The Covid shutdowns in China led to a severe decline in Tesla’s output and sales in the second quarter.
The electric carmaker reported that finished sales fell nearly 18 percent to about 255,000 vehicles in the second quarter compared with the first three months of the year. Output fell 15% to 259,000.
Of the company Factory in Shanghai closed for a few weeks in April due to lock rule in the city to combat the surge in Covid cases. Problems with getting parts from Tesla suppliers have also limited Tesla’s production even after the factory reopened. According to Dan Ives, technology analyst at Wedbush Securities, the shutdown could lead Tesla to produce about 70,000 vehicles in the quarter.
The company statement said the problems Tesla faced in the first months of the current quarter were mainly due to it.
“Despite continued challenges in the supply chain and plant shutdowns beyond our control, June 2022 was the highest vehicle production month in Tesla’s history,” it said.
Tesla does not publish a geographic breakdown of sales in its monthly sales and production reports. According to company filings, only 45% of its revenue last year came from sales in the US. Industry-wide auto sales in most of China the ground stops for most of the quarter due to lockdown. The majority of Tesla’s revenue outside the US comes from vehicles made in Shanghai.
However, this is the first time since the beginning of 2020, the company has experienced a decrease in sales or output compared to the previous quarter. Sales decline also due to a lockdown related to the early global outbreak of Covid.
Such declines are rare in a fast-growing company. Even with the decline in production and sales compared to the first quarter in 2022, both measures are up from the previous year, when the company reported a 25% increase in production and a 27% increase in deliveries.
Analysts surveyed by Refinitiv had expected the company to grow 46% in revenue in the quarter from a year ago and adjusted earnings to grow 51%. A more modest year-over-year increase in sales could dampen those expectations and put more pressure on the company’s share price. Tesla shares are down 35% this year.
The company opened two new factories during the quarter, one in Germany and one in Texas. But the problems of ramping up production at those factories mean output at those factories is “tiny” In a recent interview, Tesla CEO Elon Musk said in the first two months of the quarter.