Tesla stock hits rough patch amid supply chain constraints, price hikes

Yahoo Finance’s Pras Subramanian joins the Live show to discuss Tesla stock performance amid supply chain woes and pricing hikes across all models.

Video Transcript

BRIAN SOZZI: OK, the sell off in Tesla shares looks ugly any way you slice it, as investors shun high multiple tech companies. Tesla stock is down 8% in the past five days, 12% in the last month, and off by 40% year to date. Let's bring Yahoo Finance Senior Auto Correspondent Pras Subramanian here for a chat on this Tesla route. Wow, Pras. And I say wow because Tesla's been doing pretty well.

PRAS SUBRAMANIAN: Yeah, it's not necessarily a fundamental story. There's a lot of, like, just kind of bad headlines over the last six months, right? You know, China shutdowns-- this is in no particular order here. China shuts down-- shut down [INAUDIBLE] supply, right? You have the German Giga not supposedly fully ramped up, right? Autopilot investigations, right, this big overhang with NHTSA kind of going after Tesla on these crashes at these emergency sites. Ford and Rivian beating Tesla to the electric pickup truck, right. Tesla is not out yet.

BRIAN SOZZI: There's no Cybertruck coming.

PRAS SUBRAMANIAN: Yeah.

BRIAN SOZZI: Come on.

PRAS SUBRAMANIAN: Bitcoin and Crypto, they're getting hammered, right. Tesla has a lot of Bitcoin on the balance sheet. That could take a-- that can be an impairment in the next quarter. And then the question is Elon distracted, right. You talk about Twitter, you talk about getting involved politics, getting involved with SpaceX and Boring Company. That's-- all these things are kind of taking away from the question of Tesla performing right now.

- Oh, OK. Well, the Cybertruck is going to be in the Metaverse. We saw that clearly in the background of the NASDAQ opening bell today. But let's get back to Musk and going after Twitter via an acquisition here. And what that's done to Tesla shares as well here in tandem. Because if we go back to the beginning of April, where this started to get disclosed, there's a really stark kind of reaction that we've seen from both of these companies stock and the price action there.

PRAS SUBRAMANIAN: Yeah, every time you hear about the Twitter deal kind of going on the rocks, Tesla gets a little pop, right. Because this overhang of is Elon-- how many shares is he going to pledge to make this deal. Any kind of margin situation going on with his holdings of Tesla stock, which are, like, tremendous, right. But I've got to go back to that-- about the Tesla fundamental story, Sozz.

Like, you know what hasn't really changed-- demand is through the roof. And they're supply constraining, said that for many quarters in a row. You have people buying more and more EVs. And in Q1, we saw that doubling compared to last year. Gas prices are high, so a lot of these fundamental stories for the company are pretty good. So maybe there's some silver lining here coming into-- going into Q2 earnings for them, because not-- that has not changed.

BRIAN SOZZI: You're a well-known auto reviewer. I'm always reading your reviews. And do you think Tesla has to pick up its quality game? I've been recently running around in some Teslas. And you know, obviously they're nice. I get it. I totally understand the fascination with them. But this next wave of EVs that has come to market, notably from high-end makers, is really calling into question if Tesla can keep the quality where it is. It's not where it needs to be.

PRAS SUBRAMANIAN: I think there's so many facets to that question, right. Because you have like initial fans. They don't care. I love Tesla. I don't care about the quality, car is great. As you get more and more people like marginal buyers want to come in. I want to try Tesla-- like, why is the door panel falling off, why is there squeaks and rattles everywhere.

That could be a problem. But I just see in initial customer quality stuff is still pretty high for them. So you have this data there, but they also have, like, a lot of anecdotal pieces of news where people are really disappointed in the car.

BRIAN SOZZI: Polestar just came out. I reviewed a Polestar. Incredibly impressive vehicle.

PRAS SUBRAMANIAN: Yeah.

BRIAN SOZZI: I guess that's because of the attachment to Volvo, but still. I mean, there's a noticeable difference between a quality of a Polestar, which it's not exactly upper end or luxury, compared to a Tesla Model 3.

PRAS SUBRAMANIAN: Yeah, I mean 100%. Even a Kia EV6, every panel gap is the same, uniform. Everything. There's no squeaks and rattles. Everything is fit and finish perfect. Compared to the Tesla, there's a lot of quality issues, you might want to call it. But it doesn't matter to their fans for some reason.

- Does Tesla, in their operations, the raw materials constraints as part of the broader supply chain, does that force them to then look to alternative suppliers, source materials elsewhere? And how does that impact quality, to Sozz's point?

PRAS SUBRAMANIAN: Yeah, I think that's sort of the big question going forward. Tesla's famously very vertically integrated. They have a lot of their suppliers that are on board for many-- many years. And there are also a lot of Ford contracts in place. So a year from now, what happens when the chips do run out, and then everyone's competing for the same battery materials.

And Elon's saying we need to buy the lithium directly from the miners. So that's-- I think this is the play, right. Do you believe in Elon and the management company there to actually go through that in the future? Or do you bet on the Fords and GMs of the world who've been doing this for 100 years?

- Not at the same time while he's trying to reinvent Twitter would be my answer.

PRAS SUBRAMANIAN: Right, right, right, right.

- Pras Subramanian joining us here. We appreciate it.