Tesla shares tumbled on news out of China that the company’s sales there dropped in April and the electric-car maker led by billionaire Elon Musk reportedly opted against buying more land to turn its Shanghai Gigafactory into a base for global exports.
Sales of Tesla vehicles in China last month dropped 27% to 25,845, nearly a 10,000-unit decline from March, according to Global Times, a government-affiliated news outlet, citing China Passenger Car Association data. Separately, Reuters reported that the company decided not to purchase land adjacent to its Shanghai plant to build a new facility to build Model 3s for export to markets including the U.S., which imposes a 25% tariff on vehicles produced in China.
Tesla fell 3.7% to 605.81 at 11:10 a.m. New York time in Nasdaq trading on Tuesday, after earlier declining 5.3%. The shares are down more than 14% so far this year.
The sequential sales decline in April and modified production plans come after Tesla was criticized as “arrogant” last month for its handling of a highly publicized customer complaint about a braking issue with her vehicle and government officials raised concerns that cameras on Tesla vehicles created a potential security risk for Chinese military facilities. The company has taken a conciliatory tone to ease concerns about both issues, and Musk said last month that cameras are not activated outside of North America to randomly collect data.
On top of everything else, Tesla is contending with the same shortage of computer chips that’s complicated production plans for all major automakers, Wedbush equity analyst Dan Ives said in a research note on Tuesday.
“Taking a step back, Tesla is clearly facing chip shortage issues which is putting more pressure on production and logistics to fulfill demand globally and speaks to more cars heading to Europe this month than the Street expected (with Berlin factory build out not up and running till early 2022),” Ives said. He expects China sales for Tesla should top 300,000 units and that the market will account for about 40% of its global deliveries by 2022.
“That said, clearly Musk & Co. need to play nice in the sandbox with Beijing and smooth out PR issues in the region which have been a black eye for Tesla over the last month and clearly impacted China sales negatively in the month of April which the Street will react with a sell-off in shares this morning.”