Tesla’s stock (TSLA) crashed in mid-afternoon after a report came out claiming that an inside source confirmed new orders are free-falling in China, an important market for Tesla.
The reported in question came out of The Information, and it is behind a paywall.
Based on an unnamed source, the publication claimed that Tesla’s net new orders fell to 9,800 last month, which is significantly down from the previous month and from a high of over 21,000 in March:
“The company’s monthly net orders in China dropped to about 9,800 in May from more than 18,000 in April, according to a person with knowledge of the data. The sharp drop reflected a drastic shift in Chinese consumers’ appetite for Tesla, whose founder Elon Musk has celebrity status there. Orders spiked in January after the release of the Model Y SUV, and then slowly eased off before cratering last month. In March, Tesla had 21,000 net orders. Even on a week-over-week basis, orders so far haven’t shown any signs of recovery, this person said.”
The report links the drop in orders to “public outcry and government criticism” over some of Tesla’s actions in China lately, including its handling of the customer who staged several demonstrations over an accident that she had in her Tesla vehicle earlier this year.
Tesla ended up releasing an entire report about the incident to be more transparent about the strange situation.
After the new report came out, Tesla’s stock dropped by about 4% — wiping billions of dollars worth of market capitalization.
I’d take this report with a grain of salt from a few reasons.
I am not as familiar with Tesla in China, but I have some good sources in the US, and I know just how tight Tesla is keeping its sales information.
In order for them to have access to net orders, they would have to have a pretty high up source within Tesla in China.
It’s not impossible, but I find it quite surprising considering how Tesla keeps those details to a close circle.
Now, even if it’s true, it’s not as big of deal as the market is making it to be, in my humble opinion.
Tesla’s month-to-month sales and deliveries vary greatly. If the data is correct, I don’t think they are wrong to think that the bad press in China has affected new orders, but you could easily see sales come back as Tesla pulls some demand triggers.
I think Tesla’s prospects in China are still good, and the automaker appears to have learned from its public missteps in the market and is looking to hire more PR and marketing people in the country, according to new job listings.
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