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Tesla's China, Europe Performance Suggests Quarter Will Be One Of Automaker's Weakest, Says Gordon Johnson

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Tesla's China, Europe Performance Suggests Quarter Will Be One Of Automaker's Weakest, Says Gordon Johnson

Tesla Inc (NASDAQ: TSLA) shares appear to be on track to hit the psychological level of $1,000 — but GLJ Research analyst Gordon Johnson sees trouble ahead. 

Even as the sell-side drums up Tesla's ability to replicate its success in the U.S. EV market in potentially larger markets such as China and Europe, hard data says otherwise, Johnson said.

Tesla's Chinese Hopes Falter Amid Weak April Numbers

Tesla's car sales in China fell 34.8% month-over-month in April after a strong 449% jump in March, the analyst said in a note. 

The numbers were even more disappointing, as most competitors gained materially over Tesla in April, he said. 

Johnson highlighted reports of showroom expansion by Polestar, the luxury EV brand owned by Chinese automaker Geely, and rival Xpeng's plan of opening about 200 outlets by the end of 2020.

See also: Tesla's FSD Package Shows Automaker's Potential For Software Revenue

Tesla's Lackluster Showing In Europe

The number of Tesla vehicles sold in six EU countries that have reported May 2020 registrations fell 13.9% month-over-month and 67.8% year-over-year, Johnson said.

Through the first two months of the second quarter of 2020, registrations of Tesla vehicles in these six EU countries were down 22.8% sequentially and were 67.8% lower than last year, the analyst said. 

Tesa's aggregate EU EV market share fell from 37.2% in the fourth quarter of 2019 to 25.3% in the first quarter of 2020.

Across-The-Board Weakness For Tesla Models

Model 3 registrations in North America and Europe through the first 63 days of the second quarter showed an 87.3% quarterly drop and an 86.7% year-over-year plunge, Johnson said, citing data from a third-party tracker. 

For the new Model Y, the analyst said deliveries were running at 69 cars in the first 63 days of the second quarter. In comparison, in the first full month of sales, Model 3 sales reached 709 cars by the quarter's end, he said. 

This slackness may have led Tesla to reduce the Model Y lead time from eight to 12 weeks to four to eight weeks and also announce sharp price cuts, Johnson said. 

"As analysts are forced to revert back to TSLA's actual fundamentals (which remain publicly available for anyone who wants it) – which include market share losses in both the EU and China – sentiment could be set to shift lower." 

Benzinga's Take

Tesla, being the EV pioneer, has more experience and wherewithal to tide over any adversity. The geopolitical environment is very fluid, and it is not uncommon for even the high-and-mighty to stumble. Tesla seems to be no exception.

With factories slowly getting back to production and consumers picking up the shreds after the pandemic ends, Tesla can win back their confidence with its technology and innovation. The second quarter could signal a bottom. 

Related Link: Tesla Negotiates $565M Loan In China Amid Factory Shutdowns, Shrinking Sales

Photo courtesy of Tesla. 

Latest Ratings for TSLA

DateFirmActionFromTo
Nov 2020WedbushMaintainsNeutral
Nov 2020Morgan StanleyUpgradesEqual-WeightOverweight
Nov 2020B of A SecuritiesMaintainsNeutral

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