Tesla Stock Price Drop After China Sales Decline 70%
Tesla share price (NASDAQ: TSLA) suffered on Tuesday after the electric vehicle manufacturer suffered a drop in sales in China. Since October 2017, Tesla sales have dropped by 70 percent in China (year-on-year).
A representative at China’s passenger car association allegedly told Reuters that Tesla has only sold 211 cars in October. Considering that China is the world’s largest car market, that is a worrying metric.
Tesla commented on the allegations by saying this:
“This is wildly inaccurate. While we do not disclose regional or monthly sales numbers, these figures are off by a significant margin.”– Tesla Spokesperson
Once the news dropped, Tesla stock price fell by 1.7 percent at the opening bell.
The long-lasting trade war between China and the United States is proving to be detrimental to global brands like Tesla. Because Tesla imports the vehicles that it sells in the Chinese market, it pays tariffs and duties on each unit.
Tesla announced production numbers for Q3 last month. The company also commented on how it has been able to “significantly increase” the deliveries of the Model X and Model S cars. The Palo Alto based company also said that it has dealt with the challenges that the trade war presented.
According to Tesla, China has imposed an import tariff of 40 percent on Tesla cars. 40 percent is an immense amount, when considering that other vehicles have a tariff of 15 percent when imported to China. To produce Tesla vehicles in China, it would cost 55%-60% more.
Tesla Stock Prediction
Although Tesla has faced its challenges, the Tesla stock price today is outperforming the U.S equity market across the year. On Monday, Tesla stock price was up by more than 11 percent since January. The S&P 500 has been relatively flat this year, highlighting Tesla’s strong performance.
Investor confidence in Tesla is slowly growing, which is reassuring for the company. With production rate improving we are likely to see the price of Tesla vehicles drop, causing sales to increase. It has been reported that Tesla has fulfilled a production rate of 1,000 cars per day (reported by Electrek).
Tesla is now trying to maintain that production rate and work on lowering the cost of its vehicles. Tesla initially planned to sell the Model 3 for $35,000, with production being ramped up it is likely we will see it reach this price.
If Tesla can sustainably produce the Model 3 and sell it for $35,000USD then we can expect Tesla stock price to increase as revenues climb. The Model 3 car is the front-runner in Tesla’s vehicular lineup. Elon Musk has said that the key to profitability is the Model 3 reaching production numbers of 5,000-6,000 a week.
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