Tesla’s (TSLA) stock crashed by as much as 4% in pre-market trading on new data coming from China.
Let’s dive into what’s happening.
Insurance registration numbers were released in China last night, indicating that Tesla sold about 15,300 vehicles in the world’s biggest EV market last week.
Tesla currently sits at about 98,800 vehicles in China in the first quarter – about 4,000 fewer vehicles than during the same period in Q1 2024.
Globally, Tesla delivered 387,000 vehicles in Q1 2024 – yet, Wall Street analysts still expect Tesla to deliver 406,000 vehicles in Q1 2025.
Based on the recent ramp-up in deliveries over the last few weeks, from ~7,000 units 4 weeks ago to now ~15,000 units, it looks like Tesla was able to ramp up production of the new Model Y fairly well at Gigafactory Shanghai.
However, the problem is demand.
Yesterday, we reported that Tesla did two things:
- Tesla started to offer 0% financing on the new Model Y RWD in China
- Tesla increased the price of the Model Y AWD by RMB 10,000 yuan ($1,380 USD)
While some focus on the price increase as a good sign of demand, it’s based on a misunderstanding of Tesla’s market in China.
Tesla’s sales mix in China is roughly 90% RWD to 10% AWD.
Therefore, Tesla planned limited production of the new Long Range AWD based on the historical mix, and it got slightly more orders, resulting in a new order delivery timeline of 6 to 10 weeks.
Tesla now takes advantage of that by squeezing another $1,000 from buyers.
However, the real headline here is that Tesla’s lifeblood in China, the Model Y RWD, is seeing very weak demand on higher production, with a new delivery timeline of just 2-4 weeks.
Tesla already had to reintroduce 0% financing just a few weeks after launching the new version of the Model Y and enjoying a few weeks of extra demand for the redesign.
In addition to Tesla’s own reality in China, the automaker is also facing increasing pressure from competition. BYD just unveiled its latest ‘Super-E’ platform, which enables record-fast charging.
Today, CATL, Tesla’s main battery supplier in China, announced a new partnership with NIO, a Tesla competitor.
Also today, ZEEKR, another Tesla competitor in China, announced its own advanced driver-assist system for free as Tesla is launching its Full Self-Driving (FSD) system in the market.
More electric vehicles are also being announced in the market every week – putting more pressure on Tesla in the already most competitive EV market in the world.
Electrek’s Take
In short, China is the most critical EV market, and Tesla is being squeezed out of it.
Tesla’s margins in China are already believed to have gone to 0% late last year. It really doesn’t look like it can get better this quarter or this year.
Most people also didn’t expect Tesla to have to reintroduce 0% financing on the new Model Y so quickly in China. Thanks to the excitement for the new Model Y, they believed that Tesla would enjoy at least a few more months of unsubsidized demand.
It looks like the few months were actually just a few weeks.
Personally, I think thought that the Model 3 refresh was better executed than the new Model Y.
Tesla appears to have tailored the redesign to the Chinese market, which might work in North America, but in China, Chinese buyers might as well buy the cheaper and better-equipped Chinese vehicles that Tesla is trying to copy.
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