Daily Brief: Tesla Made A Lot Of Cars, But It Didn’t Quite Manage To Deliver

Daily Brief: Tesla Made A Lot Of Cars, But It Didn’t Quite Manage To Deliver

over 1 year ago3 mins

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Tesla announced over the weekend that it delivered fewer cars than analysts expected last quarter.

What does this mean?

The ongoing soap opera of Elon Musk’s Twitter takeover has been so engrossing that you might have forgotten about Tesla, so let’s get you up to speed: the firm just announced the number of cars it delivered last quarter – a hotly anticipated figure that underpins the carmaker’s financial results. The good news is that the firm delivered a record 344,000 cars, up 42% on the same time last year. But the bad news is that all-time high still underwhelmed demanding analysts, and also came in well below the 366,000 cars Tesla produced. That gap comes down to logistical problems that are making it hard for the company to actually get cars onto customers’ driveways.

Tesla deliveries

Why should I care?

Zooming in: Put the pedal to the metal.

Logistical issues aren’t the only ones Tesla’s contending with right now. The price of lithium – the key metal in EV batteries – jumped to a record high last week, and a pound of the stuff now costs roughly three times what it did a year ago, and a whole ten times more than back in July 2020. Those higher prices have put battery and EV manufacturers in an awkward position: either they swallow the costs and watch their profit margins shrink, or jack up prices and risk losing customers.

Lithium price
Source: Trading Economics

The bigger picture: Promising policy.

Tesla might actually get away with hiking prices in the US – its biggest market – thanks to the recently signed Inflation Reduction Act. The package extends measures offering tax credits worth $7,500 to consumers buying new EVs. And while that's not totally new, the tax credit previously had a 200,000-car limit that meant customers of EV giants like Tesla – which had sold more cars than that in the US – were no longer eligible. But now that cap’s out the window, Tesla can count on a tidy increase in demand.

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OPEC+ Tightens The Taps

OPEC image

Reports out over the weekend suggest OPEC+, a group of oil-producing nations, is considering cutting oil production.

What does this mean?

OPEC+ has been steadily increasing oil supply over the past two years, after slashing production in the dark days of Covid-19. But with the global economy cooling down, so-called “black gold” has lost its luster, and prices have seen a 25% drop in the past three months. That’s bad news for the group, especially since many members – like Saudi Arabia and Russia – rely on oil revenues to cover government spending. It’s no wonder, then, that when the group meets on Wednesday, cutting production by over a million barrels per day come November could be up for discussion. That drop – about 1% of global oil supply – would mark the biggest cut in production since the pandemic.

Oil price

Why should I care?

For markets: The worst is yet to come.

All else being equal, lower supply will mean more competition for oil, so it’s no surprise that Brent crude – a key oil benchmark – jumped 4% on Monday. But prices might just be beginning their upward climb. See, western sanctions on Russian oil exports are due to tighten later this year, which could further hit supply. That might be why Goldman Sachs thinks Brent crude will hit $100 a barrel over the next three months and climb to $105 in the space of six – a far cry from the current $89 asking price.

OPEC+ production

The bigger picture: This won’t pour oil on troubled waters.

With energy prices already adding fuel to the fire of global inflation, this is the last thing many countries will want to hear – including the US. There, the government’s been trying to lower fuel prices ahead of next month’s crucial midterm elections. And it’s not about to take reduced oil production lying down: some US politicians have suggested that if the plan does go ahead, the US should cut supply of airplane parts to Saudi in retaliation.

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