Tesla shares tumbled after the China Passenger Car Association’s April sales data. Media reports that Tesla is facing PR problems in the country and has also given up buying land near its Shanghai plant.
Tesla (TSLA) shares, down 12.5% since early 2021, fell 1.9% on Tuesday amid negative news for the automaker’s business in China and a general decline in the stock market.
Tesla shipments in China fell in April
While Tesla typically reports its shipments on a quarterly basis, the China Passenger Car Association (CPCA) publishes statistics for every automaker in the country on a monthly basis.
According to CPCA data, Tesla sold 25,845 electric vehicles in April, down 27% from March – 35,478, but more than 15,484 units in January and 18,318 units in February.
However, there is a significant clarification in the association’s report, the figure 25,845 includes 14,174 vehicles shipped by Tesla from its Shanghai plant to Europe. This means that sales in China itself fell 67% compared to March to 11,671 units. In its previous reports, the CPCA did not include Tesla export data.
“Demand for Tesla in Europe remains robust as exports to this key region are growing,” Wedbush analyst Daniel Ives wrote to clients on Tuesday.
Tesla scandals in China
Tesla’s sales in China, in addition to seasonality, could be affected by PR issues, as in April the media raised the issue of dissatisfaction with Chinese customers with the quality and safety of its electric vehicles. The company’s management initially reacted rather indifferently, which was perceived in a negative light in the country. Later, the company apologized and pledged to “work with regulators to investigate.”
“There were constant social media complaints about Tesla in China about its quality and service issues, which seemed to be largely ignored by the local team until Tuesday,” said Tu Le, an analyst at research firm Sino Auto Insights.
A reputational blow to Tesla in China was the accusation that Tesla cars are being used for espionage. Without providing any evidence, the Chinese government has banned Tesla vehicles from entering military bases in the country.
Experts have pointed out that even in the United States, car owners are free to choose whether to turn on the camera.
CEO Elon Musk also denied any wrongdoing and stressed the importance of maintaining a strong relationship with the Asian economic power.
Analysts believe these problems are related to growing tensions between the US and China and issues of trade and duties. President Biden has not lifted the 25% tariffs on imported Chinese electric vehicles imposed under former President Trump.
Tesla is not buying land in Shanghai to expand its plant
Another negative news for Tesla investors was the company’s refusal to acquire an 80-hectare plot of land across the street from its Shanghai plant. According to experts, the construction of additional workshops in this area would allow Tesla to increase production capacity by another 200,000 – 300,000 vehicles.
This suggests that Tesla has no plans to increase production in China, at least in the short term. Tesla’s Shanghai plant is designed to produce up to 500,000 vehicles per year, but it currently produces about 450,000 Model 3 and Model Y vehicles per year.
Wedbush analyst Daniel Ives believes Tesla’s decision was influenced by chip shortages, putting more pressure on manufacturing and logistics to meet global demand.
The analyst also estimates that Tesla vehicles in China will account for approximately 40% of the country’s total electric vehicle demand, which is estimated at more than 300,000 units per year.
At the same time, Ives noted that more Tesla vehicles will go to Europe this month than expected. The analyst reaffirmed the “better than market” rating and a target price of $ 1,000 for Tesla shares.
Tesla’s Berlin plant is not expected to start operating until early 2022, which falls short of the original July 2021 target. Read more in the Marketinfo.pro article “Tesla Shares Fall For Third Day In A row due to delayed production start in Berlin”.