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The Shanghai factory produces the Tesla Model Y.
Photo courtesy of Tesla
Tesla’s Chinese delivery data are difficult to decipher for investors. Did they develop? How do they stack up against expectations? What about those from other automakers? To be sure, it’s a guessing game, even if it’s a clever one. The most recent statistics, announced on Thursday, appeared to be sufficient for investors, especially given the possibility that the market had been shaken by broader uncertainties. Tesla’s stock (ticker: TSLA) began at its lows—around $620 per share—but rose to settle at $652.81, up roughly 1.3 percent. The
S&P 500 Index
and
The Dow Jones Industrial Average is a stock market index that measures how well
Both rose from lows, but ended the day with losses of 0.9 percent and 0.8 percent, respectively.
Now that it’s been a day, Wall Street appears to agree with investors: Tesla did what it needed to do, but not much more. As a result, investors and analysts tinker with the figures. But what exactly are they on the lookout for? It requires some alchemy, or at the very least some guessing, to figure out the reaction to delivery numbers. First, expansion is always necessary, perhaps even more so now that Tesla is the world’s most valuable automaker, with a market capitalization of about 100 times projected earnings in 2022. In the second quarter, Tesla produced and sold nearly 92,000 vehicles in China, up from about 79,000 in the first quarter. However, the electric vehicle pioneer sold fewer automobiles in China, preferring to export more—approximately 31,000 units, up from about 10,000 previously. The absolute quantity is essential, but in order to rise, all stocks must beat—or miss—expectations. Expectations were building early in July this quarter, for example, following other Chinese EV manufacturers, including as
NIO
(NIO) had a strong delivery performance. Tesla appears to have delivered on those shifting expectations. Former analyst and professional money manager Gary Black shares a lot of his Tesla research on his website.
(TWTR) for his 80,000+ followers on Twitter. He labeled Chinese numbers “powerful” in a tweet on Thursday.
Wedbush analyst Dan Ives agreed with the results, though not as enthusiastically as Black. Ives told Barron’s, “The China data was approximately in line with Street estimates and appears to be on a stronger trajectory into [the second half of 2021].” “The China headwinds aren’t going away, and competition in this critical region is intensifying. Tesla’s stock must improve in the next quarters to reclaim a half-full view on Wall Street.” Tesla supporters may not like to hear it, but competition exists. The Chinese electric vehicle market rose by 166 percent year over year, while Tesla’s market share shrank. According to GLJ Research analyst Gordon Johnson, the company’s market share declined roughly 6% in the second quarter compared to the same period in 2020. During the second quarter, Tesla delivered around 63,500 units in China, with the remainder being exported. Tesla, unlike several Chinese electric vehicle manufacturers, sells cars all over the world. So far, Tesla has been able to sell everything it produces, never needing to decrease output due to low demand, like traditional automakers do. After manufacturing is completely ramped up, each Tesla facility can produce around 400,000 to 500,000 automobiles per year. By the end of the year, the Shanghai factory should be able to run at that capacity. Tesla’s main production facility in California has nearly the same capacity as Shanghai. Another two, in Texas and Berlin, are expected to open by the end of the year. Nobody knows where all those cars will end up. Both Ives and Johnson are considering the wheels that Tesla is putting on Chinese roadways. The guys, on the other hand, couldn’t be more dissimilar when it came to Tesla stock. Ives rates the stock as a Buy with a $1,000 price goal. Johnson has a Sell rating on the stock and a $67 price target. Black no longer works at a brokerage firm, but he does own stock. Many of Tesla’s data points, particularly Chinese deliveries, have been sufficient to keep the stock trading in the $600 to $700 range. They haven’t been able to break the stock out of its recent range. Tesla’s stock has down around 7% year to date. The stock has gained nearly 134 percent in the last year. Al Root can be reached at allen.root@dowjones.com./n
