Tesla stock was down 2% in the premarket session after Reuters reported that the company’s vehicle sales in China for October tumbled an astonishing 70% from last month. According to the China Passenger Car Association, Tesla sold just 211 cars in the world’s largest auto market in October.
The 70% drop in sales comes after the company admitted in October that tariffs were going to make for a “challenging competitive environment”, adding the following:
Tesla continues to lack access to cash incentives available to locally produced electric vehicles in China that are typically around 15% of MSRP or more. Taking ocean transport costs and import tariffs into account, Tesla is now operating at a 55% to 60% cost disadvantage compared to the exact same car locally produced in China. This makes for a challenging competitive environment, given that China is by far the largest market for electric vehicles.
This news follows last week’s report that Tesla was slashing prices on the Model S and Model X in the Asian country in order to try and offset the cost of tariffs for customers amid sliding demand. This purposefully under-the-radar announcement came on Thanksgiving day, and now sees Tesla bearing the brunt of costs associated with the ongoing trade war between China and the United States that it once said it would pass on to customers. We suggested that perhaps demand was not as robust as many thought in the country, as well. It looks as though these suspicions have been confirmed.
The price cuts came at a time when EV sales in China have been the silver lining of the entire auto industry, as we recently documented when discussing the shrinking global automobile market. EV sales were the sole sector of growth last month in China, increasing by 51% Y/Y. For the first 10 months of the year, sales were up 76% to 860,000 fueled by government subsidies and favorable policies, as well as still prevailing novelty.