Intensifying competition and macroeconomic headwinds have created a speedbump for Tesla (TSLA, Financial) sales in China. However, in August, deliveries in the country jumped by 37% from July. Price cuts and new incentives, such as interest-free loans, are helping to boost TSLA sales, while government subsidies for EV purchases continue to support the market.
Market share losses to other Chinese EV makers have been a concern for TSLA shareholders, but the company regained some ground in August. For instance, Li Auto (LI, Financial) reported a 5.6% month-over-month decline in August deliveries to 48,122 vehicles, and NIO (NIO, Financial) saw a 1.6% drop to 20,176 vehicles. On the other hand, BYD Company (BYDDY, Financial) reported a 35% surge in vehicle sales to a record monthly high of 370,854.
After a rough Q2 where TSLA missed EPS estimates and deliveries fell by 5%, the positive news on demand is welcome for a stock that's down about 20% year-over-year. However, concerns about TSLA's eroding margins remain. In Q2, automotive gross margin slid by 180 basis points year-over-year to 14.6%, compared to 27.9% on a GAAP basis in Q2 2022.
Additionally, Bloomberg reported that TSLA will unveil its Robotaxi at a Warner Brothers Discovery (WBD, Financial) studio in California, rather than at one of its gigafactories. Originally slated for August 8, the unveiling was pushed back to October 10 to make design changes and build more prototypes. The setting at a movie studio suggests TSLA will simulate an actual rider pickup and drop-off in a staged downtown area. Despite the fanfare, the Robotaxi isn't expected to impact TSLA's fundamentals for many quarters, if not years. TSLA has been investing heavily in self-driving technology, with operating expenses increasing by 39% in Q2 to nearly $3.0 billion, but true autonomous driving capabilities are still distant.
Lastly, Reuters reported that TSLA plans to launch a new six-seat version of its Model Y vehicle in China by late 2025. Currently, only a five-seat model is available in China. The addition of a six-seater could serve as a growth catalyst, especially since the Model Y is one of the most popular vehicles in China. While these developments are bullish for TSLA, challenges like rising competition and eroding margins persist.
