European regulators have been looking at subsidies flowing to Chinese auto makers that might be hurting Europe’s domestic players. Now
Tesla
is part of the probe. Investors don’t seem all that worried.
Tuesday, Bloomberg reported that Tesla (ticker: TSLA) cars coming from China to Europe were part of an investigation being conducted by EU regulators. Tesla’s most productive plant is in Shanghai, and it serves mainly the Chinese and European markets.
Investors already knew about the investigation. The European Commission said it was launching a probe earlier this month.
“Global markets are now flooded with cheaper Chinese electric cars. And their price is kept artificially low by huge state subsidies,” said European Commission President Ursula von der Leyen in a speech on Sept. 13. “This is distorting our market. And as we do not accept this from the inside, we do not accept this from the outside.”
The outcome of an investigation could include import taxes designed to offset subsidies. That, in theory, raises the price of imports making them less competitive with locally produced models.
Tesla stock is down 1.3% in premarket trading Tuesday, while
S&P 500
and
Nasdaq Composite
futures are both off about 0.5%. The stock is down, but the EU probe probably isn’t the biggest reason.
Telsa exports a lot of cars to Europe from China, but the number has been dwindling as the company ramps up production at its German factory. Tesla exported about 106,000 vehicles to Europe from China in the fourth quarter of 2022, about 92,000 in the first quarter of 2023, and about 88,000 in the second quarter of 2023. Third-quarter exports are trending lower than the second quarter number.
The bigger factor moving the stock down is falling delivery estimates. Wall Street expects Tesla will deliver about 462,000 units in the third quarter, down from estimates of about 473,000 units a few weeks ago, according to FactSet. What’s more, the difference between the top and bottom estimates is some 70,000 units for the third quarter, roughly double the range for the second quarter, according to FactSet.
The delivery-estimate range is as wide as
Future Fund Active
exchange-traded fund (FFND) co-founder Gary Black can remember. It’s “definitely torturing the stock,” he says. Tesla stock is down about 11% over the past few days. Lower deliveries are “supply-driven,” adds Black pointing out that the updated version of the Model 3 isn’t shipping significant volume yet in China and Europe. “Q4 will be 500,000-plus units.”
Black might be right. The consensus call for the fourth quarter is about 490,000 units, according to FactSet. That number, however, will be reported in the first few days of 2024. Until then, investors will have to navigate a lot of noise related to Tesla stock. That, however, is always the case with Tesla stock.
Write to Al Root at [email protected]
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