Jim Chanos said he’s still shorting Tesla as the EV maker faces margin pressures and increased competition. He expects the Elon Musk-run carmaker’s margins to fall as its China market weakens. Meanwhile, Tesla faces competition from Chinese automakers including Nio and BYD who are taking massive market share. Loading Something is loading.
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Jim Chanos is still shorting Tesla as the electric-vehicle maker faces margin pressures and increased competition.
The famed-short seller and founder of Chanos & Company said Tesla’s biggest market, China, is now the weakest, and that’s going to hurt it’s margins.
“Everybody forgets, Tesla lost money through 2019, building cars in the United States. It wasn’t until they opened Shanghai and that ramped in a major way, that their margins took off. And China right now is their weakest market,” Chanos said in a CNBC interview on Monday.
“You’re in a cyclical business and his margins, which peaked out in the high 20s, are now heading, we think, into the high teens where they were before they opened China,” he continued, adding that Tesla is “wrestling with some issues.”
Tesla reported fourth-quarter earnings last week, beating Wall Street’s expectations. Its revenue grew 37% and the electric carmaker posted earnings per share of $1.19 for the three months until December 31.
However, Tesla’s automotive gross margin declined 25.9%, the lowest in five quarters. Despite falling margins, CEO Elon Musk said he expects to sell 2 million vehicles this year after recent price cuts to boost demand.
Meanwhile, competition in the automaker industry is ramping up, according to Chanos.
“I just think that it’s really that the choices now are increasing,” he said. “The bears were wrong on competition. It took a long time to show up, but I don’t think they’re wrong now. I think the competition is growing.”
According to Chanos, Tesla’s challengers include Chinese automakers like Nio, Xpend, and BYD.
Chanos has previously predicted Tesla’s growth would slow as rivals catch up and it runs short of new customers. He’s said the company is a “hopes-and-dreams stock” and warned investors could soon face a reality check.
Chanos’ view comes amid a recent rally in Tesla’s stock price. Shares have climbed over 44% so far in January, trading at $166.66 per share as of Monday’s closing bell, after a nightmarish 2022 where the carmaker suffered a $700 billion wipeout.