Tesla’s sales in China, the world’s largest auto market and a critical part of the company’s fortunes, slumped in late 2022 as domestic manufacturers like BYD gained ground with cheaper electric vehicles, according to data published Thursday.
Tesla sold about 56,000 cars in China last month, down 21 percent from a year earlier and 44 percent from the previous month. For the full year, Tesla’s sales in China were up nearly 50 percent, according to data published by the China Passenger Car Association.
China accounts for about 40 percent of Tesla’s sales. Concerns about the automaker’s performance there were a major factor in Tesla’s stock price plummeting last year. Shares of the company fell about 3 percent on Thursday afternoon.
Tesla has grown rapidly in China, but is increasingly facing competition from companies like BYD, which sells high-profile cars at lower prices and is the country’s No. 1 electric vehicle brand. BYD sales, including hybrid vehicles, more than doubled in December from a year earlier and rose 2 percent in December from November, according to data from the Passenger Car Association.
China is considered key to Tesla’s global ambitions. Unlike the United States and Europe, overall car sales there are still rising because many people do not own a car or only own one vehicle. The Chinese government has strongly promoted electric vehicle ownership as a solution to air pollution in cities, although it recently cut subsidies.
“If you’re not in the largest market in the world, you’re nowhere,” said Axel Schmidt, a senior managing director at Accenture who oversees the consulting firm’s automotive division, before the sales figures were released.
Tesla’s Shanghai plant is considered one of the company’s most efficient plants, supplying cars to Europe and other parts of Asia in addition to China. The figures published on Thursday include exports. The Shanghai factory was forced to close repeatedly in 2022 due to supply chain issues and pandemic lockdowns.
China is in the middle of a pandemic crisis after the government abandoned its “zero Covid” policy despite public protests, lifted draconian quarantine and lockdown measures and sparked a surge in cases.
Tesla’s revenue decline should be seen “in the context of the massive outbreak of Covid” in December, Gary Black, managing partner of the Future Fund, an investment firm that owns Tesla stock, said on Twitter.
Overall, sales of hybrids and battery-only cars in China were flat in December compared to November, the association said.
There are other signs that Tesla suffered from declining demand for its products in China. The company has slashed prices on the Model Y and Model 3, the two vehicles it makes in Shanghai. The company’s website says vehicles can be delivered within a week – last year the wait took months.
Analysts say Tesla could be vulnerable to political tensions between the United States and China. Elon Musk, the company’s CEO, has courted the Chinese government, suggesting, for example, that Taiwan become a special administrative zone of China as a way to hand over more control to Beijing. Taiwan refuses to relinquish control to China or jeopardize its independence, and Musk’s comment angered leaders in Taipei.
Another concern for Tesla: BYD and other Chinese automakers have started selling cars in Europe. Their expansion could cost Tesla, Volkswagen and other automakers sales and market share, while many European car buyers are replacing internal combustion engine cars with battery-powered ones.
“The biggest concern now hanging over Tesla is that the demand story, especially from China, shows heavy cracks in the armor at a time when EV competition is steadily increasing,” said Daniel Ives, an analyst at Wedbush Securities, in a statement. a note. on Wednesday to customers.
