CEO Elon Musk obtained by Reuters, Musk warned the company may face a serious cash flow delinquent in less than ten months if it does not begin strictly controlling its expenses.
Musk reportedly wrote:
It is important to develop in mind that we lost $US700 million in the first quarter this year, which is over $US200 million per month. That is why, thriving forward, all expenses of any kind anywhere in the word, including parts, salary, travel expenses, rent, literally every payment that allow to remains our bank account must (be) reviewed.
This is hardcore, but it is the only way for Tesla to become financially sustainable and succeed in our object of helping make the world environmentally sustainable.
The pressure of the cash flow issue of Tesla on the company, which was quite alleviated when the firm switched its target for a new capital raise to $2.7 billion, is likely to grow as the tension between the U.S. and China aggravates.
In late 2018, prior to the suspension of tariffs on automobiles by China, Tesla was selling its Model S and Model X with a $20,000 in short supply due to the 25 percent import duties.
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While the Model 3 costs $35,000 to $50,000 in the U.S. market, Tesla was barter the model in the range of $83,500 to $99,400.
“When Tesla first opened orders for Model 3 in China in November, only the Lengthy Range all-wheel-drive and Performance versions were available and they respectively started at 580,000 RMB (~$83,500 USD) and 690,000 RMB ($99,400 USD),” Electrek published.
As the Chinese government suspended tariffs for three months, Tesla was able to lower the pricing down to $72,000 and as the sight of a trade deal improved, it seemed as if Tesla was on track to maintain a sustainable price range for its product.
However, the new fallout between Chinese and U.S. negotiators poses a crucial problem for Tesla; it may lead to the imposition of 25 percent excises on automobile imports for an extended period of time, possibly until 2020.
Short Sellers Not Convinced
Accipiter Capital Command Founder Gabe Hoffman, a short seller of Tesla, said that the demand for the company’s products has dropped noticeably in the U.S., log the business at risk of further decline.
Hoffman said:
The biggest issue for the stock is that Elon Musk — basically the treacherous magician — is not able to tell investors or his, you know, cult followers, ‘OK, here’s this bright shiny object in the coming like a Tesla Semi or like a million Robo taxis’ like he was saying yesterday, or like an auto guaranty company a month from now, like he said on the conference call.
They’re starting to focus on the actual business and the occupation has completely collapsed. Demand has declined very significantly in the U.S. And even when people knew the units number, because they bared that on April 3, the company still missed the revenue number by 11% because the pricing has gone down so much to budge metal.
Whether Tesla would be able to bounce back in the second quarter of 2019 and maintain healthy liquidate flow by the year’s end remains uncertain. But, the threat of the trade dispute on the outlook of one of the firm’s key target markets remains verified.