Tesla (NASDAQ:TSLA) reportedly plans to cut off some battery production roles at its Shanghai plant. According to a Bloomberg report, workers assigned to the cell assembly lines in the first phase of the factory were informed about this decision earlier in the week.
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TSLA sources battery cells from LG Energy Solution and Contemporary Amperex Technology for its electric vehicles. However, before these battery cells can be installed, they need to be assembled into battery modules and packs. This assembly process takes place at TSLA’s Shanghai plant.
Additionally, Tesla has offered some employees the option to transfer to another workshop, such as stamping, painting, or general assembly. The exact number of workers being laid off remains unknown at the moment.
While the exact reason for the layoffs at Tesla’s Shanghai plant is not clear, it is possible that the company’s shrinking margin base could be a contributing factor. In the first quarter of 2023, the automaker reported an operating margin of 11.4%, reflecting a decline from 19.2% in the same quarter last year. The key reason for the contraction is TSLA’s efforts to boost sales by giving considerable discounts on its vehicles.
It is worth mentioning that the price war in China is now expected to come to an end. This is because about 16 automakers, including TSLA, recently signed an agreement to promote fair competition and prevent unjustifiably low price reductions.
Is Tesla a Buy Now?
Tesla has been making commendable progress on several fronts. The company’s efforts to increase production and sales, along with building a supercharging network, bode well for long-term growth.
It has received 13 Buy, 13 Hold, and five Sell recommendations for a Moderate Buy consensus rating. Further, the average TSLA stock price target of $229.31 implies 17.08% downside potential from current levels.
Investors should note that Daniel Ives from Wedbush is the most accurate analyst for TSLA stock, according to TipRanks. Copying Ives’ trades on TSLA stock and holding each position for one year could result in 70% of your transactions generating a profit, with an average return of 16.19% per trade.
