Tesla (NASDAQ:TSLA) witnessed a decline of approximately 2% on Wednesday following a revision in its price target by a prominent analyst at Morgan Stanley. The analyst highlighted weakening electric vehicle (EV) demand in crucial markets like China, despite significant price reductions.
Over the past year, EV demand has suffered due to rising interest rates prompting consumers to reconsider major purchases, including electric vehicles. These concerns are compounded by existing issues surrounding EV charging infrastructure and battery range.
Despite Tesla’s efforts to stimulate demand through price cuts initiated over a year ago, the company cautioned in January about a projected decline in delivery growth for the year. Adam Jonas, the Morgan Stanley analyst, noted concerns about Tesla’s aging product lineup compared to other major automakers, predicting sustained price cuts in China due to oversupply. Consequently, the price target for Tesla shares was revised down from $345 to $320.
Reflecting investor apprehensions, the stock dropped by as much as 3.8% during early trading, reaching nearly an 8-month low. Most of Tesla’s vehicle models were introduced before the pandemic, with only a minor refresh of the Model 3 compact sedan last year.
Furthermore, Tesla faces challenges in the first quarter, including supply chain disruptions attributed to the Red Sea attacks, suspected arson at its Berlin factory, and downtime at its California plant to accommodate production adjustments for the new Model 3.
Ben Kallo, an analyst at Baird Equity Research, pointed out that these one-time production disruptions are adding complexity to Tesla’s first-quarter outlook.
Since November 2021, Tesla shares have plummeted by over 56%, primarily due to heightened competition, particularly from Chinese automakers in key markets. Nevertheless, despite the decline, Tesla remains the world’s most valuable automaker, with a valuation of approximately $576 billion as of Tuesday’s closing.
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