Shares of Tesla Inc. (NASDAQ: TSLA) are not exactly thriving as they trade lower in May compared to levels recorded in April. A combination of product concerns, chip shortages, as well as inflation over mounting inflation are dragging tech stocks and NASDAQ index lower in May.
The electric vehicle (EV) company saw its April sales decline sharply in China as it sold 25,845 vehicles made in China. Even though that was more than the 15,484 vehicles sold in January, and 18,318 vehicles sold in February, when compared to March, sales were down 27%.
Tesla is not the only one facing issues in China. Sales of all electric vehicles fell 12%. NIO swung to a gain of 1.9%, reversing an earlier loss of as much as 6.2%; Xpeng shed 2.8% toward a six-month low; and Li Auto slipped 0.1% toward a seven-month low.
Tesla had several negative PR issues in China that led to protests at the Shanghai Auto Expo. An incident occurred when one of the protestors climbed on top of a Tesla car and accused the company of faulty brakes. Before that, they already had discussions about safety issues and military spy noises.
Shares also came under pressure amid reports that a car crash involving Model S Tesla in Houston killed two people. Social social media users raised concerns over Tesla’s automatic steering and braking system.
It’s clear Musk & Co. should be on their best behavior if they want to fix their issues with Beijing. It was reported that Tesla halted its plans to buy land in Shanghai to expand its manufacturing in China.
A fall in Tesla stock also dragged tech-heavy NASDAQ index lower this month. Nearly all carmakers and tech companies are facing major challenges in the light of the supply of key components. A chip shortage mix-up is why more pressure is being put on production and transportation to fulfill global demands.
Moreover, the higher inflation print from earlier in May is prompting investors to rebalance their portfolios and channel more funds towards growth stocks. On the other hand, most tech stocks are hit by bug outflows as higher inflation makes these assets less attractive.
Plus500 reports that Secretary Yellen’s comments made earlier in May pointed to the potential for rising interest rates, which could make loans more expensive.
“Some days investors appear relaxed about inflation risks and the possibility of central banks having to lift rates and withdraw stimulus. Today is not one of those days,” Russ Mould, an analyst at AJ Bell, said.
“The valuations of the tech-based growth companies in the U.S. are harder to justify in an inflationary and rising interest rate environment—where lower risk assets typically offer higher returns—hence the big fall in the Nasdaq,” Mould added.
All this is the reason why TSLA stock is trading under selling pressure in May, after adding 6.2% in April. Overall, it seems like Tesla’s sky-rocketing days are left in 2020 since the stock has dropped 12.3% year to date, while the S&P 500 index has gained 10.6% this year.