Tesla sales cratered in China, but investors don't seem to mind

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New York (CNN Business)Tesla sales dropped sharply in China, according to a trade group report, suggesting it is losing ground in the world's largest market for both traditional and electric vehicles.

The China Passenger Car Association reported that Tesla's sales in China fell to 8,621 cars in July, down nearly 70% from June. But the export of cars built at Tesla's Shanghai plant jumped to 24,347 for July, compared with 5,017 in June. That means total sales of Chinese-built Teslas fell less than 1% overall.

Critics say the steep decline of sales to Chinese consumers is yet another sign of the growing problems the company faces in the country. Tesla is contending with increased competition from Chinese EV makers as well as a run of bad publicity, including a recall of virtually all of the cars that have been built in Shanghai. The company also faced protests by Telsa owners at this year's Shanghai auto show over poor car quality and various safety concerns flagged by Chinese regulators.

Teslas accounted for just 3.9% of July sales of battery electric vehicles in China, down from 12.6% in June, said analyst Gordon Johnson, who has been among the harshest critics of the company. He said that decline shows Tesla is facing fiercer competition from local EV startups.

"Overall, it now seems clear that Tesla has overbuilt Chinese capacity when compared to domestic demand, which will result in further price cuts and margin pressure," Johnson said. "Given China is supposed to be Tesla's 'growth market,' these numbers should concern any Tesla bull."


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