The managerial meanderings of Elon Musk have become increasingly self-indulgent and distracting for all concerned, especially shareholders in Tesla where the share price continues to slide, reaching a level on Monday that should be the first warning signal to the wider EV sector – including Australian producers of lithium copper, nickel and other renewable materials.
The current weakness in Tesla shares does not look like a reaction to negative news for renewables from the escalating pace of lockdowns in China’s third Covid wave, but could end up triggering a loss of confidence in the future performance of the highest-profile company and individual in the sector.
The latest Covid wave is worsening – more than 28,000 cases reported on Tuesday, tougher restrictions announced for Beijing. According to Japanese investment bank Nomura, its in-house index estimates that localities accounting for about 19.9% of China’s total gross domestic product are now under some form of lockdown or curbs, up from 15.6% last Monday and less than 10% at the start of this month.
The Nomura index is approaching the levels of the midyear wave that briefly hit demand for new Energy Vehicles in China and for lithium and other metals.
This, along with the problems Musk has at Twitter and the slide in Tesla shares, could see a major selloff in lithium and related shares simply because the price boom for the key battery metal is stretched at current near record levels.
There was no sign of those fears on the ASX on Tuesday when solid rises of between 1% and 4% were enjoyed by the likes of Allkem, Pilbara Minerals, Mineral Resources and IGO.
It’s how Musk handles the debacle at Twitter and whether he can manage to soften any blow from the loss of billions of dollars that will have a knock-on impact on Tesla and through that, the whole renewables sector.
Tesla shares fell more than 6% to two-year lows on Monday – a loss of $US50 billion in market value (which, of course, is more than what he paid for Twitter).
The shares fell on news of yet another recall in the US – its 24th or 25th of the year – and worries about the rise of Covid numbers in China and increasing restrictions, especially in Beijing.
The immediate catalyst came when the electric-car maker said it will recall vehicles in the United States over an issue that may cause tail lights to intermittently fail to illuminate.
A total of 321,000 Tesla vehicles are involved and unlike many of the other recalls which involved reworking software and were done over the internet (via an update), this recall will require the vehicles to be returned to Tesla for checking and modification.
It’s in fact the 4th recall in November alone and, even though most are downloadable software fixes, the number and frequency of them has drawn the attention of US transport and financial regulators.
Musk is already under investigation on a number of fronts by the US Securities and Exchange Commission for claimed breaches of previous settlement deals with the SEC, and for what happened with Twitter and some of his remarks on the platform which may be seen as corporate announcements not made the usual or appropriate way.
Tesla’s shares seem to be suffering collateral damage from Musk’s ham-fisted attempts to run Twitter after blowing $US44 billion on the takeover and looking at the prospect of losing most of that money – which he has part-financed, along with a group of Wall Street banks and tech friends and billionaires.
They ended down 6.84% at $US167.87 on Monday after touching a two-year low in trading of $US167.54.
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Fears about EV demand and sales in China (and demand for batteries and materials) are also growing.
These are low-level worries but, when added to the weakness coming from China about the rising number of Covid cases and spreading lockdowns, share prices in major lithium groups will start taking a hit.
It has to be remembered that Tesla has cut prices of the two models it sells into China from its Shanghai plant by nearly 10% and offered cheap insurance to buyers. It is in what is looking like the start of a price war in NEVs (EVs and Plug-ins) in China which a spreading lockdown could worsen.
The lockdown also follows rising cases in Beijing, which reported the country’s first Covid deaths in nearly six months. There were two new deaths attributed to COVID-19 – after three over the weekend, which were China’s first since May.
Tuesday saw Beijing authorities shut parks and museums while more Chinese cities resumed mass testing for COVID-19.
China reported 28,127 new local cases nationally for Monday, nearing its daily infection peak in April, with cases in the southern city of Guangzhou and the southwestern municipality of Chongqing account for about half of the total.
In recent days, China had started easing its harsh Covid restrictions that had crippled local and international businesses for months. But now cases are rising once again and there are more restrictions reappearing across the country.
The Chinese government is trying to introduce more flexibility into the anti-Covid battle with a rising emphasis on mental wellbeing, less draconian testing regimes and lockdowns to try and prevent the outrage that erupted in Shanghai and parts of Being the Covid outbreak mid-year.
But that didn’t stop Guangzhou, one of China’s largest cities with nearly 19 million residents, imposing a five-day lockdown in Baiyun district, which is home to one of the country’s busiest airports. Baiyun is also the most populous district in Guangzhou, housing 3.7 million people.
