Tesla (TSLA) sales in China increased in February, while local rivals saw declines, indicating gains in market share in the world’s largest automotive market. Tesla’s shares took a leap.
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The China Passenger Car Association reported that Tesla sold 18,318 Models 3s and Ys made in Shanghai in February, up 8% from 15,484 sold in January.
About that, Xpeng (XPEV) delivered 2,223 EVs against 6,015 in January. Nio (NIO) sold 5,578 against 7,225 in January. Li Auto (LI) delivered 2,300 Li ONEs, down from 5,379 in January. Supported by Warren Buffett BYD (BYDDF) sold 10,355 new energy vehicles last month against 20,178 in January.
While consumer activity slowed last month during the Lunar New Year holiday, Wall Street was Tesla’s monthly earnings.
“We believe that price cuts and the introduction of Model Y were instrumental in some of these changes in market dynamics in China,” said Wedbush analyst Daniel Ives in a note to customers. “That said, overall EV demand in the region looks robust with EV penetration set to go from 4.5% in China in 2020 to 10% in 2022 in this EV arms race with Tesla and his Giga footprint ahead and in the center.”
Overall, February EV sales reached 97,000 electric cars in China, the CPCA said, a 38% drop from January, due in part to the week-long holiday.
Tesla is “on track to follow a trajectory of more than 200,000 units in China this year, which remains an axis for the company to reach its annual numbers of 750,000 to 800,000 for the year,” added Ives.
He maintains a neutral rating for Tesla’s shares with a 950 price perspective. Meanwhile, New Street Research analyst Pierre Ferragu raised Tesla’s shares to a purchase with a target price of 900.
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Tesla Stock
The shares rose about 10%, to 619.60 on the stock exchange today, but still below its 50-day moving average. Tesla’s stock has plummeted in recent weeks and is almost 33% below its 52-week high of 900.40, according to graphical analysis MarketSmith. Its relative strength line is trending downwards.
Nio’s shares were up 12%, Xpeng was up 16.5% and Li Auto was up 15%. BYD added 9%.
A global chip shortage halted production at Tesla and other automakers’ factories. But some industry watchers have long dismissed Tesla’s shares as overvalued. They also pointed out that it is increasingly vulnerable to falling demand and price cuts, as competition heats up in the EV market.
More recently, Ford (F) reported that it sold 3,739 Mustang Mach-E electric vehicles in February, a rival to Tesla’s Model Y.
Morgan Stanley analysts said in a recent note that the Ford Mustang Mach-E gained EV stake at Tesla’s expense last month. U.S. EV sales increased 34% in February, while Tesla’s share fell to 69% from 81% the previous year, they wrote. “The Ford Mustang Mach-E was responsible for almost 100% of the loss of shares,” they said.
But Ives de Wedbush is optimistic that the sharp drop in Tesla’s shares is temporary.
“Tesla’s strength in the EV market will continue both domestically and in Europe and China during 2021 on the heels of the Model 3’s success, especially with a green wave that catalyzes consumer demand globally,” he said.
Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.
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