For the second day in a row, electric car giant Tesla (TSLA 0.52%) saw its stock tumble, as it continued to be rocked by investor worries over a renewed risk of conflict between Russia and Ukraine, rising interest rates in the U.S., the expansion of a recent Model 3 and Model Y recall into China, and of course -- Hitlergate.
Tesla stock is down 3.6% as of 12:55 p.m. ET today. Any or all of the above factors may have contributed to today's decline, at least in part. And now investors have a new worry to consider, too:
In a lengthy piece out this morning, iconic business news publication Barron's explains how yesterday's steep sell-off of Albemarle (ALB 3.25%) stock (Albemarle is a producer of lithium, used to manufacture the electric car batteries that power Tesla's vehicles) could foreshadow an era of declining profitability at the carmaker.
Albemarle reported fourth-quarter sales and earnings yesterday that mostly matched Wall Street's forecasts for the company. Problem was, Albemarle's profit margins -- and its profits, period -- took a huge hit as it spent heavily to build out its production capacity to satisfy the tremendous global demand for lithium.
This effect of up-front capital investment weighing on profit margins is what investors call "low fixed-cost absorption," and in today's article, Barron's warns that a similar fate could await Tesla as it spends heavily to set up two new car production plants in Germany and Texas.
On the plus side, these two new factories should quickly enable Tesla to ramp up its annual car production by as much as 100,000 cars -- and eventually, by 1 million cars total. On the minus side, though, "it will take a while to get production ramped up," warns Barron's, and while production gets up to speed, Tesla's profit margins could take a hit.
Barron's notes that Tesla CFO Zachary Kirkhorn has been trying to prepare investors for this bad news, warning of "higher fixed and semi-variable costs in the near term," as well as "the usual inefficiencies as we ramp a new factory" in the company's Q4 conference call.
Investors may not have been paying close attention when he said that last month -- but they sure seem to be paying attention now that Barron's has repeated the warning today.