Tesla China sales plummet as competition intensifies

Tesla’s sales in China, the world’s largest auto market and a crucial part of the company’s fortunes, plummeted in late 2022 as domestic makers like BYD gained ground with low-cost electric vehicles, according to reports. data released Thursday.

Tesla sold about 56,000 cars in China last month, down 21% from a year earlier and 44% from the previous month. For the full year, Tesla’s Chinese sales rose nearly 50%, according to data released by the China Passenger Car Association.

China accounts for about 40% of Tesla sales. Concerns about the automaker’s performance were a big factor in Tesla’s stock price precipitously falling last year. Shares of the company closed down around 3% on Thursday.

Tesla has grown rapidly in China, but faces increasingly fierce competition from companies such as BYD, which sells well-known cars at lower prices and is the No. 1 electric vehicle brand in the world. country. BYD sales, including hybrid vehicles, more than doubled in December from a year earlier and were up 2% in December from November, according to data from the Passenger Car Association.

China is seen as key to Tesla’s global ambitions. Unlike the United States and Europe, overall auto sales continue to rise as many people do not own a car or only own one vehicle. The Chinese government has strongly encouraged the ownership of electric vehicles as a solution to urban air pollution, although it has recently cut subsidies.

“When you’re not active in the world’s biggest market, you’re nowhere,” said Axel Schmidt, Accenture’s senior managing director who oversees the consultancy’s automotive division, ahead of the release of the figures. sales figures.

Tesla’s factory in Shanghai is considered one of the company’s most efficient plants and supplies cars to Europe and other parts of Asia in addition to China. Figures released Thursday include exports. The Shanghai factory was forced to close several times in 2022 due to supply chain issues and pandemic shutdowns.

China is in the midst of a pandemic crisis after the government abandoned its ‘zero Covid’ policy in the face of public protests, lifting draconian quarantine and lockdown measures and triggering a surge in cases.

Tesla’s sales decline should be seen “in the context of the massive Covid outbreak” in December, Gary Black, managing partner of the Future Fund, an investment firm that owns Tesla stock, said on Twitter.

Overall, sales of hybrids and battery-only cars in China were flat in December compared with November, the association said.

There were other signs that Tesla was suffering from slowing demand for its products in China. The company slashed prices for the Model Y and Model 3, the two vehicles it manufactures in Shanghai. The company’s website says vehicles can be delivered in as little as a week – last year expectations stretched into months.

Analysts say Tesla could be vulnerable to political tensions between the United States and China. Elon Musk, the company’s chief executive, has courted the Chinese government, suggesting, for example, that Taiwan become a special administrative area of ​​China to cede more control to Beijing. Taiwan refuses to cede any control to China or jeopardize its independence, and Mr Musk’s remark has angered leaders in Taipei.

Another concern for Tesla: BYD and other Chinese automakers have started selling cars in Europe. Their expansion could cost Tesla, Volkswagen and other automakers sales and market share as many European car buyers replace combustion-engine vehicles with battery-powered ones.

“The main current concern for Tesla is that the demand story, particularly from China, shows severe cracks in the armor at a time when competition from electric vehicles is steadily increasing,” said analyst Daniel Ives. at Wedbush Securities, in a note. to customers on Wednesday.