What's going on?
Shares of electric car maker Tesla fell 7% on Wednesday after it announced it delivered a record number of cars last quarter – but fell short of investors’ forecasts (tweet this).
What does this mean?
Tesla delivered 90,700 cars in the fourth quarter – 2,000 fewer than predicted. The company didn’t deliver as many of its mass-market Model 3 sedans as hoped, even though customers were apparently unfazed by the higher price tag introduced last quarter. Tesla also announced that it’d cut prices on all cars sold in the US by $2,000 in response to newly lowered government subsidies for electric vehicles.
While full details won’t be available for a few weeks, the news of yet more missed targets disappointed investors. They were told in June and again in October that the company was working hard to shake its production-rate bugbears.
Why should I care?
For markets: It’s not just Tesla – stocks everywhere are in the red.
Millennial favorites the FAANG stocks also fell hard on Wednesday, along with the broader market. Investors’ 2019 #mood seemed to be a cautious one, as they shied away from stocks in general. For some, it was “better the devil you know”. Government bonds in the US, Germany, and Japan got snapped up on Wednesday, even though the US economy’s expected to slow this year, Germany’s not shooting the lights out either, and Japan’s economic growth has been stubbornly low for ages.
The bigger picture: Down, but not out.
According to Bloomberg, investors think there’s a 90% chance the Federal Reserve maintains or lowers interest rates this year – and experts predict the US economy will grow by 2.6% in 2019, thanks to low unemployment continuing to drive wage increases and consequent consumer spending. Tesla, like all carmakers, is “cyclical” and therefore reliant on people having the money to splash on a new vehicle. Both it and its investors will be hoping the US economy doesn’t go pear-shaped.