Nothing seems to be working for Tesla these days. Just days after missing the consensus delivery estimate for Q4 2022, the EV giant posted atrocious weekly registration numbers in China, firmly establishing the growing demand softness for Tesla EVs in the frontal cortex of the stock’s bulls. As we noted toward the start of this week, Tesla delivered 405,278 units in Q4 2022, missing pared-down consensus expectations of 418,000 units. Tesla has continued to assert that it will grow its annual deliveries by just under 50 percent for the foreseeable future. However, the Q4 consensus estimate miss means that Tesla was only able to grow its deliveries by around 40 percent in 2022. For a stock that used to trade at an astronomical premium based on its stellar growth story, the ongoing demand shock is leading to a brutal de-rating.
— Gary Black (@garyblack00) January 5, 2023 Moreover, as per the tabulation by China’s CPCA, Tesla’s total sales in December 2022 – consisting of domestic sales plus export – computed at just 55,300 units, constituting the lowest such numbers for the third month of a quarter in the past five quarters. In what definitely constitutes a bad omen for Tesla’s demand outlook, this slowdown has occurred even as the company cut the prices of its EVs in China to attract more buyers ahead of the expiration of a 12,000 Yuan subsidy.
— Troy Teslike (@TroyTeslike) January 4, 2023 Of course, Tesla bulls might contend that China’s fresh Coronavirus wave is to blame for much of this mess. If that were the case, then BYD would have been equally affected. However, as is evident from the latest weekly registration numbers in China (quoted in the above tweet), BYD clocked in around 5x as many registrations as those recorded by Tesla in the pertinent period! Clearly, BYD is doing something right.
— Gary Black (@garyblack00) January 6, 2023 This brings us to today when, as per the reporting by Bloomberg, Tesla has again cut the prices of the Model 3 and Model Y in China by 6 to 13 percent. Cumulatively, Tesla’s EVs in China are now a whopping 40 percent cheaper than their US counterparts!
— Andrew Hung (@raikk61) January 6, 2023 This situation is predictably giving rise to a lot of consternation.
— Motorhead (@BradMunchen) January 6, 2023 Additionally, given the magnitude of these aggressive price cuts, the impact on Tesla’s 2023 profits is virtually assured. As per an estimate by Refinitiv, China accounted for around a quarter of Tesla’s total sales in the first nine months of 2022. Moreover, according to Morgan Stanley, China accounts for around half of Tesla’s profitability.
If this Head & Shoulders plays out by it’s very definition, then it “should” drop -56% from the neckline which oh by the way coincides well with the massive $80 gap fill. So we are looking at a potential -27% more downside from current levels. pic.twitter.com/pwEGSpqr5G — Heisenberg (@Mr_Derivatives) January 5, 2023 Finally, do note that the company’s shares are currently playing out a classic Head and Shoulders pattern, which entails a further downside of 27 percent from the current levels. This means that Tesla shares might only be able to bottom once the stock hits $80 per share.
