Tesla’s sales in China have dropped significantly in the first month of the year despite Tesla starting local production and deliveries. The drop also happened before the ramp-up in fear over the coronavirus and now Tesla’s stock is taking a major hit.
The entire market has been hit this week due to fear of the coronavirus affecting the Chinese economy and spreading its impact to other regions.
But Tesla’s stock has been particularly affected and was down by as much as 10% this morning.
The drop came after it was reported that Tesla’s new car registrations in China dropped by almost 50% last month:
“Citing state-backed China Automotive Information Net, which gathers industry data based on insurance purchases, Bloomberg reported Thursday that 3,563 Tesla cars were registered in China last month, down from 6,643 in December.”
That’s despite Tesla producing more than 2,600 cars at Gigafactory Shanghai in January and not only relying on importing vehicles from the US.
The report also noted that the drop happened before the ramp-up of the issues related to the coronavirus.
It created a selloff with Tesla’s stock price being down almost 20% over the last 5 days:
In comparison, the NASDAQ is down about 8% over the same period.
China is an important market for the automotive industry and especially for electric vehicles. It has been Tesla’s second-biggest market and the company was expecting to grow significantly in China in 2020 due to now having local production after completing its Gigafactory Shanghai last year.
On top of the impact on the local market, China is also an important supplier of automotive parts for the global industry.
Tesla hasn’t reported any issue of supply for its other manufacturing location in California related to the coronavirus, but several other companies have reported supply constraints.
Tesla is taking a much bigger hit than most with this broader market selloff.
Obviously, I don’t think it’s only related to the coronavirus since Tesla also had a giant rally before the selloff so a normal correction might also be involved here.
However, the coronavirus crisis is also definitely coming at an exceptionally awful time for Tesla in China. After investing hundreds of millions into the factory, they are stuck in a health crisis that is affecting the entire market.
As for the actual sales numbers in January, I wouldn’t worry too much about that. It’s not surprising that there are some delays between the volume being imported and local production.
What would be more worrying for Tesla is if this crisis continues and Tesla doesn’t create much cash flow out of its assets in China.
What do you think? Let us know in the comment section below.
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