Auto earnings sound recession alarm

Ford stock was down almost 4% on Thursday afternoon. Following Tesla’s results, and what Elon Musk had to say about them, concern accelerated about the state of the US economy, dragging down stocks across the auto industry.

Tesla’s first-quarter gross profit margins, reported Wednesday evening, disappointed investors, coming in below 20%. And Musk mentioned high interest rates, vehicle affordability, or the economy about 10 times on the company’s earnings conference call.

The recession scenario is on. Demand remains above supply, but at the cost of a string of price cuts, reacting to a steep drop in auto demand in China and multiple signs of weakness across the world.

Investors know things are slowing down, but they don’t like to hear it from the CEO of the world’s more valuable car company. Musk also predicted “economic stormy weather” for about a year.

Weakness into the middle of 2024 is definitely not what investors have been hoping for. The possibility that Tesla could keep cutting prices to manage demand is another drag on the stock.

Shares were at $167.02, down $13.58, or 7.5%, in midday trading. The S&P 500 and Nasdaq Composite were 0.5% and 0.6% lower, respectively.

If Tesla ended the day at $167.02, it would be the lowest final level since Jan. 30, when shares closed at $166.66. Shares are now down for three consecutive days, dropping more than 10% over that span.

Ford Motor (F) and General Motors (GM) shares were off 3.9% and 3.3%, respectively. Stellantis (STLA) stock was down 4.9%. Volkswagen (VOW. Germany) shares are off 2.1% in overseas trading. Even Toyota Motor (TM) shares are off 1%.

Shares of Chinese EV maker BYD (1211. Hong Kong) lost 0.9% as Hong Kong’s Hang Seng Index gained 0.1%. Shares of EV startups Rivian Automotive (RIVN) and Lucid (LCID) were off 4% and 5.5%, respectively.