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Tesla has been affected by the pressure from the coronavirus outbreak in China, where it has decided to temporarily close all its stores. The move will delay unit delivery to customers who had ordered. TSLA stock price is falling.
The American electric automaker company Tesla has temporarily closed its stores in the entire mainland China due to fears of coronavirus spread. The move was not welcomed warmly by the customers who were waiting for unit delivery in February. As a result, in the early Asian session on Wednesday, February 05, Tesla (TSLA) stock slumped from $960 to $734 per share at the time of writing the article.
According to market data, Tesla shares enjoyed a good reception at the end of last year and the beginning of the year. This saw the investors capital doubled in less than six months, and analysts looking forward to Tesla’s inclusion in the S&P 500.
What Will Closure Mean to Tesla?
The move to close the China stores greatly affected the company’s mode of operation and delivery in the greater Asian region. Although not permanently closed, the strain on production will be felt due to the huge back-log and expectations to meet after re-opening.
With 24 stores spread across mainland China, the demand is still high on the electric motors and cannot be bridged by the few companies operating. As the death toll due to the coronavirus outbreak continues rising, there is no definite time when full reopening can be guaranteed.
Keeping in mind that China is a huge market for the company, production go slow will greatly hamper the results of the company. The likelihood of the shares slumming even deeper continues looming in many investors and analysts minds.
Coronavirus Long-term Effect on Multinational Companies
In addition to the negative effect on Tesla and even TSLA stock (that previously seemed to be untouchable), the coronavirus outbreak has also affected the Chinese market at large. This is after the authorities took precautionary measures to curb the fast spread of the killer Wuhan virus, by ordering curfew and closure of companies. Almost all multinational companies with branches in mainland China have been forced to put down their daily operation, thus counting losses in billions.
Major competitors to Tesla like Hyundai have also closed their businesses due to the coronavirus outbreak. In effect, the production of materials will be stopped, and considering that China is a major exporter of electronics and other goods, most countries worldwide are likely to feel the effects of the coronavirus outbreak even though not infected.
Other companies that have also closed their operations in China include Apple, Google, and also McDonald’s. With the spread and death toll increasing by the day, the coronavirus outbreak has proved to affect businesses operations. With the world rushing at finding a cure and also a vaccine, time will be of the essence as the effect will be damaging to the companies valuation.