Tesla shares drop on report of steep May sales decline in China

A Model Y vehicle on display in a Tesla flagship store in Shanghai, China on Jan. 4, 2021.

Gao Yuwen | Visual China Group | Getty Images

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

Quoting a single source familiar with the data, the information wrote that Tesla’s “net monthly orders in China fell from more than 18,000 in April to about 9,800 in May.” CNBC has not confirmed this report.

Tesla’s Shanghai factory is said to have the capacity to produce around 500,000 electric cars annually for delivery in China and exports to other parts of Asia and Europe.

Elon Musk’s electric vehicle company has been grappling with recalls and safety investigations in China. It is also facing a backlash in public relations there after some high profile vehicle accidents, price changes and quality complaints from Chinese customers.

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

“We see a definite material impact on Tesla branding, orders and deliveries for the coming months, although it is difficult to quantify the extent to which the falling demand is being driven by concerns about Tesla’s security features or increasing competition, particularly from Chinese automakers,” she said .

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Li’s stock research firm focuses on Chinese and US companies with significant exposure to China. In a June 1 announcement, your company estimated that Tesla orders in China were down around 30% in May compared with April. While that’s not as bad as the 50% decline reported by The Information, Warren noted that “both are catastrophic”.

According to a study by the IEA, China was the second largest electric vehicle market in the world last year. Tesla’s near-term growth depends largely on its ability to successfully manufacture and sell cars in China.

According to an analysis of Tesla job openings by Snow Bull Capital, the company will be increasing its legal and governmental recruitment positions nationwide in 2021. It is also generally increasing the hiring of employees at its Shanghai facility.

Chinese Tesla rival Nio saw shipments decline in May as a global semiconductor shortage hurt its business. But another competitor, Xpeng, said it shipped 5,686 cars in May, up 483% from last year and up 10% from the previous month.

Tesla stock is down about 15% since the start of the year and more than 35% from its January 29 intraday high.

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