Technology companies Apple and Tesla are supposedly facing one of their most frustrating periods of business operations as their shares tumble amid supply-related issues.
Supply delays messing up these well-known tech giants emanate from their production lines in China, recording the lowest shares points since June 2021 and a 73 percent record stock drop in November 2022 for the two companies.
COVID-19 attributed to Apple and Tesla shares drop
Due to COVID-19 and the relative restrictions enacted in China in order to curb its spread, many companies have struggled to keep production at its expected level.
Therefore, various enterprises in China are now facing a staffing crunch as the Asian country battles a COVID-19 wave after lifting years of restrictions.
The National Health Commission of China said on Monday that the country will stop requiring inbound travelers to go into quarantine starting on January 8th. The move is viewed as a positive sign for many investors who are seeing it as an ease in supply chain movement in 2023.
China’s management of COVID-19 will also be downgraded to the less strict Category B from the current top-level Category A, the health authority said in a statement. This is because the disease has become less virulent and will gradually evolve into a common respiratory infection.
Interest rate hikes linked to shares tumble
Besides the COVID-19 pandemic, global investors are also being cautious ahead of additional interest rate hikes, a global economic slowdown, and the ongoing war in Ukraine.
Additionally, with the current spike in COVID-19 cases in key manufacturing hubs alongside interest rate hikes, analysts say production will take time to ramp up once again.
“Factories are going to experience [labor] 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.”
In November of this year, production delays hit Apple supplier Foxconn following unrest at its Zhangzhou iPhone plant upon which the company said its revenue in the same month was down eleven percent compared to the same time the previous year.
Although Tesla declined to comment, this week, media reports said the company’s Shanghai manufacturing plant had cut production as COVID-19 infections rose in China. However, according to analysts, Tesla’s sluggish sales are evident in the fact that it has offered discounts to both Chinese and North American customers.
Elon Musk to ponder over Tesla’s shares flop
According to investors, the controversial conduct of Tesla Chief Executive Elon Musk has made him a headliner in major new tabloids.
Since he took over Twitter in October after a drawn-out legal battle, Musk has focused a significant amount of his time on running the social media platform. Therefore, some have cited his alleged distraction during this time as yet another reason for the fall in Tesla’s shares price.
Last week, in a tweet, Musk asked users if he should continue as the head of the platform. Users voted that he should not, prompting him to announce that he would resign from his position once a replacement is found.
“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,” Webush added.
According to analysts, Musk now needs to rebuild investors’ and board members’ confidence.