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After a series of negative publicity and the recall of almost all the cars sold by the company in the country, Tesla’s shipments of Chinese-made cars in the local market dropped sharply last month.
Elon Musk’s electric car manufacturer reported that China’s domestic shipments in July were only 8,621, a 69% drop from June. Exports from the company’s Shanghai plant almost quadrupled to 24,347 vehicles, most of which were sold to Europe. This means that Tesla’s overall shipments in China in July fell by only 0.6% to 32,968 units.
Tesla initially received a warm welcome in China, including becoming the only foreign automaker approved to wholly own its local business in China, but this year it has encountered a series of setbacks. At the Shanghai Auto Show in April, a dissatisfied car owner’s protest went viral on social media, followed by a series of crashes. Regulatory authorities reviewed safety and customer service issues.
At the same time, Tesla is facing more intense competition from local electric car startups, including NIO, Xiaopeng Motors, and Leo Motors. The latter has just raised US$1.5 billion in Hong Kong listing, which will help Fund R&D and infrastructure expansion. In July, Li Auto delivered 8,589 vehicles, Xiaopeng Auto delivered 8,040 vehicles, and Weilai delivered 7,931 vehicles. This is the first month that domestic upstarts deliver locally consistent with their American competitors.
“We believe that China’s current demand for Tesla is good, but Tesla’s overcapacity/advancement relative to the United States is triggering price cuts and exports,” Bernstein analyst Benstein headed by Tony Sakonaji Zhou said in a report. Domestic competition “may make it difficult for Tesla to fully obtain its fair share or maintain a similar level of profitability.”
Credit Suisse analyst Dan Levy wrote in a letter to customers that Tesla’s domestic sales are the lowest in the past 15 months. Shortly after the start of regular trading on Tuesday, the automaker’s shares fell 0.9%.
In addition to Europe, Tesla’s domestically produced cars are also exported to Japan, Australia, New Zealand, Singapore and Hong Kong. The company said that the Shanghai plant has become its main export center.
“Tesla became positive in terms of exports in July regardless of the domestic market,” PCA Secretary-General Cui Dongshu said in a briefing on Tuesday. “Tesla’s domestic delivery volume has not reached 10,000, which is normal and very good.”
Tesla launched a cheaper version of the locally-made Model Y SUV crossover last month, so some customers may postpone purchases until the version is available. The model is expected to begin delivery within the next few months.
After receiving government subsidies, the starting price of the standard battery life Model Y is 276,000 yuan ($42,600), which is about 20% lower than the original long battery life version. Tesla recently lowered the price of its base Model 3 by RMB 15,000 to RMB 235,900.
In contrast, the starting price of Weilai ES6 SUV is around 358,000 yuan, while Liqi’s Li One is priced at 338,000 yuan. Although Tesla still leads the luxury electric vehicle market, its Chinese competitors are catching up with stylish design, localized software and meticulous customer service.
Tesla China said in a statement on Tuesday that the launch of the cheaper Model Y and the price cut of the Model 3 “will certainly attract more internal combustion engine owners to accept electric vehicles.”
PCA data on Tuesday showed that overall retail sales of cars, sport utility vehicles and utility vehicles in July fell 6.4% year-on-year to 1.52 million units. Sales of new energy vehicles including electric vehicles and plug-in hybrid vehicles increased by nearly 170% year-on-year to 222,000 units, with BYD, Tesla and SAIC Motor performing strong.
Cui said he expects that the global chip shortage will begin to ease after next month, on the grounds that the government announced an investigation into possible price manipulation last week.
“The national antitrust investigation on semiconductors led by the state agency will intimidate some chip distributors. They will release their stockpiled stocks, which will further benefit production and sales,” he said.
(Updated analyst comments and sharing actions in the sixth paragraph.)
– With the assistance of Reinie Booysen.
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