Tesla (TSLA) shares slipped for a second straight day as the automaker announced price cuts in China and is also idling production at Giga Berlin due to Red Sea-related supplier disruption.
On its China website, Tesla revealed new pricing for its Model 3 sedan and Model Y SUV, with the Model 3 seeing a 5.9% cut to 245,900 yuan ($34,600), and Model Y getting a 2.8% price cut to 258,900 yuan ($36,400). Bloomberg News was the first to report these price changes.
Tesla’s price cuts in the region began in late 2022 and early last year, roiling the industry and leading to China’s other automakers cutting prices in order to compete.
Tesla’s new price cuts come as competition continues to heat up on the mainland, with rivals like NIO and BYD announcing new models, with BYD even going more upmarket into segments Tesla has operated in and found success. Sliding margins due to price cuts around the globe have dimmed investor sentiment on the stock, with the stock down 12% in the past month.
Though BYD sells more vehicles than Tesla in China, Tesla did have a strong December, with sales jumping nearly 69% in December to 94,139 units sold, according to the China Passenger Car Association. BYD, which sells hybrids and pure EVs, sold 341,043 in China in December, up 45% from a year ago.
Giga Berlin idled due to Red Sea attacks
As first reported by Reuters, Tesla announced it will suspend most production at its Giga Berlin plant in Germany due to a lack of components and parts coming from suppliers using the Red Sea transport routes.
“The attacks by Iranian-backed Houthi militants, in solidarity with Palestinian Islamist group Hamas in its fight against Israel in Gaza, have disrupted one of the world’s most important shipping routes but US electric vehicle maker Tesla is the first company to disclose a resulting interruption to output,” Reuters reported on Thursday. The US and its allies struck back at the Houthis early Friday morning with missile strikes on Houthi targets inside Yemen, for retaliation on Houthi attacks on commercial tanker ships.
Tesla’s Giga Berlin exclusively builds the Model Y SUV for European and other select markets. In a statement to Reuters, Tesla said supplier components coming from Asia will have to shift routes from the Red Sea and Suez Canal to around the Cape of Good Hope in South Africa, leading to longer lead times and “gaps in supply chains.”
Swedish automaker Volvo also said on Friday it would be halting some production at a plant in Belgium due to delays in getting gearboxes from suppliers having to use longer shipping routes.
Though Tesla’s Giga Berlin isn’t as productive as its plants in Shanghai and Fremont, Calif., it did reach 5,000 Model Ys produced in a week in May of last year, meaning around 10,000 vehicles or so could be affected. According to Tesla, Giga Berlin has an installed annual capacity of 375,000 vehicles, whereas Giga Shanghai sits at over 950,000 units.
With that said, the next big test for Tesla and its shareholders will be coming in less than two weeks, when the automaker reports fourth-quarter earnings results after the bell on Wednesday, January 24th.
Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.
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