Is the Core Lithium share price at risk following Tesla’s disappointing earnings?

The Core Lithium Ltd (ASX: CXO) share price has rebounded from early morning losses and is currently up 0.2%.

Shares in the ASX lithium stock closed yesterday at $1.33. In late morning trade shares are swapping hands for $1.34.

The company has been a major beneficiary of soaring lithium prices amid a battery manufacturing boom to power the rapid growth in global EV markets.

Year to date that’s seen the Core Lithium share price rocket an eye-popping 110%. And this is in a year where the S&P/ASX 200 Index (ASX: XJO) has dropped 12%, no less.

But could Core Lithium’s dream run be at risk from the underwhelming quarterly results reported by EV giant Tesla Inc (NASDAQ: TSLA) yesterday?

Could Tesla impact the Core Lithium share price surge?

The Tesla share price closed down 6.7% yesterday after the company’s quarterly revenues came in shy of consensus expectations. The Tesla share price is now down just over 48% this calendar year.

Core Lithium, as you may recall, executed a legally binding term sheet with Tesla for the supply of lithium spodumene concentrate.

The deal, announced on 2 March this year, is for 110,000 tonnes of lithium spodumene concentrate over a four-year period, sourced from its Finniss Lithium Project, in the Northern Territory. The Core Lithium share price leapt 11% on the day of the announcement.

Commenting on the agreement at the time, managing director of Core Lithium, Stephen Biggins said, “Tesla is a world leader in electric vehicles and its investment in offtake and interest in our expansion plans for downstream processing are very encouraging.”

Indeed. Tesla is a world leader in EVs. Therefore, its disappointing quarterly earnings could be portending a slowdown in global EV markets and lithium demand, potentially throwing up some headwinds for the Core Lithium share price.

China’s slowing growth in the spotlight

According to Eliot Hastie, markets analyst at Australian digital brokerage Stake, “Some analysts believe that softening demand is the primary concern, with sales in China – Tesla’s biggest market – having slowed due to rising competition and a poor macroeconomic landscape.”

“Tesla still makes up just under a fifth of all global battery-only electric vehicles sales, so it’s a significant sentiment driver for Australian lithium stocks,” Hastie added. “The brand’s earnings could be seen as a negative sign for lithium demand in the short term by some, but the need for this commodity is still predicted to increase exponentially over the long term.”

A slowdown in China could indeed impact EV demand from the world’s most populous nation. While that could see a short-term dip in lithium prices, the longer-term outlook remains quite strong.

According to the Department of Industry Science and Resources’ latest quarterly Resources and Energy Report, “lithium exports are now forecast to rise by over 180% to $13.8 billion in 2022-23”.

Hastie notes the Core Lithium share price will be on watch next Wednesday, 26 October. That’s when the company is set to agree on the specific terms of its offtake agreement with Tesla.

The post Is the Core Lithium share price at risk following Tesla’s disappointing earnings? appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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