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.

Requiring more than 30 percent of household income to service a home loan has long been considered the benchmark for ‘housing stress’. Yet research shows it is becoming the new normal. The 2024 ANZ CoreLogic Housing Affordability Report reveals home loans on only 17 percent of homes are ‘serviceable’ if serviceability is limited to 30 percent of the median national household income.

Based on 40 percent of household income, just 37 percent of properties would be serviceable on a mortgage covering 80 percent of the purchase price. ANZ CoreLogic suggest 40 may be the new 30 when it comes to home loan serviceability. “Looking ahead, there is little prospect for the mortgage serviceability indicator to move back into the 30 percent range any time soon,” says the report.

“This is because the cash rate is not expected to be cut until late 2024, and home values have continued to rise, even amid relatively high interest rate settings.” ANZ CoreLogic estimate that home loan rates would have to fall to about 4.7 percent to bring serviceability under 40 percent.

CoreLogic has broken down the actual household income required to service a home loan on a 6.27 percent interest rate for an 80 percent loan based on current median house and unit values in each capital city. As expected, affordability is worst in the most expensive property market, Sydney.

Sydney

Sydney’s median house price is $1,414,229 and the median unit price is $839,344.

Based on 40 percent serviceability, households need a total income of $211,456 to afford a home loan for a house and $125,499 for a unit. The city’s actual median household income is $120,554.

Melbourne

Melbourne’s median house price is $935,049 and the median apartment price is $612,906.

Based on 40 percent serviceability, households need a total income of $139,809 to afford a home loan for a house and $91,642 for a unit. The city’s actual median household income is $110,324.

Brisbane

Brisbane’s median house price is $909,988 and the median unit price is $587,793.

Based on 40 percent serviceability, households need a total income of $136,062 to afford a home loan for a house and $87,887 for a unit. The city’s actual median household income is $107,243.

Adelaide

Adelaide’s median house price is $785,971 and the median apartment price is $504,799.

Based on 40 percent serviceability, households need a total income of $117,519 to afford a home loan for a house and $75,478 for a unit. The city’s actual median household income is $89,806.

Perth

Perth’s median house price is $735,276 and the median unit price is $495,360.

Based on 40 percent serviceability, households need a total income of $109,939 to afford a home loan for a house and $74,066 for a unit. The city’s actual median household income is $108,057.

Hobart

Hobart’s median house price is $692,951 and the median apartment price is $522,258.

Based on 40 percent serviceability, households need a total income of $103,610 to afford a home loan for a house and $78,088 for a unit. The city’s actual median household income is $89,515.

Darwin

Darwin’s median house price is $573,498 and the median unit price is $367,716.

Based on 40 percent serviceability, households need a total income of $85,750 to afford a home loan for a house and $54,981 for a unit. The city’s actual median household income is $126,193.

Canberra

Canberra’s median house price is $964,136 and the median apartment price is $585,057.

Based on 40 percent serviceability, households need a total income of $144,158 to afford a home loan for a house and $87,478 for a unit. The city’s actual median household income is $137,760.

Tesla’s China Numbers Might Be Worse Than First Blush

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

New research suggests spending 40 percent of household income on loan repayments is the new normal