Tesla stock is falling. China is the reason

From June to August, Tesla sold about 13,000 electric vehicles per week to Chinese car buyers. September sales fell to about 9,000 per week, according to insurance filing data compiled by Jeff Chung, an analyst at Citi.

The decline in the number of retail deliveries in China will make it difficult for Tesla to meet the consensus among analysts tracked by FactSet that the number for the third quarter will reach 463,000 vehicles.

Expectations have dropped. Wall Street’s average estimate was about 473,000 a few weeks ago. Tesla delivery estimates tend to decline towards the end of the quarter, but a drop to 463,000 would leave deliveries short of the 466,000 Tesla achieved in Q2.

Tesla took some planned downtime at factories in the third quarter, limiting production. The company is also offering an updated version of its Model 3 sedan in China, which also leads to a decline in sales of the car this month.

Tesla sold about 240 Model 3 sedans in China from September 11 to 17, while the typical number is between 2,000 and 3,000 cars per week. This trend should reverse in October when the newest version starts shipping.

Tesla is expected to report deliveries around October 2, followed by earnings a few weeks later. The consensus call on Wall Street is for third-quarter earnings per share to be 79 cents, down from 91 cents in the second quarter and $1.05 in the third quarter of 2022. Price cuts and competition in China continue to impact Tesla’s profit margins and all Chinese electric car makers.

Investors should prepare for some trading volatility between now and the end of the quarter, as well as from the delivery report to earnings. Tesla’s stock chart has shown some troubling patterns recently.

“The immediate concern is seeing the potential for the stock to drop below that [a] “The uptrend line is steep,” said Frank Cappilleri, CappThesis founder and market technician. “Similar trend line breaks have led to a rapid downward move the last three times in 2023.”

Tesla’s stock price rose from roughly $220 to $280 in a heartbeat. But now, shares are threatening to fall below $260. If they did, $240 would trade, according to Cappeleri’s charts.

Cappeleri’s call is not based on the outlook for Tesla’s business. It analyzes stock movement charts to get an idea of ​​the direction it could be headed in the short and medium term. It’s an additional tool to help investors understand what’s going on with the electric vehicle manufacturer’s relatively volatile stock.

Write to Al Root at [email protected]