Tesla suspends Berlin production due to Red Sea disruption
- Tesla is halting production at Berlin factory for two weeks, estimated impact of 8-10k vehicles
- Lost production volume remains immaterial for now, estimated at 0.5% of consensus’s 2024 delivery forecast
- However, exacerbated Red Sea disruptions could lead to further downside risks to deliveries and gross margins, with the latter already under pressure amid price cuts news. Maintain HOLD with lower TP of US$240 (previous US$255).
Tesla’s Berlin production on pause due to shortage of components as a result of Red Sea disruption. Tesla is reported to suspend most car production at its Berlin factory (which has a production capacity of 375k vehicles per year, out of Tesla’s total >2.2m capacity) as a result of the Red Sea disruptions, which have led to a shortage of components and longer transportation times due to shifts in transport route. Tesla is the first US electric vehicle maker to disclose such an interruption to its output due to the ongoing armed conflicts in the Red Sea. We believe other US/EU automakers with production facilities in Europe may also see some degrees of disruption, given many OEMs’ reliance on many key components exported from China which has to be transported to Europe through the Red Sea.
Additional headwind to watch. Currently, consensus is expecting Tesla to deliver 2.2m vehicle deliveries in 2024. Whilst a two-week pause in production at Tesla’s Berlin factory appears immaterial for now (lost volume is estimated at 8k-10k units over 2 weeks, which makes up 0.4%-0.5% of 2024’s delivery volume forecast of 2.2m), exacerbated conflicts at the Red Sea could lead to extended production stoppages, supply chain disruptions and possibly higher material costs, which could lead to downside risks to vehicle delivery numbers and margins. Tesla’s delivery numbers and margins are already under pressure as a result of its shrinking market share in China (with BYD overtaking Tesla in BEV deliveries in 4Q23) and recent price cuts to its models in China of up to 6% (e.g., Model 3 from Rmb261,400 to Rmb245,900 and Model Y from Rmb266,400 to Rmb258,900). Exacerbated Red Sea disruptions pose as additional headwind to watch. Maintain HOLD with lower TP of US$240 (previous US$255).