Tesla released its second-quarter delivery report last week. It produced 258,580 cars in the quarter and delivered 254,695 of these. The deliveries were lower than the first quarter and it is the first time in two years when the company’s production has fallen on a quarterly basis.

The decline in production was expected though as the COVID-19 lockdowns in China took a toll on not only Tesla but other EV (electric vehicle) makers in China. NIO’s production also fell in April and May due to the lockdowns. However, as the lockdowns were lifted, China’s manufacturing activity rebounded in June and the PMI (purchasing managers’ index) rose to a multi-month high.

While announcing the second-quarter deliveries, Tesla said that June was its best production month on record. NIO also delivered a record number of cars in the month. However, its deliveries have trailed that of Li Auto and Xpeng Motors for the last few months. Xpeng is now fast catching up with NIO on cumulative deliveries also.

Meanwhile, Tesla, which has held the crown of the world’s largest EV company, lost the title to Chinese company BYD Motors. The latter reported a four-fold rise in deliveries in the first half of 2022 and delivered 641,350 new energy vehicles which were far ahead of the 564,743 that Tesla delivered.

Berkshire Hathaway, which is led by the legendary Warren Buffett has invested in BYD. The stock is trading in the green this year even as other EV stocks are deep in the red. Buffett has mostly invested in US companies but has also ventured into non-US companies at times.  In 2020, the conglomerate bought stakes in five Japanese trading companies. It also invested in Paytm, an Indian fintech startup.

Tesla Would Pause Production after Losing EV Leader Crown

Tesla would temporarily pause production of Model Y in Shanghai for two weeks which would then be followed by a 20-day pause of Model 3 production. The company would upgrade the production line at the plant which is widely believed to be its most productive and profitable plant.

The company would also reportedly pause production in Berlin for two weeks in July. The plant has been facings production-related issues and Tesla’s CEO Elon Musk recently admitted that the new plants in Berlin and Austin are burning billions of dollars.

Germany’s road traffic agency has issued a recall of 59,000 Tesla cars due to issues with the automatic emergency call system. The Elon Musk-run company has had trouble with US regulators also and the NHTSA in the US has been investigating its Autopilot crashes.

Analysts Are Concerned but See Tesla as a Buy after the Crash

Analysts are concerned about Tesla for multiple reasons. These include the slowdown in China, the not-so-smooth production ramp-up at new Gigafactories, competition from legacy and EV companies, and distraction from Musk’s now-stalled Twitter acquisition.

However, while some brokerages have lowered their target price on Tesla, they have maintained their buy ratings. Last week, Deutsche Bank maintained its buy rating on Tesla stock and said that the second quarter would be the trough for the company.

The brokerage is impressed with Tesla’s pricing power. Notably, last month, Tesla raised the prices for all its models in the US. The price hike came at a time when input costs have dropped. Also, many fear that given the economic slowdown, carmakers might need to lower prices.

Markets would next be watching Tesla’s second-quarter earnings which are scheduled for later this month. The company’s cash flows in the quarter would be of particular interest considering the production shutdowns in China. Also, the management’s commentary on 2022 delivery guidance would be closely followed.

The company had previously said that it expects to deliver over 1.5 million cars in 2022. However, the lockdowns in China and issues at Berlin Gigafactory might play a dampener.

Tesla stock was trading flat in US premarket price action today and has a 52-week trading range of $620.46-1,243.49

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