Tesla shares fell 12% on Tuesday after the electric car maker reported shipments fell short of analyst expectations, and Apple returned in the December quarter as concerns about demand for its flagship iPhone returned. , fell more than 3%.
Challenges in China are partly responsible for the price decline. China, the world’s second-largest economy, accounts for about 17% of Apple’s sales and 23% of Tesla’s sales, making it an important market for both companies.
“China is the heart of supply and demand for Apple and Tesla. The biggest concern for Straits is that the Chinese economy and consumers will curtail spending, which bodes ill for Apple and Tesla, says Daniel Ives, senior equity analyst at Wedbush Securities. told CNBC.
“While 2022 was about supply chain issues and not Covid-related issues, 2023 was about demand concerns. There was a large overhang on the Apple iPhone demand concerns
At Apple, investors are watching the company’s first-quarter financial results. It will be announced later this month and will cover the important holiday season in December.
But in October, the world’s largest iPhone factory in Zhengzhou, China, was hit by an outbreak of the new coronavirus. Taiwanese company Foxconn The operator of the facility imposed restrictions. In November, the factory was rocked by worker protests over wage disputes, with many workers leaving. Foxconn is trying to bring back its employees with bonuses. Reuters reported on Tuesday that Foxconn’s Zhengzhou plant has returned to near full production.
The episode highlighted Apple’s reliance on China for the production of its iPhones. In early November, after Foxconn imposed Covid restrictions on its factories, Apple said its facilities were operating at “significantly reduced capacity.”
Analysts at Evercore ISI estimate that Apple’s revenue loss for the December quarter will be between $5 billion and $8 billion. According to Refinitiv’s consensus estimates, Apple could report a 1% annualized sales decline in the December quarter. This has worried investors who were hoping for a strong performance from the company’s latest smartphone, the iPhone 14 series.
But it’s not just supply chain problems that Apple faces now. China has changed course on its zero Covid policy to reopen its economy. Beijing’s policies include strict lockdowns and mass testing to control the virus. Many countries are currently experiencing Covid-19 outbreaks, which could impact demand for iPhones.
“We expect the biggest challenge will be on the demand side, especially as resilient high-end consumers may begin to shift their spending towards travel, while some consumers will focus on medical supplies. Spending shifts will be a key challenge in the near term,” said Will Wong, research manager at IDC.
Tesla delivery failure Tesla’s plunge on Tuesday was due to a slump in vehicle deliveries, the closest to sales announced by Elon Musk’s electric car maker. His 405,278 cars delivered in the fourth quarter of 2022 fell short of expectations of 427,000 deliveries.
Again, the focus is on China’s demand history as well as the supply chain.
Throughout 2022, Tesla faced disruptions from his Covid at the Gigafactory in Shanghai. But analysts also said there were concerns about consumer demand in China. “Tesla will point to supply disruptions and lockdowns as its main concerns in China in 2022. These are real headwinds, but demand has slowed for a variety of reasons, and the order backlog has been pushed to the Shanghai lockdown. We can’t hide the fact that we’re down 70% from before,” said Bill Russo, CEO of Shanghai-based Automobility. CNBC.
Shanghai’s lockdown began in late March 2022 as the megacity’s government attempted to control the Covid outbreak.
Investors are also concerned that Tesla will have to cut prices to attract buyers, which could squeeze profits. In China, Tesla cut prices on its Model 3 and Model Y vehicles in October, undoing some of the prices increases it made earlier in the year. But another big headwind for Tesla in China is increased competition from domestic rivals like Nio.
and li car As well as cheaper competitors who launch new models in 2023.
“Tesla models have been around for a while and are not as fresh to Chinese consumers as other options. What we are learning is that EV products have a short life cycle because EVs “Buying an old EV is like buying a smartphone from last year,” Russo said.
“They need new or updated models to revitalize the market. Only low prices can hurt your brand in the long run. ”