According to a trade group report, Tesla sales in China have dropped dramatically, indicating that the company is losing ground in the world’s largest market for both traditional and electric vehicles.
Tesla’s sales in China fell to 8,621 cars in July, down nearly 70% from June, according to the China Passenger Car Association. However, the number of cars exported from Tesla’s Shanghai plant increased to 24,347 in July, up from 5,017 in June. Overall, sales of Teslas manufactured in China decreased by less than 1%.
Critics argue that the steep drop in sales to Chinese consumers is yet another sign of the company’s growing problems in the country. Tesla is facing increased competition from Chinese EV manufacturers as well as a string of bad press, including a recall of nearly all Shanghai-built vehicles. At this year’s Shanghai auto show, Telsa owners protested the company’s poor car quality and various safety concerns raised by Chinese regulators.
According to analyst Gordon Johnson, who has been one of Tesla’s harshest critics, Teslas accounted for just 3.9 percent of battery electric vehicle sales in China in July, down from 12.6 percent in June. According to him, the decline indicates that Tesla is facing stiffer competition from local EV startups.
“Overall, it now seems clear that Tesla has overbuilt Chinese capacity when compared to domestic demand, which will result in further price cuts and margin pressure,” Johnson said. “Given China is supposed to be Tesla’s ‘growth market,’ these numbers should concern any Tesla bull.”
Tesla (TSLA) investors, on the other hand, appeared unconcerned about the sales decline, as shares fell less than 1% on Tuesday. This is in stark contrast to the stock price drops that followed similar weak CPCA reports in April and May.
According to Dan Ives, a tech analyst for Wedbush Securities and a Tesla bull, declining numbers in China didn’t stop Tesla from reporting better-than-expected global sales for the full quarter last month.
“I think investors are becoming less sensitive to the month-to-month China numbers,” he said. “Ultimately, it’s not been the best indicator of Tesla’s success, as we saw in the second quarter.”
Ives, on the other hand, believes that unless Tesla’s sales in China improve, the company will face serious problems in the future.
“Right now we believe that China will be 40% of deliveries for Tesla by next year,” he said. “So selling only 8,000 in a month, even though it’s a volatile number, it doesn’t give the bulls the warm and fuzzies.”
Unlike other automakers, Tesla does not break down sales by market and only publishes quarterly sales reports rather than monthly. As a result, the CPCA’s figures are unreliable. A request for comment from Tesla on Tuesday went unanswered.