What does the future hold for Tesla in China? Expansion, or exports?
That’s the question being asked by an Automotive News story today.
Earlier this year, the outlook for Tesla in China looked rosy. But net orders for cars have fallen by nearly half this quarter amid concerns about the company’s vehicle safety, along with how it collects and stores data, and at least one report suggests that the company could end up exporting cars produced in China to Europe.
Not long ago, analysts were predicting expansion for Tesla in China. One analyst mentioned that in addition to planned plants in Texas and Berlin, Tesla could build another factory in China.
China’s Passenger Car Association will release May’s sales data next week. Sales dropped more than 25 percent from March to April, with more than half of the over 25,000 cars produced in China being exported.
Tesla stock did rise a bit in Friday’s early trading after a slight fall on Thursday, though the stock is down 35 percent from its peak in January.
For reference, China is the second-biggest market for Tesla, following the U.S. It builds Model 3 and Model Y vehicles in Shanghai.
Like the analysts, we too are curious about what happens. Tesla appears to be at a crossroads in China — if expansion was in the cards, it would obviously be great news for Elon Musk and company. Not just because growth is generally good, but because China is obviously a huge market. The country’s EV market is arguably more competitive than here, thanks to the presence of both several startups and more traditional automakers like BYD that build EVs, with roughly 20 makes in play, but Tesla shipped a half-million units there in 2020.
Obviously, the company would prefer to sell Chinese-made Teslas in China instead of shipping them to other markets. But the company has been dealing with a series of headaches for quite some time now. Between concerns about reliability here in the States and the ability of Teslas equipped with autonomous-driving software to perform those functions in a safe manner, and concerns about data, Tesla has enough headaches to make Musk want to take some time off to host a comedy show. Oh, wait.
All this would seem to confirm earlier reports that we highlighted regarding canceled expansion plans at the Shanghai plant.
At the moment, it sure looks like contraction, rather than expansion, is the name of Tesla’s China game.