What happened
Investors may have thought Tesla (TSLA +3.01%) shares had bottomed after a drop of 65% in 2022. But the stock is plunging again today to start the new year. Shares have sunk 9.2% as of 10:11 a.m. ET.
NASDAQ: TSLA
Key Data Points
So what
Today's decline follows yesterday's update for fourth-quarter vehicle production and deliveries. After expecting 50% growth at the start of 2022, Tesla told investors it delivered a total of 1.31 million electric cars for the full year, representing an increase of just 40% over 2021. Production, however, grew 47% year over year. That gap is what is scaring investors today.
Now what
The fear is that the combination of growing competition and slowing global economies has derailed Tesla's growth plans. If the company is producing vehicles that are simply becoming unsold inventory, it could be time to rethink Tesla's future growth path. But the company had an explanation that suggests things aren't as bad as investors seem to think.
Image source: Tesla.
The company said in a statement, "We continued to transition toward a more even regional mix of vehicle builds which again led to a further increase in cars in transit at the end of the quarter." That implies that vehicles continue to be built for existing customers and that the shortfall in deliveries is mostly due to logistics and transit. That shouldn't come as too much of a surprise, as two of Tesla's four production facilities are still ramping up.
There's no doubt that competition is quickly entering the global market. And there's likely also some slowdown in demand due to economic conditions and EV adoption headwinds. But the stock has already come down to what looks to be a reasonable valuation, with growth still strong by conventional standards. The stock may continue to drop, and there will be more information coming from Tesla when it provides its full quarterly report on Jan. 25. But averaging into the stock now seems like a reasonable approach.
