Tesla rejoins the $1 trillion club, but troubling China data sparks investor doubts about what's really driving growth
Tesla might have regained its $1 trillion market capitalization this week, but a worrying trend is starting to appear in China, Tesla's most significant market.
Sharp Drop in Tesla Sales in China
The latest insurance data from China showed a decline in Tesla's weekly sales, triggering new fear among investors already on edge about the company's performance, as per a report.
For the week ended May 11, Tesla delivered only 3,070 cars in China, 58% fall from the prior week, and 69% below from a year ago, reported Fortune. Most of that drop was in the Model Y, Tesla's best-selling model worldwide, which reported just 1,270 units sold, its lowest point since it went on sale in China, according to the report.
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For a firm that has China as its sole largest market, which is larger even than the United States, these figures are a red flag. Roland Pircher, who regularly tracks Tesla's international EV sales, said, 'Something is definitely going on in China,' quoted Fortune.
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Stagnant Product Line
CarNewsChina reported that Tesla's plan to stick with the same lineup of vehicles and provide just incremental updates is beginning to fail in China. Regardless of how many incentives or discounts the company includes, it's increasingly difficult to persuade buyers, particularly those who have been waiting for a more thrilling update of the Model Y, as per the report. Numerous potential buyers do not find it to be of compelling value to purchase what is ultimately a five-year-old vehicle, as per CarNewsChina.
Rising Competition from Chinese EV Brands
Meanwhile, Chinese companies such as Xpeng G6, Onvo L60, Li Auto L6, BYD Sealion 7 and Zeekr 7X are performing way better than Tesla because the domestic brands innovate at 'China speed', according to the report. This means that these companies have reduced development cycles on new models to just two to three years from the industry standard of six to seven, as per CarNewsChina.
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CarNewsChina wrote, 'Competition in the Middle Kingdom is simply too much,' adding, 'Young Chinese buyers don't have the fear of buying Chinese products like their parents, who still remember the 90s. The lack of new models is finally hurting Tesla in China.'
FAQs
Did Tesla's sales drop in China?
Yes. Tesla's sales dropped due to declining demand, especially for the Model Y, which saw a sharp decrease in sales, as per Fortune.
How fast are Chinese automakers innovating compared to Tesla?
Chinese automakers are speeding up their innovation cycles to just 2-3 years, while Tesla takes much longer to refresh its models.
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