Tesla, Inc. TSLA shares have been under pressure since the start of the year amid the broader market rout. The weakness continued into June, even as most other stocks rebounded. Incidentally, the U.S.-listed Chinese electric vehicle stocks fared way better than their bigger rival.
Musk Plays Spoilsport: Some of the Tesla weakness is attributable to the uncertainty surrounding the impact of the Giga Shanghai lockdown on June quarter production and financials.
Giga Shanghai is a vital cog in Tesla's growth story. The factory not only produces roughly half of Tesla's output, it also supports margin expansion. Given the low cost of labor involved in manufacturing at the plant, cars rolling out of its assembly line carry a higher margin.
One may argue, China's Nio, Inc. NIO, XPeng, Inc. XPEV and Li Auto, Inc. LI have also faced problems on that front.
The uncertainty surrounding Tesla chief executive officer Elon Musk's proposed offer to take Twitter, Inc. TWTR private is also weighing on the EV giant's shares. Tesla investors fear that Musk may have to sell more of his stake in the company to finance the Twitter deal. Additionally, the specter of Musk's divided attention has not gone down well with investors.
To make matters worse, Musk's announcement of layoffs, his confession of huge losses at Tesla's newest Gigas and his commentary on an impending recession all have begun to work in unison to pressure the stock.
China Negativity Alleviates: The Chinese stocks, meanwhile, are benefiting from an improvement in sentiment toward their prospects following protracted, acute weakness. Amid domestic softness, the Chinese government has showed willingness to offer a helping hand. The EV subsidies that were set to expire by the year-end have been extended.
Delisting fears that remained an overhang are now much less talked about.
Also, the underperformance relative to other stocks belonging to the sector has brought in bargain hunters.
Tesla Trails: Tesla may be the EV market leader, but its performance has paled in comparison to the Chinese trio in the month-to-date period.
A $1,000 invested in Tesla at the end of May, would have fetched 1.3 shares. This 1.32 shares are currently valued at roughly $973, a decline of 2.7%.
The returns from Nio, XPeng and Li Auto for the same period are a positive 38.5%, 50.2% and 62.7%, respectively.
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