Tesla (TSLA) shares experienced a downturn, reaching new multi-week lows amidst indications of slowing shipments in China and fresh price reductions in the region, signaling potential challenges for the electric vehicle (EV) leader in the world’s largest automotive market.
Preliminary data from China’s Passenger Car Association (PCA), as reported by Bloomberg, revealed that Tesla shipped 60,365 vehicles from its Giga Shanghai factory in February. This figure marks a 16% decline from the previous month, a 19% decrease from the same period last year, and stands as the lowest shipment total since December 2022.
Following this announcement, Tesla shares closed down 7.16%, marking their lowest close since February 13.
The timing of the Chinese Lunar Holiday in February, during which the country observes a nearly two-week shutdown, historically leads to subdued economic activity and sales. Additionally, Tesla tends to allocate shipments outside of China in the earlier months of the quarter, with a subsequent increase in domestic Chinese sales later in the quarter.
However, Tesla’s lowest shipment total in over a year raises concerns for the company, which views China as a crucial growth market. Even China’s BYD, which surpassed Tesla in overall EV sales in Q4, experienced a significant decline in February sales, dropping from 193,655 to 122,311 units, a 37% decrease.
China currently leads the world in EV sales, but a recent slowdown in demand prompted automakers to engage in a price war earlier this year, including Tesla.
According to a report by Deutsche Bank’s Emmanuel Rosner, Tesla’s recent incentives in mainland China involve offering customers purchasing from existing inventories of Model 3 and Model Y vehicles by the end of March a “price cut equivalent to ~$4.8K.” These incentives include insurance discounts, paint change discounts, and preferential financing plans on the Model Y. This follows Tesla’s price cuts in January for the Model 3 (5.9% reduction) and Model Y (2.8% reduction).
The intensifying competition in China’s EV market, coupled with Tesla’s price reductions and potential shipment adjustments, raises concerns for investors.
However, there’s a silver lining: BYD’s potential entry into the US market seems less imminent for now.
“We’re not planning to come to the US,” stated Stella Li, executive vice president of BYD and CEO of BYD Americas, in an interview with Yahoo Finance Live. Li cited the complexities of the US market, including growing political scrutiny on Chinese companies and the decelerating rate of EV adoption.
Worries about BYD’s US market entry had been escalating, fueled by reports that the China-based automaker was considering utilizing Mexico-based factories to import EVs into the US without facing tariff penalties under the terms of the United States-Mexico-Canada Agreement.
