Stocks of Apple and Tesla have fallen as worries about delays in their Chinese production lines rise. Apple’s stock fell to its lowest level since June 2021. Since reaching a record high in November 2021, Tesla’s stock has decreased by 73%.
Due to COVID restrictions and weeks of lockdowns, businesses have found it difficult to maintain production in China.
As China confronts a Covid wave after relaxing years of prohibitions, they are currently experiencing a staffing shortage.
The announcement by China that it will relax its tight travel quarantine regulations on January 8 is welcome news for many investors who anticipate easier supply chain movement in 2023.
However, global investors are also being wary in light of more interest rate increases, a recession in the global economy, and the ongoing conflict in Ukraine.
Analysts predict that it will take time for output to resume its upswing given the surge of Covid cases in important manufacturing centres.
Simon Baptist, chief economist at The Economist Intelligence Unit, predicts that factories will experience labour shortages for at least 4-6 weeks as the wave moves through their production areas. Of course, the majority of migrant workers will return to their home villages for the Lunar New Year at the end of January.
It doesn’t appear like production will resume normally in China until late February.
Foxconn, an Apple supplier, experienced production delays earlier this year as a result of unrest at its “iPhone City” plant in Zhangzhou. According to the business, November’s revenue was down 11% from the corresponding month in 2021.
According to media reports this week, output at Tesla’s Shanghai factory was reduced as Covid infections increased in China. The business opted not to comment.
However, analysts claim that the company’s weak sales are demonstrated by the discounts it has provided to both Chinese and North American customers.
Investors are also concerned about Tesla CEO Elon Musk, who frequently makes news for the wrong reasons. After a protracted legal battle, he acquired control of Twitter in October, and since then, Mr. Musk has devoted a sizable portion of his time to managing the social media network. Others have suggested that his purported diversion during this period is another factor contributing to Tesla’s stock price decline.
Last week, Mr. Musk tweeted asking users if they thought he should stay as the platform’s CEO. After they responded “no,” he announced that he would step down once a replacement is chosen.
Analysts claim that he must now win back the trust of shareholders and board members.
In his newsletter, Webush tech analyst Dan Ives stated that Musk “is perceived as ‘asleep at the wheel’ from a leadership viewpoint for Tesla at a time when investors need a CEO to manage this Category 5 storm.”
Instead, Musk is totally preoccupied with Twitter, which has been a never-ending headache for investors.