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Today in the Market (12/28/2022)

Good Evening. U.S. equities dropped Wednesday, continuing a severe year-end plunge as investors staggered toward the conclusion of a grim 2022.

The S&P 500 lost 1.20% as losses ramped up towards the close, while the Dow Jones sank 1.10%. The Nasdaq Composite fell 1.35%.

MUSK TREATS TESLA AS A MIDDLE CHILD

Tesla (TSLA) stock closed higher, halting a terrible seven-day losing streak. However, the stock has declined by more than 17% in the previous week, 42% in the past month, and a staggering 68% for the whole year.

Why the selloff? COVID cases have increased in China as a result of the government’s relaxation of its zero-COVID policy (which is explained more below), the carmaker is allegedly extending its holiday vacation. On top of that… investors and Wall Street experts are begging Musk to return to Tesla. An expert said that Musk is “asleep at the wheel” amid a crucial period for the firm.

It’s not all bad news, Tesla continues to increase output at Giga Austin and Giga Berlin, both of which have reached new production milestones. Future manufacturers will struggle to equal Tesla’s efficiency, according to analysts like Colin Rusch at Oppenheimer. What does this mean? As Tesla continues to drive down the costs of EV production, other manufacturers will struggle to match its efficiency.

THE EV MARKET IS HURTING

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The South China Morning Post (SCMP) estimates that China’s EV sector would lose 600,000 sales in the first quarter of 2023 due to an outbreak of COVID-19 cases. Citing statistics from China International Capital Corporation (CICC), the research concludes that the increase in cases would result in production disruptions and decreased demand.

Why is this happening? All of this transpires as China lifts its zero-COVID plan and begins the new year. The CICC analysis indicates that EV sector production would reach 1.5 million deliveries in the first quarter of the following year, a 40% decrease from Q4 when the industry is projected to supply 2.1 million cars.

Looking Forward… There is hope for China’s car industry in 2023. According to the CICC research, Chinese automakers will gain from the government’s departure from the zero-COVID policy by the second quarter. CICC said that manufacturers such as BYD, Tesla, Nio, and Li Auto have secured substantial orders for the future, and sales might revive as soon as the epidemic subsides.

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