Apple, Tesla Stocks Drop Over Fears About Supply Bottlenecks in China

Trisha Kae Andrada, Tech Times 28 December 2022, 10:12 am

Apple and Tesla shares have fallen amid escalating worries that manufacturing delays at their Chinese factories may affect global sales.

The price of Apple stock dropped to a level not seen since June 2021. Meanwhile, Tesla shares have fallen by 73% from their all-time high in November 2021.

In Connection With China's Covid-19 Cases

Due to Covid-19 restrictions and weeks of lockdowns, companies in China have had a difficult time keeping manufacturing running.

After years of prohibitions being lifted, China is now fighting a fresh wave of Covid-19 cases. And now, they are short-handed, according to BBC's report.

China said it would relax its rigorous quarantine restrictions for travelers starting Jan. 8, 2023. This may be a good indication for many investors who anticipate a reduction in supply chain disruption in 2023.

Investors worldwide are wary because of rising interest rates, a slowing economy, and the continuing conflict in Ukraine.

Analysts predict that production would take some time to resume normal levels after a surge in Covid-19 cases was reported in major industrial hubs.

Simon Baptist, a chief economist at The Economist Intelligence Unit, told BBC, "Factories are going to experience labor shortages for at least 4-6 weeks as the wave passes through their production regions. Of course, most migrant workers will go back to their home villages for the Lunar New Year at the end of January."

He added that until late February, it is doubtful that production in China will return to normal.

Foxconn, an Apple supplier, experienced production delays at its "iPhone City" facility in Zhangzhou early this year due to worker dissatisfaction. The company reported an 11% drop in sales from November 2020 to November 2021.

Tech Times reported that Tesla's Shanghai factory would slow production in January because of an increase in Covid-19 infections in China. Company representatives did not provide comments on the matter.

Analysts, however, point to the fact that the automaker has discounted its products for both Chinese and North American clients as evidence of its slow sales.

Elon Musk Since the Twitter Buyout

Elon Musk, CEO of Tesla, has been the subject of investor worry due to his history of making headline-grabbing statements.

After a protracted court struggle, Musk finally gained control of Twitter in October and has devoted a great deal of time and energy to its management ever since. Reports suggest that his lack of focus during this period contributed to the decline in Tesla's stock price.

Musk polled his Twitter followers last week to see whether he should remain CEO of the platform. The majority said no; thus, he has now announced his resignation once a successor is in place.

It is now imperative that he win back the trust of investors and board members, as per analysts.

"Musk is viewed as 'asleep at the wheel' from a leadership perspective for Tesla at the time investors need a CEO to navigate this Category 5 storm," Webush tech analyst Dan Ives noted in his newsletter. "Instead, Musk is laser-focused on Twitter which has been an ongoing nightmare that never ends for investors."