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Tesla suffers after a sharp drop in Chinese sales


Tesla's shares fell more than 5 percent after a report said that the company's auto orders in China fell sharply last month. Tesla's monthly net orders in China fell to about 9,800 in May from more than 18,000 in April. Tesla's Shanghai plant is supposed to have the capacity to produce about 500,000 electric cars per year for delivery in China and export to other parts of Asia and Europe. Elon Musk's electric car company is struggling with recalls and safety investigations in China.

It is also dealing with a public relations backlash there in the wake of some high-profile car accidents, price changes, and quality complaints from Chinese customers. Although Tesla has not talked about the potential effects of the PR crisis in China, it expects it to be substantial. There is a critical physical impact on Tesla's brand, orders, and deliveries for the coming months.

It is difficult to determine to what extent the drop in demand is driven by concerns about Tesla's safety features, or by increased competition, especially from Chinese automakers. Research firms estimate that Tesla's orders in China fell about 30 percent in May compared to April. And last year, China represented the second-largest market for electric cars in the world, according to research by the International Energy Agency.

The electric-car maker's near-term growth depends largely on its ability to successfully manufacture and sell cars in China. According to an analysis of job listings, the company is ramping up recruitment for legal and government positions in 2021. It is also generally working to increase staffing at its Shanghai factory.

Chinese rival Tesla's Nio saw a drop in deliveries in May as a global semiconductor shortage affected its business. But another competitor, Xpeng, said it delivered 5,686 cars in May. This is a 483 percent year-over-year increase and a 10 percent increase from the previous month. Shares of the electric car maker have fallen by about 15 percent year-to-date. It is down more than 35 percent from its intraday high on Jan. 29.

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