Tesla dropped by 4.79% yesterday to close at $197.36. The catalyst was a disappointing forecast from automotive chip maker ON Semiconductor, which said Q4 sales will be around $2bn, short of Wall Street's expectations of $2.2bn.
ON makes products that manage power, which is key to battery-powered cars. As such, the market interpreted ON's forward guidance as a sign, and possible confirmation, that EV sales are slowing.
Recently, both Ford and General Motors have opted to postpone investments worth tens of billions of dollars in electric vehicle production. Their rationale for this decision hinges on the prevailing economic conditions and a perceptible slowdown in the demand for electric vehicles. Notably, Volkswagen, in a recent announcement, issued a cautionary note, revealing that orders for electric vehicles had begun to decelerate. Adding to the turbulence in the electric vehicle market, when reporting third-quarter financial results, Tesla experienced a substantial 9.3% dip in its stock value, following concern by CEO Elon Musk about the adverse impact of elevated interest rates on consumer demand.
Another warnign sign - Panasonic, a Tesla battery partner, reduced domestic battery production, citing a slowdown in sales for "high-end EVs."
Tesla (TSLA.us) has charted a lower peak followed by a lower trough on its weekly chart. This puts the weekly timeframe into a defined downtrend. The weekly RSI has dropped to the bearish side of 50 (green rectangle). The longer it maintains under 50, the greater the underlying downside momentum that the share will be exposed to, pressuring its price further.
Tesla is now trading at its lowest levels since May.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.