Tesla (TSLA) stock was lower after the company posted a 31% sales drop in China compared to June.
TSLA: Weekly Chart
TSLA dropped from almost $300 to $256 over the last few weeks but may have more corrections ahead. The $200 and $220 levels are in play for further weakness.
Tesla sold 64,285 electric vehicles for the month of July, down 31% from the previous month, according to data from the China Passenger Car Association. The figure marks the lowest number of cars sold by Tesla so far this year in China.
On a sequential basis, the numbers were lower, but year-over-year, the 2022 Shanghai shutdown meant sales of the Model Y and Model 3 were actually up 128%.
BYD, Tesla’s largest competitor in China, posted 261,105 EV sales in July, up 61% year over year. Bloomberg noted that BYD has now surpassed Tesla in global EV sales, effective last year.
In 2022, BYD sold 1.85 million electric vehicles, a huge jump from the 200,000 sold in 2019.
Another headwind for Tesla was the announcement of an investigation by the National Highway Traffic Safety Administration (NHTSA) over steering problems. The probe could affect up to 280,000 vehicles and covers Tesla’s best-selling Model 3 and Model Y.
The NHTSA says it has received 12 complaints about loss of steering control and power steering in the vehicles.
Tesla is currently subject to several investigations, including reports that the steering wheels on Model Y SUVs have fallen off while the vehicle was being driven. The NHTSA also received over 800 reports of “phantom braking” problems in Tesla vehicles. The company was forced to issue a software update to 1.1 million vehicles in China due to braking issues.
After a strong 2023, traders should look for a downside trading opportunity as tech valuations look strained and Tesla faces a China sales drop and a new investigation. Tesla is currently valued at a price-earnings ratio of 75x, compared to Ford’s 18x.
