Price Drop and Factory Closure Cause Tesla’s Stock to Plunge

Tesla has once again cut its prices in China and is experiencing disruptions in its European operations due to attacks in the Red Sea.

In a highly competitive environment with local giants BYD and Geely, Tesla has reduced the starting prices of its Model 3 in China by 5.9% to 245,900 yuan ($31,570) and the Model Y by 2.8% to 258,900 yuan ($33,240). In both cases, these are of course their lowest prices ever.

A few hours earlier, Tesla announced it would suspend most of the production at its Berlin Gigafactory. An inevitable decision due to a shortage of parts while its main suppliers are adjusting their shipping routes to protect against attacks on ships in the Red Sea.

Tesla’s stock fell as much as 3.4% before regular trading began on Friday, putting the stock on track for an 11th decline in 12 sessions. The day offered no respite for the American automaker as, at closing, the decline reached 4%.

Tesla sold 1.81 million vehicles worldwide in 2023, more than half of which were shipped from its Shanghai factory, which produces a new car every 40 seconds. While Elon Musk’s company reached its annual delivery target, BYD became the world’s leading seller of battery-powered electric cars in the fourth quarter.

Tesla revamped the six-year-old Model 3 in September and is preparing a refreshed Model Y that could hit the market as early as mid-2024. Meanwhile, Chinese automakers have been much more active in deploying new models. Tesla claims it can reverse this trend thanks to its European production. Opened in March 2022, Tesla’s German factory has a capacity to produce 375,000 vehicles per year. The halt in production naturally threatens these goals.