While Elon Musk is busy overhauling his newly acquired Twitter company, Tesla Inc. is facing increasingly pressing problems and testing the confidence of some of its chief executive’s loyal fans.
Weak demand in China has forced the electric car maker to slow production and delay hiring at its Shanghai plant. Its top executives in that market have been called in to help its newest plant in Texas, which is not expanding capacity as planned. And Tesla shares, which have lost more than $500 billion in market value this year, are under renewed pressure as advisers to Musk weigh using the billionaire’s stock as collateral for new loans to replace Twitter’s debt.
The disclosures over the past few days have raised concerns among shareholders, already concerned about Musk’s priorities, since Musk took the helm of another company.
“Lack of action by Tesla’s board,” Leo KoGuan, one of Tesla’s largest individual shareholders, tweeted on Wednesday, recommending a share buyback. He and another outspoken Tesla investor, Ross Gerber, called on the board to add a director who would represent retail shareholders.
Musk himself has said he has “too much work” on his plate and sometimes sleeps in the office to deal with it. In the past he’s slept in Tesla’s facility, and more recently he’s hibernating at Twitter’s San Francisco headquarters.
“I continue to oversee Tesla and SpaceX, but the teams there are so good that I’m usually not needed,” Musk tweeted Thursday. “The Tesla team has done an incredible job despite going through extremely difficult times,” he said earlier in the day, pointing to Europe’s energy crisis, a downturn in China’s property market and U.S. interest rates as macroeconomic challenges .
The recent turmoil has muddied Tesla’s hopes to end the year with record sales and retain its crown as the world’s largest electric carmaker. However, it has not been immune to a slowdown in China’s auto market and a recession in Europe. In October, Chief Financial Officer Zachary Kirkhorn said the company expected growth in vehicle deliveries to be slightly lower than the 50% growth the company has repeatedly said it expects to be within a few years.
The expansion of Tesla’s Austin, Texas, factory has been slower than expected, and new lithium-ion batteries are not yet ready for mass production. Against that backdrop, the company hired Tom Zhu, a key China executive who oversaw construction of the Shanghai plant, to oversee operations in Austin, Bloomberg reported Wednesday.
In Shanghai, Tesla is cutting production shifts and delaying entry dates for some new hires, Bloomberg reported on Thursday, the latest sign that demand for Tesla’s electric vehicles in China has fallen short of expectations. This follows a Bloomberg report earlier this week that Tesla plans to cut production at its Model Y and Model 3 production lines in Shanghai by about 20%.
Tesla has a lot going for it in 2023. The company recently started deliveries of its long-awaited Semi truck and plans to eventually start production of its first pickup, the Cybertruck.
Buybacks, which some investors have been demanding, could also become a reality. Musk said in the company’s last earnings call that the board generally believes that buybacks make sense, and that buybacks of around $5 billion to $10 billion are possible. Last month, he tweeted that the decision would be made by Tesla directors.
Musk and Tesla did not respond to requests for comment on Thursday. A company representative earlier said Bloomberg’s report on Shanghai’s production cut plans was “untrue,” without elaborating.
Shares of Tesla fell less than 1% at the close in New York, marking a fourth straight day of losses. The stock has plunged 51% this year.
First published date: December 9, 2022 at 07:35 AM CST