Tesla (NASDAQ:TSLA) just took a hit in China, with January sales of its locally made EVs dropping 11.5% year-over-year to 63,238 unitsdown a brutal 32.6% from December. The reason? A production shift. Tesla is rolling out a refreshed Model Y, its best-seller, and that transition is slowing down deliveries at its Shanghai Gigafactory. Meanwhile, BYD (BYDDF) is flexing its muscles, moving 296,446 passenger EVs and plug-in hybrids last month, up 47.5% from a year ago, though it also saw a steep 41.8% month-over-month decline.
Now, Tesla’s China sales aren’t exactly tanking, but the real test is coming. The company is shutting down part of its Model Y production lines from January 22 to February 14 for Chinese New Year, meaning even fewer deliveries in February and March. To offset the slump, Tesla is ramping up discounts on the Model 3, hoping to keep sales momentum alive while Model Y production gets back on track.
For investors, this is where things get interesting. Tesla is in a delicate balancing actnavigating a production overhaul while fending off BYD’s aggressive expansion. Short-term sales turbulence is inevitable, but the real question is how quickly Tesla can get its updated Model Y rolling at full speed. With China’s EV market more competitive than ever, Tesla needs to execute flawlessly to keep its edge.
This article first appeared on GuruFocus.
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