Outside the untimely death of NBA legend Kobe Bryant, the coronavirus issue has been hitting news headlines hard. It has also plucked the attention away from Tesla's record-breaking surge in stocks, appreciating close to 200-percent coming off a 52-week low.
Tesla is all set to reveal something big in the upcoming earnings call. Investors will pay close attention but may factor in the coronavirus issue. In short, sales forecasts will likely be in close scrutiny with Tesla vehicle sales most likely to take a hit, Ccn.com reported.
Unofficially, the coronavirus is considered worse than the SARS outbreak of 2003. The number of people affected by it is swelling, and some feel that the Chinese government is not divulging the real impact of the said virus. The point here is that with the coronavirus spreading, markets may underperform. Hence, it would not come as a surprise if traders end up shorting individual stocks that could fall.
This could be bad news for Tesla, which has been making big moves over In China. For as long as the coronavirus lingers, the more risks are up in the air. Recall that Tesla secured $521 million in loans from Chinese banks back in 2019. This was used to put up their Shanghai Gigafactory. The loan is due to be repaid in March 2020, a few months from now.
They also have a $1.4 billion loan, something they borrowed last month. This will be used to pay off that previous debt due in March. In a way, it seems like a revolving tactic for Tesla to be able to settle its financial obligations. But at some point, they will need to pay off the loans in full.
Another thing worth considering is Tesla promised the Chinese government $320 million per year in taxes. Though it may not show now, the American company could find itself in a deep hole if its business is forced to change course.
In a most recent report from CNN, the Tesla Model 3 has already experience delay in Shanghai because of the coronavirus. With Beijing trying to contain the spread of the Wuhan virus outbreak, major cities have been placed on lockdown. Folks over there have been forced to extend the Lunar New Year holiday from Jan. 30 to Feb. 9.
"At this point, we're expecting a 1 to 1½ week delay in the ramp (up) of Shanghai-built Model 3 due to a government-required factory shutdown," Tesla's chief financial officer Zachary Kirkhorn.
Despite the development, Kirkhorn claims that the whole thing will not severely affect Tesla's earnings. He points out how the China-made cars are still in the early stages. But at some point, Tesla is bound to feel the true effects the same with most businesses in the country.
