Tesla China sales slump as rival BYD grabs market share

Tesla (TSLA) - Get Free Report shares edged lower Monday after the carmaker posted the biggest slump in China sales in nearly a year. It faces intensifying competition in the world's biggest EV market while looking to meet its global delivery target of 1.8 million.

The China Passenger Car Association said Tesla sold 82,432 vehicles in the world's biggest market last month, up 14.3% from the October tally but down nearly 18% from the year-earlier month. That figure is the biggest annual decline since last December.

Sales from BYD (BYDDY) - Get Free Report, meanwhile, were up 31% from a year earlier to a record 301,378 units as Tesla's China-based rival continues to win market share thanks in part to its partnership with Mercedes-Benz.

Tesla said in October that it's on pace to meet its goal of delivering 1.8 million cars this year, which will require a fourth-quarter tally of around 477,000. But Chief Executive Elon Musk cautioned that an earlier ambition of growing overall deliveries by 50% each year may not be possible.

Tesla might need to keep cutting prices

Tesla may be forced to continue its strategy of aggressive price cuts in key markets, including China and the U.S., to maintain market share in the face of slumping EV demand.

That's likely to further pressure profit margins, which in the third quarter narrowed more than 25% from a year earlier, taking its closely tracked gross margin tally below 18%.

Tesla shares were marked 0.5% lower in premarket trading to indicate an opening bell price of $237.66 each, trimming the stock's six-month gain to around 9.4%. That's just ahead of the 8.13% advance for the Nasdaq.

Tesla stock short interest remains elevated

Short interest in Tesla stock remains elevated at the highest levels in the world. Investors have placed bets against the group of around $18.63 billion, or 3.03% of the stock's entire float, according to recent data from S3 partners.

Last week, the Austin group unveiled pricing for its Cybertruck pickup. It'll cost around $100,000 for the high-end version of the long-delayed vehicle, marking a key plank in Musk's near-term strategy.

Musk delivered the first 10 Cybertrucks at a livestreamed event held at the group's headquarters. The company tamed estimates for 2024 deliveries last month when Musk warned that ramping the new vehicle "is going to be extremely difficult."

"This is simply normal for – when you've got a product with a lot of new technology or any new – brand-new vehicle program, but especially one that is as different and advanced as the Cybertruck, you will have problems proportionate to how many new things you're trying to solve at scale," Musk told investors on Oct. 19.

• Action Alerts PLUS offers expert portfolio guidance to help you make informed investing decisions. Sign up now.

This story was originally published December 4, 2023, 4:43 AM.