Tesla's Stock Dips as Panasonic Reduces Battery Supply, Sparking Concerns Over EV Demand

Tesla Shares Dip Amid Panasonic's Production Cut

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On October 30th, Tesla (TSLA.O) experienced a modest decline of approximately 5%, following an announcement by key supplier Panasonic Holdings (6752.T) that it had reduced automotive battery production in the third quarter of the year. This news has sparked discussions about the state of the electric vehicle (EV) market on a global scale.

Panasonic cited a slowdown in the adoption of high-end EVs in North America as the primary reason for its production decrease, echoing sentiments expressed by Tesla CEO Elon Musk earlier this month, who had raised concerns about the impact of sustained higher borrowing costs on vehicle demand.

Edward Moya, a senior market analyst at Oanda, noted, "Panasonic's caution regarding soft demand for Tesla's Model S and Model X vehicles has raised concerns about the global economic outlook, possibly being less robust than previously assumed."

In a separate development on the same day, General Motors reached a tentative agreement with the United Auto Workers union, following similar agreements made by Ford Motor and Stellantis, potentially putting an end to disruptions that some analysts believed might have provided Tesla with a competitive advantage.

During the period of the UAW strike, Tesla shares did experience a decline of 34%, while Ford Motor and General Motors saw declines ranging from 30% to 33%. Conversely, Stellantis's shares witnessed a 33% increase.

Tesla investor Gary Black pointed to chipmaker Onsemi's (ON.O) pessimistic outlook as a contributing factor to the weakness in Tesla shares. He noted, "ON sells to automotive players with over 50% share of global EV sales, including 4 of the top 5 China EV makers."

Onsemi CEO Hassane El-Khoury expressed concerns about their top European clients clearing their inventory and emphasized the "increasing risk to automotive demand due to high interest rates."

The ongoing weak demand is adding pressure to Tesla's gross margin, which contracted from 25.1% to 17.9% between July and September, partly due to the company's aggressive price cuts that sparked a price competition in key markets such as China.

It's worth noting that Tesla's valuation, trading at approximately 56 times its 12-month forward earnings estimates, stands in stark contrast to Ford and General Motors, with LSEG data showing them at 5.6 times and 4.1 times, respectively.

While Tesla has shown impressive growth and innovation in the EV space, recent market dynamics have led to its shares underperforming compared to those of GM, Ford, and Stellantis.

Source: Reuters (Reporting by Chavi Mehta and Akash Sriram)