Tesla slumps as Red Sea attacks force suspension at Berlin factory

Tesla said it would need to suspend operations at its Berlin gigafactory following supply disruptions linked to attacks on cargo ships in the Red Sea.

Jan 12, 2024 - 19:30

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Tesla slumps as Red Sea attacks force suspension at Berlin factory

Updated at 8:15 AM EST

Tesla (TSLA) - Get Free Report shares slumped lower in early Friday trading following another round of EV price cuts in China and reports that it would suspend production at its new Berlin factory after supply disruptions linked to attacks on ships in the Red Sea.

Tesla confirmed a Reuters report that its Berlin factory, which opened last year, would suspend operations from Jan. 29 to Feb. 11 as key components from shipments through the Red Sea, which feeds into the Suez Canal, remain targets of Houthi rebels in Yemen.

The U.S. and the U.K. carried out coordinated military attacks on the Iran-backed rebels on Friday, with President Joe Biden saying in a statement that he will not tolerate "attacks on our personnel or allow hostile actors to imperil freedom of navigation."

"The armed conflicts in the Red Sea and the associated shifts in transport routes between Europe and Asia via the Cape of Good Hope are also having an impact on production in Gruenheide," Tesla said in a statement. "The considerably longer transportation times are creating a gap in supply chains."

Tesla is also cutting the price of its new Model 3 sedan in China by around 6%, to 245,900 yuan ($34,600), with a near 3% reduction in the price of its Model Y sport utility EV.

Morgan Stanley analysts said the new round of cuts could trigger a fresh round of price-lead competition in the Chin market, as "major OEMs may look to undercut competitors to lock in as many orders as possible, as their order backlogs are low given the year-end sales push."

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Tesla shares were marked 3.05% lower in premarket trading to indicate a Friday opening bell price of $220.30 each, a move that would extend the stock's six-month decline to around 19%.

Earlier this month, Tesla reported that it delivered a record 484,507 new cars over the three months ended in December. That was up 19.6% from the year-earlier period and 11.4% north of the 435,059 tally reached over the three months ended in September.

The full-year tally was marked at 1.81 million cars, rising 38% from a year earlier and topping the group's official forecast of 1.8 million but falling shy of CEO Elon Musk's target of 2 million.

Tesla will report fourth-quarter results after the close of trading on Jan. 24.