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Tesla Down 5.4% Today: What’s Driving the Pessimism?


Nov. 20 2020, Updated 2:41 p.m. ET

Tesla stock

Today, at 12:30 PM ET, Tesla (TSLA) stock was down 5.4% from the previous session’s closing price. Over the last couple of months, the stock has faced high volatility. The causes include CEO Elon Musk’s Tweet about “taking Tesla private” before his decision to stay public, followed by the SEC and Justice Department’s probe into Musk’s tweet, and Tesla’s third-quarter vehicle data released earlier this week.

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Recent developments

On October 2, in its third-quarter vehicle production and deliveries data press release, Tesla described its rising difficulty in China due to the US–China trade war. In its latest press release, the company said, “Those trade tensions have resulted in an import tariff rate of 40% on Tesla vehicles versus 15% for other imported cars in China.”

During the company’s second-quarter earnings call, Musk commented, “From an operating plant standpoint, from Q3 onwards, I really want to emphasize our goal is to be profitable and cash-flow positive for every quarter, going forward.” Tesla’s third-quarter vehicle deliveries and production were in line with its own guidance. The company produced 53,239 and delivered 55,840 Model 3 units in the third quarter, marking the second consecutive quarter when TSLA managed to meet its Model 3 production guidance.

What’s driving the pessimism?

These positive deliveries and production growth figures don’t guarantee immediate profitability for Tesla. The company still has high capital investment requirements to ramp up its Model 3 production and begin working on other products, such as the Tesla Semi truck and the Model Y.

The question of whether Tesla could achieve sustainable profitability in the third quarter could be puzzling investors lately, resulting in an intensified fight between bulls and bears.

At 12:30 PM EDT today, other auto stocks (XLY) General Motors (GM) and Ford (F) were up 0.9% and 0.1%, respectively. Fiat Chrysler (FCAU) and Toyota (TM) were down 1.2% and 0.8%, respectively.

To learn what’s ahead for the markets in October, see October Should Be Full of Thrills and Chills.


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