Tesla Stock Falls As Ominous Signs Emerge From China - Investor's Business Daily

1 month ago 63

Tesla (TSLA) sales in China dropped in April, and the U.S.-based EV maker reportedly halted an expansion of its Shanghai plant amid growing tensions with Beijing. Tesla stock fell but slashed losses.


China Passenger Car Association data show Tesla sold 25,845 EVs in April, down 27% from 35,478 in March, but up from January's 15,484 and February's 18,318.

Tesla shipped out 14,174 cars to Europe in April. In prior reports, CPCA sales excluded Tesla exports, but there were some reports that in April they were included. If so, that would imply a massive 67% month-to-month sales decline to 11,671.

"Demand in Europe remains robust with more exports going to this key region," wrote Wedbush analyst Daniel Ives in a note to clients on Tuesday. Tesla's Berlin factory now isn't expected to be operational until early 2022, slipping from an initial July 2021 target.

However, Ives added that Tesla's share gains stagnated vs. domestic players Nio (NIO), Xpeng (XPEV)and Li Auto (LI) during the month "as the company faced a handful of negative PR issues in China stemming from well-discussed safety issues, military spy noise and the protest at the Shanghai Auto Expo."

Shanghai Plant Expansion Halted

And according to Reuters, Tesla has shelved plans to buy additional land to expand its flagship Shanghai Gigafactory in light of rising U.S.-China tensions and tariff issues. President Biden has not removed the 25% tariffs on imported Chinese electric vehicles imposed under former President Trump.

Tesla's Shanghai factory is designed to make up to 500,000 cars per year. It's currently producing 450,000 Model 3 and Model Y vehicles per year.

Tesla had earlier considered expanding exports of its China-made entry-level Model 3 to more markets, including the U.S., according to Reuters. While Tesla never officially revealed plans to acquire more land near the factory, the 200-acre lot would enable the company to boost capacity by up to 300,000 cars. However, the current site still has space for expansion.

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Tesla Stock

Shares retreated 1.9% to close at 617.20 on the stock market today, after falling to 595.60 intraday. TSLA stock shed more than 6% on Monday. Tesla stock is now testing its 200-day line after undercutting its 50-day moving average, which itself is trending lower, according to MarketSmith chart analysis

Since hitting an all-time high of 900.40 achieved intraday on Jan. 25, Tesla stock has lost more than 30%. The relative strength line is also trending downward. Its RS Rating is 92, while its EPS Rating is 74.

Rival China-based EV makers Nio climbed 1.6%, Xpeng fell 2.1% and Li Auto was flat.

U.S. automakers with a growing slate of EVs General Motors (GM) declined 2.9%, while Ford (F) slipped 1.1%.

Global Chip Shortage

A global chip shortage is also putting pressure on production for automakers worldwide. Still, Ives says China demand for Tesla vehicles is on a 300,000-plus annual run rate and is poised to represent roughly 40% of deliveries for the automaker by 2022.

"That said, clearly Musk & Co. need to play nice in the sandbox with Beijing and smooth out PR issues in the region which have been a black eye for Tesla over the last month and clearly impacted China sales negatively in the month of April," said Ives, who maintained an outperform rating on Tesla stock and a 1,000 price target.

Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.


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