Tesla Shares Dip After Production Halted as Red Sea Conflict Escalates
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Tesla Shares Dip After Production Halted as Red Sea Conflict Escalates

Tesla fell nearly 3% in premarket after saying it must halt production at its factory in Germany due to the ongoing conflict in the Red Sea.
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Tesla (NASDAQ: TSLA) will temporarily cease most of its production at the factory in Berlin due to shipping disruptions caused by recent Houthi attacks in the Red Sea. The company’s shares tumbled 2.9% ahead of the market opening on Friday.   

Tesla to Cease Most of Germany Production Until Feb. 11

Shares of Tesla slipped 2.9% at the market open on Friday after reports revealed that the carmaker plans to halt bulk of production at its plant near Berlin for two weeks due to parts delivery delays caused by recent Red Sea attacks.

Per the reports, the attacks launched by Houthi rebels led to shipping delays, forcing Tesla to suspend most production from January 29 to February 11. In December, an average of 236 ships traversed the Red Sea and Gulf of Aden daily, key international shipping routes. 

The EV giant said the temporary halt could result in the non-production of approximately 5,000 to 7,000 cars.

Due to disruptions, companies were forced to use an alternative, much longer shipping route around the southern tip of Africa. Consequently, global trade fell 1.3% in December, data shows. 

“The armed conflicts in the Red Sea and the associated shifts in transport routes between Europe and Asia via the Cape of Good Hope are also having an impact on production in Grünheide. The considerably longer transportation times are creating a gap in supply chains.”

– Tesla said.

The US and UK launched retaliation attacks targeting Houthis in Yemen on Friday, adding to the already elevated geopolitical tensions in the Middle East. The assaults triggered a significant spike in crude oil prices.

Tesla’s Recent Challenges 

Tesla’s stock price drop at the market open marks the latest blow to the EV maker, which fell over 9% since the start of the year. 

Though the stock witnessed triple-digit gains in 2023, it saw a slowdown in the latter part of the year as its spate of price cuts started to eat into profitability. As a result, Tesla’s operating margins plunged considerably in the latest quarter.

Analysts expect those headwinds to persist in 2024, mainly due to the challenges Tesla’s core EV business and the broader auto industry will likely face. Moreover, the company recalled 1.6 million cars earlier this month amid software-related issues.

Meanwhile, the automaker has also been overtaken by its Chinese rival BYD as the top-selling EV manufacturer. 

Do you think Tesla can manage to navigate through the various 2024 headwinds? Let us know in the comments below.