Tesla's China-Made EV Sales Drop Y/Y in May: Is Price War a Suspect?

Core Insights - Tesla's sales of China-made EVs have declined for the eighth consecutive month in May, primarily due to intensifying price wars in the Chinese auto market [1][9] - The company's sales in Europe have also slumped, attributed to an aging product lineup and the negative impact of CEO Elon Musk's political involvement on consumer sentiment [2] - To stimulate demand in China, Tesla has introduced smart-assisted driving features for new vehicles and included the Model 3 and Model Y in a government initiative promoting EV adoption in rural areas [3][9] Sales Performance - In May, Tesla's combined domestic and export deliveries of the Model 3 and Model Y fell 15% year-over-year to 61,662 units, following a 6% decline in April [1] - BYD, a key competitor, saw a 14.1% increase in global passenger car sales in May, although this was a slowdown from April's 19.4% growth [5] - Geely Auto also reduced prices on selected models to stimulate sales, offering discounts between 9,000 yuan and 16,000 yuan [6] Market Dynamics - The ongoing price war in China has involved over 40 brands, with new competitively priced EVs entering the market, putting pressure on Tesla [4] - The Chinese government has called for an end to aggressive price wars, particularly after BYD introduced new incentives on multiple models [4] Valuation and Estimates - Tesla's stock has underperformed the Zacks Automotive-Domestic industry, with shares down 17.8% year-to-date compared to the industry's decline of 14.8% [7] - Tesla appears overvalued with a forward price/sales ratio of 10.23, significantly higher than the industry's 2.75 [11] - The Zacks Consensus Estimate for Tesla's EPS has been revised downwards for 2025 and 2026 by 13 cents and 16 cents, respectively, over the past 30 days [13]