Gordon Johnson: Tesla’s China Weekly Delivery Numbers Fell Sharply Last Week

No sooner did we write about how Tesla’s sales in China were perking up to start the new year thanks to price cuts, than it looks as though the increase in demand may be falling off to start the new month.

That was the topic of a new GLJ Research note to clients on Tuesday morning. Analyst Gordon Johnson looked at the company’s weekly China deliveries for the week of February 6th to February 12th and noted an apparent plunge in demand.

While the “trend” only looks to have been for one week so far, it is worth keeping an eye on, especially because Tesla has once again raised prices in China (as we noted days ago). Whether or not this was in response to the fall in demand or the cause of it remains unclear. 

Johnson wrote to clients: “In short, as detailed in Ex. 1 below, we remind our readers that in TSLA’s most important/profitable market of China, on Jan. 5th, 2023, due to lackluster demand, the company resorted to sharp price cuts across its suite of cars in China, to include: (a) -17.0% for the Model 3 SR, (b) -5.7% for the Model 3 P, (c) -13.4% for both the Model Y SR and Model Y LR, and (d) -9.6% for the Model Y P.”

Recall we wrote last week that the price of a Model Y had risen again to 261,900 Yuan. The price of the vehicle had been cut to 259,900 Yuan on January 6th from its original price of 288,900. 

He continues, noting the fall off in sales for the second week of February: “And, as detailed in Ex. 2 below, while these cuts resulted in a (mild) short-term boost in demand, this week TSLA sold just 6.963K cars in China, domestically, or a FRACTION of the roughly 17.734K adjusted cars/week TSLA produced in Shanghai in January 2023 (i.e., 58.270K cars produced ÷ [31 days in Jan. – 8 days of Shanghai plant shutdown in Jan.] = 2.534K adjusted cars produced/day in Jan.).”

“Stated differently, TSLA sold just 39% of its Shanghai adjusted production, domestically, this week,” Johnson says. 

Due to the plunge, Johnson revised his estimates for the year:

Using simple math, and also considering BYD sold 31.417K NEV cars (Ex. 3), domestically in China, Feb 6-Feb 12, or 4.5x that of TSLA (this is not a typo), barring another, large, price cut, we see TSLA’s 1Q23E China sales coming in around 90K, or down -25.8% QoQ from 4Q22’s 121K figure. At risk of stating the obvious, given Consensus currently expects TSLA to deliver ~129K cars, domestically, in China in 1Q23 (Ex. 4), this would be seen as a major headwind to TSLA’s growth narrative, as well as its ability to achieve 1.8M-to-2.0M in global sales in 2023E (as many currently assume).

Stated more clearly, should TSLA’s 1Q23 domestic China sales come in below and/or around 100K, as the data currently suggests it will, we believe the stock would come under acute selling pressure.

As for us, we’ll wait for another week – or even month’s – worth of data before claiming all has been lost in China for the quarter.