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Tesla Stock Trades Below $700 As Global Carmakers Face Inflation Reckoning

Surging input costs, chip shortages and China's Covid lockdown are proving to be a collective headwind to global automakers, pushing Tesla shares to the lowest levels since last August.

Updated at 1:58 pm EST

Tesla  (TSLA) - Get Tesla Inc Report shares slumped below the $700 mark for the first time in more than eight months Thursday as investors continue to worry about near-term profit prospects for global carmakers amid a surge in input costs and the ongoing semiconductor shortage. The stock later recovered some to end the day down $6, at $728.

Nissan Motor Co  (NSANY)  cautioned Thursday that operating profits for its 2023 fiscal year, which ends next March, will likely be flat to the prior period thanks in part to what it called an "uncertain situation" in global supply chains exacerbated by China's ongoing Covid lockdowns. 

Nissan's COO Ashwani Gupta told investors that "semiconductor shortage is a new normal" that automakers will have to live with, because this is not going to finish tomorrow morning."

The cautioned followed a muted outlook yesterday from Toyota  (TM) - Get Toyota Motor Corp. Report, the world's biggest carmaker, which said that "unprecedented" increases in raw materials costs -- expected to hit $11.1 billion, more than double the 2021 total -- would likely cause a 20% hit to its coming-year profits.

Nickel prices, a key component in battery production, have risen 33.8% so far this year to around $27,700 per ton on the London Metals Exchange, while battery-grade lithium carbonate prices are up around 60% from early 2021 levels. 

Tesla, for its part, said last month that current quarter deliveries should be flat when compared to the first three months of the year, even with the multi-week shutdown of its Shanghai gigiafactory -- which made around half of the group's cars last year -- amid China's 'zero Covid' crackdown. The full-year delivery estimate stands at 1.47 million units.

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"We’ve lost about a month of build volume out of our factory in Shanghai due to COVID related shutdowns," CFO Zach Kirkhorn told investors on April 21. "The Shanghai team has been extremely dynamic with the unpredictable nature of our part arrivals and our supply chain team in particular, production planning portion of supply chain, we often get very little notice when there’s part shortages coming and it’s a scramble couple days before that part is supposed to arrive to figure out how to get it here."

Tesla shares were marked 3.8% lower Thursday to change hands at $711.06 each, a move that puts the stock's year-to-date decline at around 41%. The stock hit an eight-and-a-half month low of $680.00 each earlier in the session.

The carmaker is already seeing an impact, in fact, as data last week from the China Passenger Car Association (CPAC) showed Tesla produced just 10,757 cars last month, selling just over 1,500 and exporting none, thanks to a 22-day closure of its Shanghai facility during the city's Covid lockdown.

The April tally is the lowest in 2 years and compares to a sale total of 65,814 in the month of March. Overall car sales in China fell 35.7% from last year in April, the CPCA said, the biggest single-month decline since the pandemic trough of March 2020.

The closures could test CEO Elon Musk's declaration of a "reasonable shot" for 2022 deliveries to rise 60% from last year as the billionaire pursuer of Twitter  (TWTR) - Get Twitter, Inc. Report ramps-up production facilities in Berlin and Austin.

Tesla said on April 2 that first quarter global deliveries rose 67.8% from last year to a record 310,048 units over the first quarter, just shy of analysts' forecasts of and only 0.5% from the final three months of 2021.

That tally helped revenues rise 80.5% from last year to an all-time high of $18.76 billion, while better-than-expected automotive profit margins of 30% powered a Street beating bottom line of $3.22 per share.

"Challenges around supply chain have remained persistent, and our team has been navigating through them for over a year. In addition to chip shortages, recent COVID-19 outbreaks have been weighing on our supply chain and factory operations," Tesla said in a statement released with its first quarter earnings. "Furthermore, prices of some raw materials have increased multiple-fold in recent months."

"The inflationary impact on our cost structure has contributed to adjustments in our product pricing, despite a continued focus on reducing our manufacturing costs where possible," the company added. "Our own factories have been running below capacity for several quarters as supply chain became the main limiting factor, which is likely to continue through the rest of 2022."