{"id":17583,"date":"2023-04-20T13:54:10","date_gmt":"2023-04-20T13:54:10","guid":{"rendered":"http:\/\/lynettelockhart.com\/client\/tesla-to-feel-commodity\/"},"modified":"2023-04-20T13:56:25","modified_gmt":"2023-04-20T13:56:25","slug":"tesla-to-feel-commodity","status":"publish","type":"post","link":"http:\/\/lynettelockhart.com\/client\/tesla-to-feel-commodity\/","title":{"rendered":"Tesla to feel commodity cost pain until second half of 2023"},"content":{"rendered":"

By Aditya Soni and Akash Sriram<\/p>\n

(Reuters) -A recent pullback in commodity prices will aid Tesla Inc’s bruised margins only in the second half of the year, signalling more near-term pain for the electric-car maker which has been cutting prices to prop up sales.<\/p>\n

Chief Financial Officer Zachary Kirkhorn said on Wednesday that battery material prices have been a big drag for the past two years and Tesla was “still kind of at the maximum of pain for commodities in our cost structure.”<\/p>\n

The comments dampened hopes that this year’s tumble in prices of commodities would provide relief to Tesla, whose margins fell to a more than two-year low of 19.3% in the first quarter, missing the average market estimate of 22.4%.<\/p>\n

Tesla has slashed prices six times in 2023, a move that Wall Street analysts expect will amp up competition with incumbent automakers such as Ford Motor Co and startups including Lucid Group Inc.<\/p>\n

So far this year, prices of battery metals such as cobalt and lithium – the most important ingredients in EV batteries – have declined around 50% and 40%, respectively. Nickel has lost about 20% this year and is down nearly 50% from a peak in March 2022.<\/p>\n

Analysts attributed the lag in benefits from lower battery-material prices to long-term contracts, especially for lithium, which is bought at rates that vary from spot prices.<\/p>\n

But minerals research firm Benchmark Intelligence said the contracts could get revised due to the declining prices. <\/p>\n

“EV manufacturers have a huge amount of power in these contract negotiations, so we do see contract structures getting revised especially now that prices are decreasing,” said Daniel Fletcher-Manuel, Benchmark Intelligence’s head of prices, data & indices.<\/p>\n

Lithium prices have eased following a ramp-up in mining output and a slowdown in EV demand due to rising economic uncertainty and a planned subsidies halt in China, the world’s biggest and fastest growing market.<\/p>\n

The slide has even sparked rare discounts from Chinese battery giant CATL, a Tesla supplier, and analysts said prices could fall further as EV demand declines.<\/p>\n

Rystad Energy sees the global market deficit of lithium shrinking to around 20,000 to 30,000 tonnes of lithium carbonate equivalent (LCE) this year, from 76,000 tonnes LCE in 2022.<\/p>\n

“It’s worth mentioning that the price of lithium has dropped significantly,” Musk said on a post-earnings call.<\/p>\n

That would be beneficial for Tesla as the company ramps up output from its mega factories in Austin and Berlin.<\/p>\n

Tesla shares fell 7% in early trading and also dragged stocks of automakers from Europe to the United States as Elon Musk said the company will prioritize sales growth over profit. <\/p>\n

(Reporting by Aditya Soni and Akash Sriram in Bengaluru; Editing by Saumyadeb Chakrabarty)<\/p>\n

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By Aditya Soni and Akash Sriram (Reuters) -A recent pullback in commodity prices will aid Tesla Inc’s bruised margins only in the second half of the year, signalling more near-term pain for the electric-car maker which has been cutting prices to prop up sales. Chief Financial Officer Zachary Kirkhorn said on Wednesday that battery material […]<\/p>\n","protected":false},"author":8,"featured_media":17584,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"spay_email":"","footnotes":""},"categories":[1213],"tags":[1223],"class_list":["post-17583","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-u-s-business","tag-updated"],"jetpack_featured_media_url":"http:\/\/lynettelockhart.com\/client\/wp-content\/uploads\/Reuters_Direct_Media\/USOnlineReportBusinessNews\/tagreuters.com2023binary_LYNXMPEJ3J0G8-VIEWIMAGE.jpg","_links":{"self":[{"href":"http:\/\/lynettelockhart.com\/client\/wp-json\/wp\/v2\/posts\/17583","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/lynettelockhart.com\/client\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/lynettelockhart.com\/client\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/lynettelockhart.com\/client\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"http:\/\/lynettelockhart.com\/client\/wp-json\/wp\/v2\/comments?post=17583"}],"version-history":[{"count":2,"href":"http:\/\/lynettelockhart.com\/client\/wp-json\/wp\/v2\/posts\/17583\/revisions"}],"predecessor-version":[{"id":17868,"href":"http:\/\/lynettelockhart.com\/client\/wp-json\/wp\/v2\/posts\/17583\/revisions\/17868"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/lynettelockhart.com\/client\/wp-json\/wp\/v2\/media\/17584"}],"wp:attachment":[{"href":"http:\/\/lynettelockhart.com\/client\/wp-json\/wp\/v2\/media?parent=17583"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/lynettelockhart.com\/client\/wp-json\/wp\/v2\/categories?post=17583"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/lynettelockhart.com\/client\/wp-json\/wp\/v2\/tags?post=17583"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}