Tesla's China Numbers Might Be Worse Than First Blush

Confusion has reigned in recent Tesla trading. There has been confusion about Tesla driving features and a fatal Texas crash; the true impact of zero-emission credit sales; and now over Tesla’s April sales figures in China. One thing is certain: Investors hate confusion.

Tesla stock fell 1.9% Tuesday, but started out the day significantly lower, making the drop actually a small win for Tesla investors. The S&P 500 and Dow Jones Industrial Average fell 0.9% and 1.4%, respectively.

Even though the stock rallied through the day, Tesla’s China sales numbers might be worse than investors initially assumed. Chinese auto industry data show Tesla sold roughly 26,000 EVs in April, down from about 35,000 in March. It’s a decline amid growth for Tesla’s Chinese EV competitors.

The confusion is over exports. Tesla also exported about 14,000 cars from China in April, according to the same industry association. So the question investors started asking analysts is: Did Tesla produce 40,000 cars in China in April, meaning the company sold 26,000 in China and exported an additional 14,000? Or did Tesla make 26,000 cars overall in China, selling 12,000 of those in China and exporting the rest?

Tesla isn’t helping untangle the numbers. The company didn’t respond to a request for comment.

“We’ve been exchanging emails with confused clients all morning,” wrote Piper Sandler Alex Potter in a Tuesday report. His original interpretation of the numbers was that Tesla sold about 26,000 vehicles in China and exported an additional 14,000, but acknowledged the possibility that Tesla only sold about 12,000 in the country and exported the rest of the 26,000.

That would mean Tesla sales declined by nearly two-thirds month to month. But even if the answer is only 12,000 Chinese sales in April, Potter isn’t worried.

“Don’t stare too closely at these monthly numbers,” wrote the analyst. “We prefer to examine Tesla’s market share on a trailing [three-]month basis.”

He also points out that the Tesla plant in Shanghai was closed for two weeks in the first quarter, which might have sacrificed 10,000 or so vehicles. What’s more, Tesla tends to ship most of its units in the final month of the quarter.

GLJ analyst Gordon Johnson isn’t as sanguine and believes the 14,000 deliveries are part of the 26,000 figure. For him, that means Tesla has a market share problem in the world’s largest market for EVs.

Potter and Johnson’s take on the April data aligns with their ratings. Potter rates shares Buy and has $1,200 price target for the stock, the highest on Wall Street. His target price values the company at more than $1 trillion. Johnson rates shares Sell and has the lowest target price on the Street at $67 a share. His target values the company at about $80 billion, or roughly what General Motors (GM) stock is worth.

The entire April report is, frankly, confusing, adding to existing uncertainty surrounding Tesla stock.

Tesla’s driver-assistance function was initially implicated in a deadly Texas crash in April, but it looks as if the system wasn’t turned on, according to preliminary findings by the National Transportation Safety Board. In other words, that would mean the human driver crashed the car, although investors will have to wait to see the NTSB’s final report.

Tesla also reported better-than-expected first-quarter numbers in late April. The numbers, however, were boosted by Bitcoin trading profits and bigger-than-expected zero-emission credit sales—which Tesla earns for producing more than its fair share of no-emission cars and then sells to other auto makers that don’t meet zero-emission quotas.

All the confusion has weighed on shares. Tesla stock is down about 9% over the past month. The Nasdaq Composite is off 4% over the same span.

Regardless of the final interpretation, Tesla’s April sales in China dropped sequentially, while other EV makers’ deliveries rose. That isn’t what Tesla bulls want to see, and it’s another thing to worry about in coming months.

Australia is in the midst of a ‘baby recession’ with preliminary estimates showing the number of births in 2023 fell by more than four percent to the lowest level since 2006, according to KPMG. The consultancy firm says this reflects the impact of cost-of-living pressures on the feasibility of younger Australians starting a family.

KPMG estimates that 289,100 babies were born in 2023. This compares to 300,684 babies in 2022 and 309,996 in 2021, according to the Australian Bureau of Statistics (ABS). KPMG urban economist Terry Rawnsley said weak economic growth often leads to a reduced number of births. In 2023, ABS data shows gross domestic product (GDP) fell to 1.5 percent. Despite the population growing by 2.5 percent in 2023, GDP on a per capita basis went into negative territory, down one percent over the 12 months.

“Birth rates provide insight into long-term population growth as well as the current confidence of Australian families,” said Mr Rawnsley. “We haven’t seen such a sharp drop in births in Australia since the period of economic stagflation in the 1970s, which coincided with the initial widespread adoption of the contraceptive pill.”

Mr Rawnsley said many Australian couples delayed starting a family while the pandemic played out in 2020. The number of births fell from 305,832 in 2019 to 294,369 in 2020. Then in 2021, strong employment and vast amounts of stimulus money, along with high household savings due to lockdowns, gave couples better financial means to have a baby. This led to a rebound in births.

However, the re-opening of the global economy in 2022 led to soaring inflation. By the start of 2023, the Australian consumer price index (CPI) had risen to its highest level since 1990 at 7.8 percent per annum. By that stage, the Reserve Bank had already commenced an aggressive rate-hiking strategy to fight inflation and had raised the cash rate every month between May and December 2022.

Five more rate hikes during 2023 put further pressure on couples with mortgages and put the brakes on family formation. “This combination of the pandemic and rapid economic changes explains the spike and subsequent sharp decline in birth rates we have observed over the past four years,” Mr Rawnsley said.

The impact of high costs of living on couples’ decision to have a baby is highlighted in births data for the capital cities. KPMG estimates there were 60,860 births in Sydney in 2023, down 8.6 percent from 2019. There were 56,270 births in Melbourne, down 7.3 percent. In Perth, there were 25,020 births, down 6 percent, while in Brisbane there were 30,250 births, down 4.3 percent. Canberra was the only capital city where there was no fall in the number of births in 2023 compared to 2019.

“CPI growth in Canberra has been slightly subdued compared to that in other major cities, and the economic outlook has remained strong,” Mr Rawnsley said. “This means families have not been hurting as much as those in other capital cities, and in turn, we’ve seen a stabilisation of births in the ACT.”

Tesla’s China Numbers Might Be Worse Than First Blush

After a day of confusion saw the company’s stock fall.

Continued stagflation and cost of living pressures are causing couples to think twice about starting a family, new data has revealed, with long term impacts expected