Apple and Tesla stock prices have plummeted as investors become increasingly concerned about production line delays in China.
Apple’s stock has dropped to its lowest level since June 2021. Tesla’s stock has fallen 73% since its all-time high in November 2021.
Companies in China have struggled to maintain output due to Covid limitations and weeks of lockdowns.
They are now confronting a manpower shortage as China confronts a Covid tsunami following the removal of years of prohibitions.
China said on January 8 that it will relax its rigorous quarantine restrictions for travelers, a favorable sign for many investors who anticipate an ease in supply chain movement in 2023.
However, global investors are concerned about further interest rate hikes, a global economic slowdown, and the ongoing conflict in Ukraine.
Given the increase of Covid cases in key manufacturing hubs, analysts believe it will take time for production to resume.
“Factories are going to experience labour shortages for at least 4-6 weeks as the wave passes through their production regions, and of course most migrant workers will go back to their home villages for the Lunar New Year at the end of January,” says Simon Baptist, chief economist at The Economist Intelligence Unit.
“Production looks unlikely to be back to normal in China until late February.”
Foxconn, an Apple supplier, had production delays earlier this year as a result of unrest at its Zhangzhou plant known as “iPhone City.” According to the corporation, revenue was down 11% in November compared to the same month in 2021.
According to media reports this week, Tesla’s Shanghai manufacturing factory suspended output as Covid infections increased in China. The corporation did not respond to requests for comment.
Analysts claim the company’s poor sales are evidenced by reductions offered to both Chinese and North American customers.
Investors are particularly concerned about Tesla CEO Elon Musk, who has frequently created controversial headlines. Mr Musk took control of Twitter in October after a protracted court struggle, and he has devoted a large amount of his time to the company since then.
Analysts say he now needs to rebuild investors’ and board members’ confidence.
“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,” wrote Webush tech analyst Dan Ives in his newsletter.
“Instead Musk is laser-focused on Twitter which has been an ongoing nightmare that never ends for investors.”
