Tesla extends Shanghai production pause due to COVID-19 outbreak
Yahoo Finance’s Pras Subramanian joins the Live show to discuss the decline in stock for Tesla following the suspension of vehicle production in Shanghai as COVID cases rise.
Video Transcript
JARED BLIKRE: Welcome back and still some time before the opening bell, so let's get a dive into some of the hot tickers that are trending this morning. We're going to start with Tesla. The stock is down about 5%, as you can see there. That's after the EV maker announced they have suspended production at its Shanghai plant due to a wave of COVID-19 cases among its workers. And Yahoo Finance's Pras Subramanian is here tracking the story. He joins us live now on set. Pras, what are the details here? Because these are-- we had the zero-COVID reaction from the government, and now we have the opposite of it.
PRAS SUBRAMANIAN: Yeah, you know, so they were going to shut down for Christmas break anyway for a few days, and they extended the shutdown by a day. And apparently, Reuters and the Journal reporting that's because they had a wave of COVID infections at their factory, but also their suppliers. So they extended that break for a day.
Traditionally, they don't actually take off probably that much time during the holidays, but now they are because of, hey, demand slowing down in China. They actually have increased production at the plant so they're actually more productive there, so they don't need to be on a lot of those days. I know it's going to come up with NIO, but I think that's-- NIO is a big reason why a lot of the shares of these EV makers are down today.
JULIE HYMAN: Well, and just quickly, I want to say it also feels like that people are, at this point, looking for excuses to sell Tesla maybe into the end of the-- I mean, the stock has just had such a terrible 2022.
PRAS SUBRAMANIAN: Yeah, and you have tax loss, selling season, and all that stuff happening right now. I mean, look, it's down 5% today. You know, people are talking about $100 is support. I mean, this is-- it's wild how deep the selloff has been this month in Tesla, in particular. So for sure, this is a stock trending in the wrong direction, for sure.
JULIE HYMAN: Yeah, and you mentioned NIO. NIO also coming out this morning and explicitly cutting its production forecast or delivery forecast, I should say. And now it says it expects to deliver up to 39,500 vehicles in this current quarter. Before this, the lower end was 43,000.
PRAS SUBRAMANIAN: 43.
JULIE HYMAN: So this is quite a cut for NIO also.
PRAS SUBRAMANIAN: Yeah, a statement today, facing challenges in deliveries and productions, supply chain constraints caused by the outbreak of the coronavirus, like you mentioned, Jared, that is really hampering their ability right now. But I think a lot of it is still having to do with the fact that sales were only up 4 and 1/2% in December in China. So you're seeing that market slowdown to begin with. And then adding on top of that the reopening and the COVID infection rate kind of rising, I think that's sort of creating this perfect storm right now for them as we enter the end of the year.
JARED BLIKRE: Well, let me go back to Tesla here for a second and just getting to the Chinese New Year, which we have coming up at the end of the month, from January 20 to January 31, so that's 11 days right there. It looks like the EV maker is going to be stopping output, is, how does this compare to how they've dealt with the situation in years past? Does this speak as to the demand situation there?
PRAS SUBRAMANIAN: So Reuters saying that they're going to shut down for Lunar New Year. Typically, a lot of other automakers will do that, but Tesla hasn't done that typically. So this year, they're going to have the extended shutdown in January, saying they're going to do some maintenance in the factory there. But I think it's something like almost 10 days, they'll be shut down in January for the holiday.
So it's a lot for them. They're going to maintain their-- they call them the plug wiring harness. They're going to-- making those different, like EV parts, but not actually assembling vehicles at that time. So it's hard to say if this is actually a thing that they want to do going forward. And that's matching what the industry is doing. But it hasn't been what they've been doing in the past in terms of shutting down production in Shanghai.
JULIE HYMAN: Very interesting. Pras, thank you so much. Appreciate it.
