There could be a Chinese problem that shook stocks a bit on Friday.
After all, China is very important to all electric vehicle manufacturers, and Tesla is the most valuable electric vehicle manufacturer of all. Now CEO Elon Musk has addressed the problem. And he doesn’t seem overly concerned.
On Friday, The Wall Street Journal reported that the Chinese government could stop driving Tesla vehicles (ticker: TSLA) due to national security concerns. The moment coincided with the talks between the United States and China in Alaska that turned into a controversial back and forth on human rights and democracy.
Tesla shares fell in early trading on Friday, but ended the day up roughly 0.3% while
won 0.8% and
fell a bit.
Reuters reported on Saturday that Musk told Chinese listeners that his company has a very strong incentive to be very careful with any information that may be collected by the company or by its car sensors and cameras.
“If Tesla used cars to spy in China or anywhere, they will shut us down,” Musk said, according to Reuters.
For stocks, the problem with the Chinese government appears to be small, but investors have to move on because China is critical to the success of the company. China is the largest market for new cars and electric vehicles. Wedbush analyst Dan Ives sees China as the lynchpin of the company’s future growth. It rates the Tesla stock as a Hold and has a $ 950 price target for the stock.
“At a time of extreme tensions between the United States and China, Musk & Co. are in a unique position, along with
“From getting caught in the crossfire,” Ives wrote in a report Friday. He added that while he was not expecting the situation to get out of control, he was watching events closely.
Tesla shares have fallen in recent weeks, but not because of geopolitical tensions.
Higher interest rates have hurt Tesla shares. High rates hurt high-growth stocks like Tesla more than others. For starters, higher interest rates make financing growth more expensive. Second, high-growth companies generate most of their cash flow going forward. The higher rates make the promise of future cash slightly less attractive, relatively speaking, than the higher yield on bonds today.
Tesla shares are down about 7% year-to-date, lagging behind comparable returns from the S&P 500 and
Dow Jones Industrial Average.
The shares are down 27% from their 52-week high in January. The yield on the 10-year Treasury note recently rose above 1.7%, an increase of around 0.5% in recent weeks.
Write Al Root at [email protected]