Tesla sales in China falter
During the last few months, Tesla's stock has offered the volatility that traders crave. At the turn of the year, the share price was around $100, but doubled its price in three months. In the summer, the share price was almost 300 dollars, but has since fallen to around 240 dollars but not before touching 200 dollars in October.
Rare earth metals in electric motors soon history?
In mid-September at its investor day Tesla announced its intentions, which sent shock waves through the entire electric car industry; the company plans to stop using rare earth metals in its electric motors.
The ground-breaking news arouses emotions in both directions, and skeptics refuse to believe in Elon Musk's big plans until they see with their own eyes Musk taking his plans to the finish line.
The change would be significant for the entire electric vehicle market, as rare earth metals are very expensive raw materials due to their scarcity.
Common raw materials in electric motors are neodymium, dysprosium and terbium. It is unlikely many remember the names for chemistry classes, but thanks to electric motors, they are hot names at the moment.
If Tesla succeeds in completely stopping the use of rare earth metals, it would drive production costs down significantly.
Problems in China
During the summer, Tesla sold around 13,000 electric cars in China every week, but in September sales have fallen 9,000 per car per week.
Tesla's problems in China are not only caused by sales, but China also controls a large part of Tesla's production chain. China is responsible for about ⅔ of the mining of rare earth metals and about 85 percent of their processing, which makes the prices of raw materials difficult to predict.
Sales problems in China make it difficult for Tesla to meet Wall Street consensus forecasts. Analysts tracked by Factset predict Tesla will sell about 463,000 in the third quarter of the year. Just a few weeks earlier, the forecast was 10,000 more cars.
Tesla's share price previously rose rapidly from $220 to $280, but has fallen below $250 this week due to demand issues.
Tesla cut for the beginning of September the prices of Model S and X by almost 20 percent. The price reduction was the second of the year. The news has been received with enthusiasm in the market, but many have already forgotten that in the aftermath of the pandemic, Tesla had raised prices on many occasions.
The analysis that Marketwatch is following give Tesla stock an average target price of $258.60 and an average recommendation of “Hold”.
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