Why Tesla Stock Will Crash

Tesla hosted the Cyber Rodeo event at the grand opening of the Austin Gigafactory on 7 April 2022 with a series of updates on Tesla’s product roadmap in the years ahead. This includes the announcement of a dedicated Robotaxi, and the first version of Optimus, the humanoid robot, that could come as early as next year, alongside the production of Cybertruck, Roadster, Semi, and many more deliveries as Tesla ramps up production. Elon Musk said that Tesla’s future will bring “An Age of Abundance”.

These updates will get long-term Tesla supporters (like myself) feeling very excited about the company’s future prospects. However, before we get carried away, it is helpful to understand the other side of the argument, the bearish sentiments, to give us a more balanced view of how the future will likely pan out for the company.

In this video, Sasha (Financial YouTuber) raised a few concerns about why he is not as optimistic as the Tesla bulls and listed some considerations that might crash Tesla’s stock in the upcoming quarters.

Concern 1: Job Positions Yet To Be Filled

Sasha mentioned that Tesla’s website indicated there are currently 572 different job roles available on their jobs website in Austin. He was guessing that many of these roles, e.g. Production Associate, require more than one person, Therefore, Tesla has thousands of people that they have yet to hire into the Austin factory. Even after they do all that hiring which is going to take a while, these new employees will need to go through training and build up some experience before they can run production.

Concern 2: Efficiency Of Battery Cell Production Line

While Elon Musk had said that over time, Giga Texas will become the biggest battery cell factory in the world, little has been said about the volume or the ramp of production of the battery cells in the factory currently. Thus, it is difficult to gauge how effective the production line is right now or will be in the next few months, bearing in mind that the global supply chain crisis is still here and the war in Ukraine continues to affect raw material and energy prices.

Concern 3: Factory Shutdown In Giga Shanghai Will Affect Production Numbers

Giga Shanghai has been closed since the 28th of March because of a complete lockdown in Shanghai and unconfirmed reports say it will stay closed until at least the 18th of April. This is very significant because the 22 days of delay is about 24 percent of the quarterly volume coming out of Giga Shanghai, which is about 40,000 to 45,000 cars down for Q2 deliveries.

Compared to their previous run rate and given that tesla made 310,000 cars globally in Q1 2022 in total, the 40,000 to 45,000 drop in car production is going to be very noticeable when the numbers are published. It will even worse because in the first two months of the quarter, April and May, Giga Shanghai predominantly makes cars for export. Thus, the hit on production numbers at the beginning of the quarter means that those cars are not going to be reaching their European/ Australian buyers in Q2.

Shanghai’s lockdown seems to only be getting worse as the zero covid policy in China means that the immunity levels are low and the number of cases is still spiraling. There is every chance that the Shanghai factory will be closed beyond the 18th of April deadline. Giga Berlin has started production a few days ago but only has a reported run rate of about 500 cars a week at the moment.

The extension to the Shanghai factory that was due to be completed at the end of April is now put on hold and will probably now be pushed out to June or July. The Shanghai factory has to shut down again for another reported three weeks to move from using 2170 battery cells to 4680 battery cells. Giga Berlin is going to have to do the same thing because they have the same problem as they started manufacturing with the old 2170 cell battery packs as well..

Concern 4: Media Going To Make Big Deal Over Drop In Production Numbers

The media is going to make a big deal out of the issues with production numbers and an impact on the commercials is definitely going to come as well when we will see the drop in production being reflected in the quarterly results.

Concern 5: Phase 2 Plan Uncleared

It is unclear when phase 2 development might start in Berlin or Austin because the phase 2 development is necessary for the production of Semis and Cyber Trucks. When it starts, it will take at least 18 months to 24 months, based on previous experiences, with the three factories they have built for those to complete. Tesla’s stock is likely to get hit relatively hard as projections suffer big time on the back of all of this happening.

Conclusion

Sasha ended off by saying that the good news is that this is a short to a medium-term issue that does not have long-term implications. Investors who believe in the long-term potential of Tesla may get a decent stretch of time to load up on Tesla shares that will be priced lower as a result of the potential issues with production and delivery numbers.

***
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