Tesla's August Sales Numbers in China Don't Add Up*
New data this week revealed much weaker monthly sales in China in August versus previously reported. *UPDATE 10/15/21: Insured Aug MY sales later amended by CBIRC & now track reported sales—still weak
Update 10/15/21: CATARC data for insured August sales was recently amended by CBIRC to indicate MY sales actually closely tracked reported sales by CPCA—which is more typical with long term trends.
As such, this report has been edited to reflect the corrected numbers from CBIRC and delete grossly incorrect data as reported by CATARC. See more details below.
New Numbers Are Out. They're Not Good
Investors have mostly shrugged off news last week that Tesla's (TSLA) monthly sales in China for August came in much weaker than expected at 12,885. That was up a modest 9% y/y but well below my 14,000 estimate and roughly 57% below market consensus (see my report Tesla's China Sales and Market Share Continued to Shrink In August).
I don’t share the market's optimism, especially since local China EV sales soared by 168% thanks to continued double-digit growth from rivals like Chinese giant BYD Co LTD (1211 HK) and EV startups Lixiang, XPeng (XPEV) and NIO (NIO).
Tesla’s disappointing August results also followed weak July results when sales were just 8,621, down 69% versus June and down 35% versus last year. This leaves cumulative deliveries so far in the quarter down 6% versus July-August last year.
As I noted last week:
At this rate September monthly China deliveries need to hit at least 40,243—an unprecedented 212% one-month jump—just for third quarter numbers to match 61,759 for the June quarter, which was down 11% versus 69,431 for the March quarter (see Tesla China Sales Deflated in July and Plaid Sales Edge Tesla Q2 Deliveries Above 200,000.
Tesla's China Sales and Market Share Continued to Shrink In August).
It’s not enough for Tesla to just to match Q2 deliveries given the market’s excessively high expectations for the quarter with consolidated deliveries projected at more than 220,000. That’s up 10% versus record second quarter results and up 58% versus last year.
Tesla's China deliveries already are trending well below such ambitious targets. Even a lower than average 30% contribution from China to Tesla's consolidated total indicates 66,300 China deliveries for the quarter—likely well out of reach.
So much for CEO Elon Musk’s boasts that Tesla would need several plants just to meet demand in China. Instead, demand has been strained for MIC Model 3 since the third quarter of last year with faltering monthly sales and shrinking market share—trends which have worsened this year with the introduction of MIC Model Y.
This, as I have noted before, is the same pattern I’ve been tracking for years. Sales in Tesla’s legacy models have faded almost immediately when faced with its new models, and now Tesla is facing stiff new competition from strong rivals in all its markets—especially China. Its new models have also struggled to sustain sales after initial new launch and/or new market expansions even before the first anniversary of said events (I last discussed this at length in Tesla: Don’t Drive Angry).
And, as I said last week, Tesla reported in August:
A record 31,379 in excess inventory for export, some 2.4x more cars than it was able to sell locally and substantially more than was needed to meet demand in Europe and smaller markets.
The lion’s share of those exports went to Europe where only 11,581 were sold in August. Indeed, of the 55,728 cars Tesla exported from China in July-August, only 12,333 sold in Europe, leaving most of the 43,400 remaining still sitting in inventory for September where I suspect only 35,000 or so will sell.
Tesla's China Sales and Market Share Continued to Shrink In August
But wait, there’s more
Tesla reported to China Passenger Car Association (CPCA) that it had 44,264 in total wholesale “sales” in August, including 31,379 shipped for export and 12,885 in retail sales.
Subsequent reports from the CPCA revealed that Model 3 August sales crashed by 89% y/y to 1,309—the lowest since October 2019. This marked three out of the past four months that Model 3 deliveries posted double-digit y/y declines.
The wholesale figures were broken out as 27,066 for Model 3 and 17,198 for Model Y. This implied exports at a stunning 25,757 for Model 3 and 5,622 for Model Y.
If so, Tesla exported 20x more Model 3s than were sold locally. Most of those exports went to Europe, where only 7,984 are indicated as sold in August.
As I expected, this came as MIC Model Y gained traction and local rivals thrived.
By comparison, Model Y August sales were reported as 11,576. That was improved versus the surprising slump in July to just 2,144—the lowest since it was launched in January—but still down versus 11,623 in June and 12,728 in May.
It also wasn’t enough to make up for the QTD slump so far. Cumulative July-August sales for MIC Models 3+Y at 21,506 were still were down 8% versus the same period y/y. Worse, they’re down 36% versus the same two-month period in the second quarter and down 37% versus the even stronger first quarter.
Perhaps that’s why Tesla exported 5,622 MIC Model Ys, mostly to Europe where only3,593 were sold in August.
Trends are going the wrong way.
Update 10/15/21: CATARC data for insured August sales was recently amended by CBIRC to indicate MY sales actually closely tracked reported sales by CPCA—which is more typical with long term trends.
China Automotive Technology and Research Center CATARC tracks insurance registrations rather than sales data provided by carmakers as collected by CPCA. This tends to align closely with monthly retail sales since cars must be insured before they can be licensed. Tesla sales are all cash due upon delivery, so insurance must be arranged and finalized before the customer can take possession of the car.
CATARC is regulated by China Banking & Insurance Regulatory Commission (CBIRC).
Important data from CBIRC was recently released since this report was published on 9/17/21 which corrected an extreme and highly unusual difference between reported August sales by CPCA and insured sales reported by CATARC,
CBIRC reported, without explanation, that indicated Model Y insured sales were 11,721 in August—well within the more traditional margin of reported sales at 11,576.
This corrected a dramatically lower 1,538 for Model Y, down 28% versus weak July results, which previously had been reported by CATARC, which had created a stunning 10,038 difference versus the 11,576 previously reported by CPCA.
As such, this report has been edited to reflect the corrected numbers from CBIRC and delete grossly incorrect data as originally reported by CATARC.
CBIRC reported Model 3 insured August sales at 1,273, confirming previously reported results by CATARC which had closely aligned with the weak 1,309 reported by CPCA.
CBIRC’s action to correct the large discrepancy in reported August Model Y sales was no doubt a great relief to Tesla, which has enough trouble with regulators already in China as well as the US—not to mention its voracious local rivals which are rapidly absorbing market share.
Back to my original report as published on 9/17/21:
So we are left with logging either weak or dramatically weaker sales trends and plunging market share continuing in China, along with increasing odds that Tesla may fall short of ambitious market expectations for the quarter and potentially for the full year.
So I’ll stick with my projections for Q3 deliveries flat to slightly higher versus Q2 and Q4 deliveries up roughly 5-10% versus Q3. This implies roughly 800,000-822,000 for the year, well below market consensus.
We'll see.
In the meantime, there are no large, liquid Tesla bond issues left outstanding so I have Tesla: Not Rated.
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