Hedge funds face losses amid unexpected Tesla rally

Investing.com - A considerable number of hedge funds that had bet against Tesla Inc (NASDAQ:TSLA) may now be facing potential losses, following a surprising rally in the electric vehicle manufacturer's shares.

According to Hazeltree, a data provider, approximately 18% of over 500 hedge funds had a short position on Tesla at the end of June, marking the highest percentage in over a year. This was a significant increase from just under 15% at the end of March.

This turn of events comes on the heels of Tesla's recent vehicle sales results, which revealed second-quarter deliveries surpassing average analyst estimates, despite a drop in sales.

This news sparked investor enthusiasm, pushing Tesla's shares to a six-month high and causing a surge of approximately 40% in Tesla's share price since the beginning of June.

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The electric vehicle industry, crucial in achieving global net-zero emissions by 2050, faces numerous challenges. These include tariff wars, consumer rejection of electric vehicles perceived as "woke" transport, and political uncertainties. Former US President Donald Trump, a professed fan of Tesla's Cybertruck, has also expressed his intention to repeal laws supporting battery-powered vehicles if he returns to office.

Despite these challenges, Tesla has its share of internal disruptions to manage. Earlier in the year, CEO Elon Musk warned employees of impending job cuts, with sales roles being particularly affected. Additionally, the production of the Cybertruck, Tesla's latest consumer model, has been slow to accelerate.

Meanwhile, traditional automakers are under pressure from shareholders to reduce capital expenditure on electric vehicles. For instance, luxury electric vehicle manufacturers such as Polestar Automotive Holding Uk Plc A (NASDAQ:PSNY) and Fisker Inc (BE:FISG) have experienced significant losses in value, with the latter filing for Chapter 11 bankruptcy protection.