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Investors Business Daily
Investors Business Daily

Tesla Stock, In Midst Of 86% Run, Sees China Sales Increase

Tesla sales in China shot up in January compared to a year ago, according to the latest data released Friday by  the China Passenger Car Association. Tesla stock edged up Friday.

The global EV giant sold 66,051 China-made vehicles in January, a 10.4% increase compared to a year ago and up 18.4% vs. December. The sales numbers, released by the China Passenger Car Association, do include exports. This marks the first monthly delivery numbers from Tesla's Shanghai facility since the company slashed China prices in early January.

Other China EV makers reported significant sales declines in January vs. December.

On Tuesday, China vehicle insurance data between Jan. 15-29 showed 10,852 Tesla registrations. This was down 14% from the 12,654 during the week of Jan. 9-15.

However, investors should be wary of reading too much into this decline as The Chinese New Year holiday, which runs from Jan. 21-27, significantly impacted car companies' sales across the board in China.

Tesla Shanghai was shut for an extended Lunar New Year holiday, but had significant inventory from year-end.

The Demand Picture

Tesla CEO Elon Musk told investors on Jan. 26 that Tesla saw "the strongest orders year-to-date than ever in our history" in January. Musk added that orders were coming in at "almost twice the rate of production."

Signaling the global EV giant is expecting increased demand, Tesla plans to produce an average of nearly 20,000 vehicles a week at its Shanghai plant in February and March, according to Reuters. The company expects monthly production to roughly reach September levels of 82,000 vehicles.

A big question is whether the Tesla demand boost from price cuts will be sustained, especially in China. Several other automakers have already cut China EV prices, with analysts expecting further cuts in the next several weeks. New or revamped models add to the competition.

Tesla is also reportedly considering opening a new plant in Mexico City and has announced it is building a $3.5 billion manufacturing facility in Northern Nevada for its long haul Semi trucks.

The EV company's plans to ramp production come as many analysts expect demand for vehicles to retreat in 2023.

Tesla stock advanced 1% to 190.18 Friday during market trade. On Thursday, Tesla stock rallied 3.8% to 188.27. TSLA shares have shot up nearly 90% since bear market lows in early January, surging after Musk's bullish comments on demand following price cuts.

Tesla Price Cuts

On Jan. 6, Tesla slashed prices for the Model 3 and Y in China, with the base Model 3 cut more than 13% to $33,570. The EV giant also cut prices in other Asian markets that day, with further cuts in Korea on Feb. 3.

The EV giant has also announced price cuts in the U.S. and Europe. This will make more models eligible for tax incentives of $7,500 under the Inflation Reduction Act (IRA).

The EV giant cut U.S. Model 3 prices by 6%-14%, depending on the trim. A standard trim Model 3 RWD was cut by $3,000 to $43,990. With the IRA tax credit applied to the vehicle, consumers that meet income limits would be paying $36,240.

The Performance Model 3 trim was cut $9,000 to $53,990, getting under the $55,000 limit for tax credits. Meanwhile, Tesla's base Model Y has been slashed $13,000, or nearly 20%, to $52,990, also below the tax credit limit. The Performance variant for that vehicle has been cut to $56,990, also down $13,000.

"I think there's just a vast number of people that want to buy a Tesla car but can't afford it.  And so these price changes really make a difference for the average consumer," Musk said during the Jan. 26 earnings call.

"It's always been our goal at Tesla to make cars that are affordable to as many people as possible so I'm glad that we're able to do so," he added.

On Friday, the U.S. Treasury Department revised vehicle classification definitions making more electric vehicles eligible for the tax credits up to $7,500.

The Treasury will now use Environmental Protection Agency fuel economy labeling standards. This expands the definition of SUVs to include more crossovers. This will allow more of Tesla's high end EV models to qualify.

Customers who purchased qualified electric vehicles since Jan. 1 can claim the tax credit, even if the vehicles did not qualify under the prior standard, according to the the Treasury Department.

Tesla Stock

Last week, Tesla stock spiked 33%, rocketing above its 50-day moving average for the first time since September. Since hitting a Jan. 6 bear-market low at 101.84, TSLA shares have erupted for a 86% gain.

Following Tesla earnings last week, a number of analysts stock revised price targets for Tesla stock. The move from analysts comes after many had slashed price targets ahead of Tesla's financial results.

TSLA shares rank fourth in the Auto Manufacturers industry group. Tesla stock has an 59 Composite Rating out of 99. The stock has an 9 Relative Strength Rating, an exclusive IBD Stock Checkup gauge for share-price movement. The EPS rating is 99.

Please follow Kit Norton on Twitter @KitNorton for more coverage.

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