Tesla now has around 30% spare capacity at Giga Shanghai, and that bodes ill for its profitability
Elon Musk was able to work his magic during Tesla's Q1 2024 earnings call, giving the bulls enough ammunition to pull up the beaten-down stock from its 1-year low. However, the recent recovery in Tesla shares is likely to be ephemeral if the EV giant is not able to revive the margin-critical demand for its vehicles in China.
Today, China's CPCA disclosed that Tesla's insured units for Apr - a close approximation for the monthly delivery number - were recorded at 62,167 units, continuing the prevailing trend of year-over-year declines.
What's more, Tesla recorded a relatively muted insured units number for Apr despite offering zero-percent financing promos and material discounts, with new government incentives for EVs in China continuing to act as potent tailwinds for the wider industry.
Critically, Giga Shanghai is now operating with a spare capacity of around 30%, based on the facility's widely reported annual production capacity of 1.1 million units. As per the company's latest Form 10-Q, China accounted for around one-fifth (21.56%) of Tesla's total revenue in Q1 2024. Given the fact that the vast majority of Tesla's net income in 2023 was sourced from Giga Shanghai and Giga Berlin, this spare capacity is expected to materially dent its profitability.
Meanwhile, the NHTSA has now given a 01st of July ultimatum to Tesla to provide additional information regarding its Dec 2023 Autopilot-related recall. Specifically, the NHTSA wants a comparison of how many times drivers have been prompted to place their hands on the steering wheel pre- and post-recall. This information is intended to help the NHTSA in determining whether the Autopilot played any role in the 20 crashes involving a Tesla vehicle since the Dec recall.
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