24/7 Insights

• Tesla Inc. (NASDAQ: TSLA) has trouble with its sales in China.
• Yet the Chinese government has approved sales of its cars.

Tesla Inc. (NASDAQ: TSLA) shareholders have had two concerns about China. The first is that its market share there is under siege from local electric vehicle (EV) manufacturers, including BYD. The other is that, without tariffs, Tesla would face significant competition in Europe and the United States if the Chinese flooded the car markets with very low-priced EVs. Fortunately, those tariffs are in place.

Tesla got a break in China. For the first time, it is on a list of cars the government can buy. A Chinese news source, translated from the original by CNN, reports, “For the first time ever, Tesla cars have been placed on a local Chinese government’s purchase list.” It is the only foreign-owned company to make this cut, which is put into what is defined as government catalogs. This catalog is for the Jiangsu province government in eastern China. It is not clear whether this decision will spread to other provinces.

What is clear is that Tesla has broken away from the status of cars owned by companies outside of China. Since China is the world’s largest car market and EV market by far, this is a chance for Elon Musk’s company to pick up some of the market share it has lost. Its sales from its Chinese factories fell 18% in April.

Good News/Bad News

Tesla got some good news/bad news earlier this week. For the second quarter of the year, global deliveries of its vehicles dropped 6% to 438,019. That was the bad news. The good news is that the number was better than expected, and Tesla’s shares soared. Where will Tesla’s share price be in a year?

However, Tesla cannot expect a longer-term surge in its shares unless it gets back to the point where deliveries are increasing. So, the China news, even if it only produces modest deliveries, is an important step forward.

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