Tesla Inc. (TSLA) – Get report Shares fell on Monday amid lingering concerns about the pace of car sales in China and a decision by founder and CEO Elon Musk to unplug the high-end version of his Model S Plaid sedan.
Musk said the Plaid +, which was marketed with a 520-mile driving range, is now unnecessary given that the Model S Plaid is “so good.” It will be unveiled at a media event on June 10.
Meanwhile, an Information report last week indicated that May orders for Tesla vehicles in China, the world’s largest car market, fell 45% from April to just under 10,000. The China Passenger Car Association will release official figures on Friday.
However, Wedbush analyst Dan Ives notes that only about 5% of car sales in China are electric vehicles, and he expects to double deliveries in the next two years, with Tesla as well as national rivals like Nio NIO. , the main beneficiaries.
“We believe that this year, Tesla with a strong 2H can close to 900,000 annual deliveries and track to 1.3 million in 2022 with the Cybertruck adding to the overall EV demand story,” Ives said in a note to the customer who maintained a rating of ‘top performance’ with $ 1,000. target price. “Simply put, competition is increasing from all angles in this electric vehicle arms race that has been a cantilever on Tesla and the industry at large, yet this is just the beginning of an EV transformation that will change the world. auto industry for decades to come with Tesla leading the charge. ”
Tesla shares were 1.34% lower in pre-market trading on Monday to indicate an opening bell price of $ 591.00 each, a move that would set the shares falling so far. of the year by around 16.2%.
China is a crucial market for Tesla, accounting for just over a third of the 184,800 new cars the group delivered during the three months ending in March, a record total that included the production of 180,338 Model 3s and Model Ys.
The China Passenger Car Association (CPCA) showed the first quarter count of 69,280 units sold in the world’s largest auto market following the launch of its Shanghai gigafactory in 2019. The April count was set at 25,845, said CPCA last month.
Tesla, for its part, has sought to defend its place in the Chinese market by establishing data centers that will store the information generated by cars sold in the country, a move that follows the automaker’s renewed commitment to Chinese authorities. Beijing amid a broader crackdown on tech companies. and the collection of customer data.
Bloomberg reported last month that officials in China banned Tesla vehicles from military bases and housing complexes amid concerns that potentially sensitive data from their onboard cameras could be collected and stored on Tesla servers.
The military ban also came amid a Reuters report that one of China-based Tesla’s main rivals, Geely, is preparing to unveil a range of newly branded electric vehicles that could challenge the group’s dominance with based in Palo Alto, California in the high-end market. .
Geely, which owns a majority stake in Volvo and a nearly 10% stake in Daimler AG of Germany (DAILY) , has long held the ambition to make electric vehicles at a premium price, just like its national rival Nio.
“The main line in the sand now for the bulls and bears is not short-term chip shortages in our opinion (which is temporary), but rather Tesla’s ability to penetrate further into China,” Ives said. “With China a linchpin of Tesla’s global success and its Giga footprint a key advantage, the latest trade between Beijing and Tesla has clearly negatively impacted demand for Tesla in China for now.”
“Now it’s about Musk playing well in the sandbox and making sure Tesla doesn’t see any more stumbling blocks in China, which is poised to account for more than 40% of global deliveries by 2022,” he added.