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Tesla giga factories are losing billions: a red flag for investors?

Shares of Tesla Inc (NASDAQ: TSLA) closed 1.0% down on Thursday after CEO Elon Musk said the giga factories in Austin and Berlin were losing “insane money”.

Supply constraints are hurting Tesla Inc

Musk said supply constraints, particularly ones driven from the resurgence of COVID in China, were standing in the way of ramping up production. In a recent interview with Tesla Owners of Silicon Valley, he said:

Berlin and Austin factories are gigantic money furnaces; they’re losing billions of dollars right now because there’s a ton of expense and hardly any output. Supply chain interruptions have been extremely severe and we’re not out of it yet.

Tesla will terminate the majority of production at its Shanghai Gigafactory in the first half of July to execute upgrades. The stock is down over 40% for the year.

Oppenheimer analyst reacts to Musk’s comments

According to Oppenheimer’s Colin Rusch, however, the announcement that supply constraints are hurting Tesla Inc is not much of a surprise. This afternoon on CNBC’s “Power Lunch”, he said:

It’s fully digested by the Street. Our sense is that investors expect some growing pains, but it’s not going to be a revisit of the Model 3 ramp where they had major challenges in terms of the actual factory design in Fremont.

The Oppenheimer analyst has a “buy” rating on TSLA with a $1,291 price target. Despite supply constraints, Tesla remains committed to producing 1.5 million vehicles in 2022.

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