Tesla shares hit two-year low amid demand worries, concerns about Musk

(Alliance News) - Tesla Inc suffered its worst day in eight months on Tuesday, with the stock hitting a more than two-year low at USD109.10.

Victoria Scholar at interactive investor said Tuesday's drop followed a report that the electric vehicle manufacturer was looking at reducing its production in January at the Shanghai plant amid rising covid infections.

"There are also understood to be worries about a weakening demand outlook as well as stiff competition from electric vehicle rival Nio in China," Scholar added.

Concerns about weakening demand gained further traction as Tesla boosted the discounts it is offering on its two top-selling models last week.

The Texas-based firm began offering a USD3,750 incentive on its Model 3 sedan and Model Y SUV on its website earlier this month, but on Wednesday doubled the discount to USD7,500 for those who take delivery between now and December 31.

For Hargreaves Lansdown's Sophie Lund-Yates, this raises questions marks about the firm's quarterly performance, which is due in the coming weeks.

Shares fell 11% on Tuesday in New York, but the company's stock has lost more than 72% in the year-to-date, as the performance of Tesla has been on a downward track as investor fret about the eccentric and controversial Tesla chief, Elon Musk.

In the last month alone, the stock has fallen 40%.

"Having enjoyed a meteoric surge during the pandemic, Tesla has seen its stock shed more than 70% of its value this year, underperforming the wider embattled Big Tech space which has fallen out of favour this year as investors shun growth stocks amid the rising inflation and interest rate environment," ii's Victoria Scholar commented.

Investors have been extremely cautious towards Tesla since Elon Musk's acquisition of Twitter for USD44 billion back in October, as concerns mounted that the Tesla boss could be distracted from the electric vehicle company.

These worries were not calmed when Musk dumped another USD2.58 billion worth of Tesla stock last week, with a significant portion of the proceeds gone to help fund the acquisition of the social media company.

Musk's time as head of Twitter has also caused investors to sweat, with the Tesla chief presiding over a dizzying series of changes that have unnerved advertisers and turned off users.

Looking forward, Lund-Yates said the market will remain "highly sensitive" to Tesla against a backdrop of higher interest rates, adding that any potential for disappointment on production and margins will be "harshly punished."

By Heather Rydings, Alliance News senior economics reporter

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