Mar 5 2024: On Monday, Tesla (NASDAQ:TSLA) witnessed a drop of more than 7% in its shares following a decrease in sales during February in China, possibly influenced by the slowdown typical during the Lunar New Year festivities.
The decline in sales within its crucial market casts a shadow over Tesla’s global delivery prospects, especially as the leading EV manufacturer contends with dwindling demand, heightened competition, and constraints stemming from a lack of entry-level vehicles and an aging product lineup.
According to data from the China Passenger Car Association, Tesla sold 60,365 vehicles manufactured in China in February, marking a 19% decline from the previous year and the lowest volume since December 2022. Tesla’s Shanghai facility produces Model Y and Model 3 electric cars for local and international markets, with over half of Tesla’s global deliveries originating from this plant last year.
Tesla’s shares concluded the day down 7.2% at $188.14, representing a slump of approximately 24% since the year began.
The Lunar New Year celebrations in China in February typically lead to reduced car purchasing activities. In response to slowing demand and increased competition from Chinese counterparts like BYD (SZ:002594), Tesla has implemented a series of price cuts and incentives.
Wedbush analyst Dan Ives remarked, “Tesla has encountered a perfect storm of challenges in China. This negative data point further fuels concerns surrounding the stock.”
Recently, Tesla introduced new incentives, including insurance subsidies, to attract consumers in the world’s largest automotive market.
On the same day, BYD launched a new iteration of its top-selling vehicle at a price lower than its predecessor, intensifying competition among rivals. BYD also experienced a 37% drop in sales to 122,311 units in February compared to the previous year.
In the United States, Tesla initiated an offer this month providing 5,000 free Supercharging miles to customers who trade in their older vehicles for a new Tesla by March 31. Additionally, Tesla temporarily reduced prices for some Model Y cars in the U.S. in February.
Analyst Troy Teslike adjusted his forecast for Tesla’s global deliveries in the first quarter of this year downwards, citing weaker-than-anticipated sales in China despite price reductions, indicating “a demand problem.”
In January, Tesla cautioned about “notably lower” sales growth for the year ahead as it focuses on ramping up production of its more affordable electric vehicle.
