Tesla Sales in China Slump as Competition Intensifies

Tesla sales in China, the world’s largest car market, rose in 2022 but slumped in December as domestic manufacturers gained ground, according to data published Thursday.

The company sold around 56,000 cars in China last month, a decline of more than 20 percent from a year earlier, and nearly 45 percent from the previous month. For the full year, Tesla’s Chinese sales rose 50 percent, according to data published by the China Passenger Car Association.

China accounts for roughly 40 percent of Tesla’s sales. Concern about the carmaker’s performance there has been a significant factor in the precipitous decline of Tesla shares. The company’s stock was down about 5 percent on Thursday morning.

Tesla is facing increasingly stiff competition from Chinese automakers like BYD, which sells well-regarded cars at lower prices and is the No. 1 electric vehicle brand.

China is considered key to Tesla’s global ambitions. In contrast to the United States and Europe, overall auto sales are still rising because many people do not own cars, or own just one vehicle. The Chinese government has heavily promoted electric vehicle ownership as a solution to urban air pollution, though it has slashed subsidies recently.

“When you are not active in the largest market in the world, you are nowhere,” Axel Schmidt, a senior managing director at Accenture who oversees the consulting firm’s automotive division, said before publication of the 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. The factory was forced to shut down repeatedly during 2022 because of supply chain problems and pandemic lockdowns.

There have also been signs that Tesla was suffering from softening demand for its products in China. The company has cut prices for its vehicles and advertises on its website that vehicles can be delivered in as little as a week, in contrast to wait times of months last year.

Elon Musk, the chief executive of Tesla, has courted the Chinese government, suggesting, for example, that Taiwan become a special administrative zone of China as a way of ceding more control to Beijing. Still, analysts say that Tesla could be vulnerable to political tension between the United States and China.

“The major worry now overhead for Tesla is that the demand story especially out of China is showing heavy cracks in the armor at a time that E.V. competition is steadily increasing,” Daniel Ives, an analyst at Wedbush Securities, said in a note to clients on Wednesday.

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