Shares in Tesla fell more than 7% on Monday following a decline in sales in China in February. The Lunar New Year holidays likely contributed to the slowdown in China, a key market for the electric vehicle (EV) maker.
The drop in sales in China has dimmed the outlook for Tesla’s global deliveries. The company is currently facing challenges including a decline in demand, rising competition, and a lack of entry-level vehicles in its product lineup.
According to data from the China Passenger Car Association, Tesla sold 60,365 China-made vehicles in February, down 19% from a year earlier and the lowest volume since December 2022. Tesla’s Shanghai factory, which produces Model Y and Model 3 electric cars for the local market, Europe, and other countries, accounted for over half of Tesla’s global deliveries last year.
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Tesla’s shares ended the day down 7.2% at $188.14, marking a slump of about 24% since the start of the year.
The Lunar New Year holidays in February led to reduced car purchasing activities in China. To counter slowing demand and rising competition from Chinese rivals like BYD, Tesla has implemented a series of price cuts and incentives.
Wedbush analyst Dan Ives commented on the situation, stating, “It’s been a perfect storm of headwinds for Tesla in China. This was a negative data point that adds fuel to the fire around the stock.”
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Last week, Tesla unveiled new incentives, including insurance subsidies, to attract consumers in the world’s largest auto market. Meanwhile, BYD launched a new version of its best-selling car at a lower price than its discontinued predecessor, escalating a price war with rivals. BYD also experienced a 37% decline in sales to 122,311 in February from a year earlier.
In the United States, Tesla has offered 5,000 free Supercharging miles to customers who trade in their older vehicle for a new Tesla vehicle by March 31. Additionally, Tesla temporarily reduced prices of some of its Model Y cars in the U.S. in February.
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Analyst Troy Teslike revised down his forecast for Tesla’s global deliveries for the first quarter of this year, citing weaker-than-expected China sales despite a price cut as indicative of “a demand problem.” In January, Tesla warned of “notably lower” sales growth this year as it focuses on the production of its cheaper electric vehicle.
