Yahoo Finance Tesla shares drop after company reportedly cut production
Tesla (TSLA) shares tumbled 5% Wednesday afternoon and touched their lowest level since October after Bloomberg reported that the company reduced production hours for the Model S and Model X after cutting the 75 kWh versions.
A Tesla spokesperson released a statement in response to Bloomberg’s report and said, “We recently announced that we are no longer taking orders for the 75 kWh version of Model S and X in order to streamline production and provide even more differentiation with Model 3. As a result of this change and because of improving efficiencies in our production lines, we have reduced Model S and X production hours accordingly. At the same time, these changes, along with continuing improvements, give us the flexibility to increase our production capacity in the future as needed. We’ll be providing more details on our earnings call next week.”
This comes on the heels of a big downgrade from RBC. The firm cut its rating on Tesla from Sector Perform to Underperform and lowered its price target to $245 per share from $290 - which is about a 13% move lower from the current trading price.”
Analyst Joseph Spak cited concerns regarding Tesla’s ability to produce high volume. “The rubber appears to be hitting the road as the realities of Tesla becoming a volume player, the challenges to scale and deliver high volume at high ASPs/margins are coming to a head,” he wrote in a note to clients on Wednesday.
Tesla has been attempting to manage production demands as of late, and last week CEO Elon Musk announced that Tesla would no longer be producing the 75 kWh versions of both the Model S and Model X. Additionally, Musk wrote in a note to employees on Friday that Tesla would be cutting about 7% of its workforce in order to ramp up production of the Model 3.
The electric-car maker is also in the process of opening up its first international giga-factory in the outskirts of Shanghai, China. The new factory will help Tesla produce its vehicles in the Chinese market more quickly and cost effectively.
This is a developing story. Check back for updates.
Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.
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