Elon Musk's Tesla sees 11.5% sales drop in China as rival BYD races ahead

Shares of Elon Musk’s Tesla fell 1.5 per cent in premarket trading after sales data from China revealed a 11.5 per cent drop in electric vehicle sales in January. The stock remained 0.70 per cent down at EST.

Tesla sold 63,238 units of its electric vehicle last month, compared to 71,447 cars in January 2024. Chinese EV brands like Build Your Dreams (BYD), Changan Automobile and Xpeng reported growth in sales, as per CNBC.

BYD recorded a growth of 47 per cent year-on-year, with 296,446 plug-in hybrid and pure electric vehicles sold last month.

Tesla next casualty of China-US trade war?

According to a report in Fortune, Tesla stocks fell 5 per cent after US President Donald Trump’s tariff announcement. This was the biggest drop for a member of the Magnificent Seven — a grouping of the largest companies in the US in terms of market capitalisation.

Owing to the complex global supply chains for EVs, Trump’s tariffs could hit Tesla’s business and profit margins negatively in the long run.

Furthermore, China’s retaliatory 10 per cent levy on electric trucks imported from the US could target Tesla.

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Tesla’s bid to woo buyers in China

Amid stiff domestic competition, the American EV brand has slashed prices on its vehicles to attract consumers. Tesla had reduced the price of its Model Y car in China last year. It had also extended a zero-interest five-year loan deal till January end. The zero-interest plan also extended to the revamped version of the Model Y.

The automaker aims to launch its driver assist system, which it calls “Full Self Driving,” this year in China. Local manufacturers are experimenting with similar features.

Investors nervous about falling sales

It’s not just China that has seen a decline in Tesla sales. The company has seen a drop in sales in France and Germany as well. In California too, the company recorded its fifth consecutive quarterly decline, as per Barron’s.

Figures from China may add to investor worries. While the January figures could be a blip in the radar since the month was not positive for automobile sales in general, fears of stiff competition from domestic EV brands may plague the car manufacturer in the long run.

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FAQs

1. Will Tesla release a new model this year?
It is expected that the company will launch a new and affordable vehicle in the first half of 2025.

2. Do investors believe Tesla will bounce back from a decline in sales?
Yes, they think a new model can kickstart recovery.