Tesla Stock Holds In Buy Zone After China Sales Data

The China Passenger Car Association reported booming July electric vehicle sales, with Tesla (TSLA) exporting the bulk of its production. Tesla stock dipped Tuesday after initially retreating toward an early buy point.




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Tesla wholesale sales totaled 32,968 in July. That included just 8,621 vehicles sold locally and 24,347 exported. Tesla exported 16,137 Model 3s and 16,137 Model Ys.

Wedbush analyst Daniel Ives told IBD Monday that he expected overall China Tesla sales to “rebound modestly and be up roughly 5% from June numbers.”

Tesla delivered 33,155 EVs in June, down slightly from 33,463 in May.

China EV Sales

China new energy vehicle (NEV) wholesale sales totaled 246,000, up 203% vs. a year earlier. NEV sales include all-electric, hybrid and fuel-cell vehicles. EV-only wholesale sales leapt 204.5% to 198,000.

Tesla Sales Offer Little Clarity

July’s sales data don’t provide much clarity regarding Tesla’s local demand, with so much production going overseas, mostly to Europe. Tesla has just started exporting the made-in-China Model Y to Europe, the first time the crossover will reach that highly competitive EV market. The Shanghai plant already has largely replaced the Fremont plant as a Model 3 export hub.

So, like Europe and other key markets, investors need to evaluate Tesla’s local China sales on a quarterly basis, rather than focusing on one month.

Tesla China’s local sales fell about 16% in Q2 vs. Q1. That’s despite a boost in Model Y sales as China production ramped up. Made-in-China Model 3 sales fell significantly vs. Q1.

In the second quarter, Tesla set a record for quarterly deliveries, surging 120% vs. a year earlier to 201,250 vehicles, roughly meeting Q2 forecasts. That was up from the prior record of 184,800 in Q1.

Tesla began long-delayed deliveries of the Model S Plaid, the revamped version of the luxury sedan, in June. But those weren’t expected to ramp up anytime soon. It’s unclear if Tesla is making any Model X vehicles.


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Cheaper Model Y

Last month, Tesla also unveiled a cheaper, lower-range made-in-China Model Y. Its lower price makes the vehicle eligible for government subsidies, which brings the price down to $42,600. That’s about 20% less than the longer-range Model Y.

Deliveries of the cheaper Model Y won’t show up in the July sales data, but could start as soon as this month.

Tesla briefly sold a Model Y SR+ in the U.S., but it was quickly discontinued amid limited demand.

The cheaper variant so quickly after the Model Y launch  along with a recent Model 3 price cut in China, suggest some weakness in local demand. The move to export the made-in China Model Y so quickly also could be a sign of weak demand. But the true strength of local demand at various price points may not be clear until the Berlin plant is operational, cutting off Tesla Shanghai’s main export market.

Tesla’s China Rivals 

Tesla’s China-based rivals Li Auto (LI) and Xpeng (XPEV) reported record car sales in July. Li Auto July sales jumped 251% year over year to 8,589 units, while Xpeng’s sales soared 228% to 8,040 cars.

Li Auto’s July sales were also 11% higher vs. June. Xpeng’s sales grew 22% compared to last month.

Nio (NIO) delivered a total 7,391 vehicles in July, up 125% from a year earlier, but down from 8,083 in June.

Chinese EV giant BYD (BYDDF) reported July EV sales of 24,996, up 109% vs. a year earlier. Its plug-in hybrid sales skyrocketed 463% to 25,061.

Tesla reportedly will start using BYD blade batteries for some made-in-China EVs next year. It already uses batteries from Chinese giant CATL.

Tesla Stock

Shares dipped 0.5% to 709.99on the stock market today after dipping to 701.88 intraday. On Monday, stock rose 2.1% to 713.76, moving back above an early entry at 700.10, according to MarketSmith chart analysis.

The Leaderboard stock is in a buy zone that extends to 735.11. Tesla recently found support at the 40-week line on its weekly chart. Now it’s spending some time above its 10-week moving average.

Still, TSLA stock remains about 20% below its all-time high 900.40 achieved on Jan 25.

Its relative strength line is trending slightly higher, but remains low. Tesla’s RS Rating is 87 out of a possible 99. Its EPS Rating is 72.

Among other EV stocks, Nio lost 2.2% while Xpeng dipped 0.1% and Li Auto stock retreated about 1%. On Monday, Nio stock and Xpeng climbed about 3%, while Li Auto rose 1.1%.

BYD stock edged higher Tuesday. Shares fell 1.5% on Monday after nearly hitting a record high last week.

Production Delays

China accounts for 30% of Tesla’s sales. It is the second-largest market for the EV maker, behind the U.S.

Global chip and battery shortages have stymied Tesla’s growth plans. In a call with investors following Q2 earnings, CEO Elon Musk said the “global chip shortage situation remains quite serious; hard to say how long this will last. It’s out of our control essentially. Seems like it’s getting better but it’s hard to predict.”

But other supply chain woes have also slashed global auto production, giving pricing power to Tesla and other carmakers. Tesla has announced several U.S. prices hikes in 2021.

Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.

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