Editor's note: The Reuters article reporting that two people in the know had claimed that Tesla would likely cut production of its Model Y mass-market SUV by more than 20% in December has been updated to note that in response to Reuters' request for comment a "Tesla representative replied 'false news,' without elaborating."
Wall Street prepared for a slightly lower open on Monday morning, as investors seemed ready to take a pause after a solid performance last week. Stock market futures were down about half a percent, falling back from gains that had taken the S&P 500 to its best levels since the summer.
Stocks of electric vehicle (EV) manufacturers came into the spotlight in premarket trading, following some key news that came out over the weekend. In particular, the latest happenings in China's EV market had implications for both U.S. industry pioneer Tesla (TSLA -0.26%) and Chinese manufacturers like XPeng (XPEV -2.23%), and those companies' stocks saw sizable moves as a result.
Tesla sets a record in China
Shares of Tesla dropped 4% in premarket trading Monday morning. Shareholders reacted negatively to reports that the automaker might reduce production of one of its mass-market electric vehicles, even after Tesla made a record number of EVs in China.
November was a strong month for Tesla's Shanghai Gigafactory facility, as the company delivered more than 100,000 EVs. That was the highest output since the opening of the factory two years ago, and it represents a 90% rise year over year, although it still trails leading EV seller BYD by a margin of more than 2 to 1.
However, reports based on those in the know about Tesla's production strategy claimed that Tesla would likely cut production of its Model Y mass-market SUV by more than 20% in December. Investors are speculating that if the reduction happens, it would be in response to falling demand in the Chinese EV market. Already, Tesla has resorted to price cuts and added incentives to boost its sales.
The big question in China remains when the government will loosen its zero-COVID restrictions, which have recently led to protests and pushback from its citizens. A sooner-than-expected end to lockdowns and other measures could breathe new life into the Chinese EV market and help Tesla.
XPeng keeps rising despite mixed financial results
Meanwhile, shares of XPeng were sharply higher again, rising 13% in premarket trading after adding 15% in Friday's regular trading session. Shareholders in the Chinese EV manufacturer stayed optimistic following last week's report of third-quarter financials.
It's important to put the stock's response into the proper context. Coming into the report, XPeng's stock had already fallen from above $50 per share back in January to just $7 per share. Expectations were extremely low for the Chinese EV manufacturer, particularly in light of all the stresses on demand that the electric vehicle market faced there.
Indeed, XPeng's financial results reflected these challenges significantly. Revenue was down sequentially from where it had been three months ago, and XPeng continued to lose more money. Vehicle deliveries were up from year-ago levels but posted a sequential decline for the third consecutive quarter. Yet investors focused instead on XPeng's plans to try to recover, including boosts of production capacity and efforts to increase average sales prices.
Shareholders seem convinced that XPeng will be able to bounce back from its woes in 2022 and get back on track in 2023 and beyond. How realistic those expectations are remains to be seen, but those watching XPeng stock shouldn't confuse the recent rebound from the stock's 85% decline with longer-term assurances that the Chinese EV company will play an ever more important role within the broader industry in the world's most populous nation.
