Why Are Tesla Sales Falling In China?

Tesla investors are concerned after the EV maker reported a sharp drop in sales in April, while its home-grown Chinese rivals’ sales soar.

After the report was released, Tesla (NASDAQ: TSLA) shareholders have become worried that the string of recent bad press involving the company is directly hurting its sales in China. The California-based company was the subject of a protest last month at China’s largest auto show in Shanghai. The demonstration involved Tesla owners who said that there were issues with their vehicles. 

Furthermore, Tesla has five Chinese regulatory agencies questioning the quality of its Shanghai-made Model 3 vehicles. This follows the news that China’s military has banned Tesla cars from entering its complexes over privacy concerns, casting a shade of doubt on the company in the eyes of Chinese buyers. 

How many cars did Tesla sell in China in April? 

According to the China Passenger Car Association, the EV maker sold 25,845 vehicles which were made in China in April, down 27% from 35,478 in March. The report also stated that Tesla exported around 14,174 cars from its Shanghai factory in the month but the association did not give the company’s export figures for March. The dramatic drop in China sales came from an overall 12% month-on-month fall in April for new energy passenger vehicles, which include pure-electric and hybrid modes.

Tesla does not divide its monthly deliveries per country, therefore, the association has given investors an important insight into how much the Chinese market is growing for the company. During the first quarter of 2021, these figures indicate that Tesla made $3 billion in sales in China, totaling 29% of the company’s global sales in the same period.

This disappointing news was made even worse when investors saw how Tesla’s competitors performed during the month of April. For example, Warren Buffett-backed car manufacturer BYD is close to outpacing Tesla, with the association reporting that the company sold 25,450 new energy cars during April, up 6.5% from 23,906 in the month prior. Tesla rivals, NIO, Xpeng, and Li Auto also all reported improved sales which have concerned some investors.

Is Tesla in trouble? 

As CEO Elon Musk continues to battle with negative press involving reports of Tesla brake failures, crashes, and even explosions in the company’s factories, regulators are keeping a close eye on the firm. In more bad news, it seems Tesla has halted its plans to buy more land to expand its Shanghai factory, which would have allowed the EV maker to produce more vehicles in the country.

It’s not all doom and gloom though, as the association also noted that the city of Beijing is giving 60,000 new license plates for new energy vehicles in May. This news is great for Tesla as it should boost sales for the company’s new market launches including Aion Y and Model Y models. 

Following the report, Tesla shares fell almost 2% in after-hours trading and are currently down around 12% for the year. 

Read more about Tesla below: 

Should I Buy Tesla Stock Right Now Following Earnings?

How Tesla Will Benefit From Biden’s Infrastructure Plan

Are Tesla’s Competitors Beginning To Catch Up?

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