Tesla Shares Fall On Report Of Sharp May Sales Slump In China

A Model Y vehicle displayed at a Tesla flagship store on January 4, 2021 in Shanghai, China.

Gao Yuwen | Visual China Group | fake images

Tesla shares fell more than 5% on Thursday after a report said the company’s vehicle orders in China fell sharply last month.

The Information, citing a single source familiar with the data, wrote that Tesla’s “monthly net orders in China fell to around 9,800 in May from more than 18,000 in April.” CNBC has not corroborated that report.

The Tesla factory in Shanghai is supposed to have the capacity to make around 500,000 electric cars a year for deliveries in China and exports to other parts of Asia and Europe.

Elon Musk’s electric vehicle company has been dealing with recalls and safety investigations in China. It is also dealing with a public relations backlash following some high-profile vehicle crashes, price changes and quality complaints from Chinese customers.

JL Warren Capital CEO Junheng Li said in an email to CNBC that while Tesla has not discussed the potential impacts of its PR crisis in China, it expects them to be material.

“We see a definite material impact on Tesla’s branding, orders and deliveries for the coming months, although it is difficult to quantify exactly to what extent declining demand is driven by concerns about Tesla’s safety features or growing competition, especially from Chinese automakers, ”he said. .

Li’s equity research firm focuses on Chinese and US companies with significant exposure in China. His firm estimated, in a note on June 1, that Tesla’s orders at Chan decreased by about 30% in May compared to April. While that’s not as terrible as the 50% drop reported by The Information, Warren noted that “both are disastrous.”

China represented the world’s second-largest electric vehicle market last year, according to IEA research. Tesla’s short-term growth depends largely on its ability to successfully make and sell cars in China.

According to analysis of Tesla job openings by Snow Bull Capital, the company is stepping up hiring for “Legal and Government Affairs” positions in 2021 across the country. In general, it is also increasing hiring at its Shanghai plant.

Tesla’s Chinese rival Nio saw deliveries fall in May as a global semiconductor shortage hit its business. But another competitor, Xpeng, said it delivered 5,686 cars in May, representing a 483% year-on-year increase and a 10% increase from the previous month.

Shares of Tesla are down 15% year-to-date and more than 35% since their intraday high on January 29.

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