Tesla (TSLA.O) is set to hit another record quarter with its China sales even as it faces mounting pressure from local competitors such as BYD, eating into its share in the world’s largest auto market, analysts say. The U.S. automaker could sell 155,000 cars in China from April to June, an increase of 13% from its record first quarter, according to estimations by Shi Ji, an analyst with China Merchants Bank International Securities. The number would be a new record for Tesla. Still, its share in China’s battery electric car market will shrink as rivals, including BYD and Aion, the E.V. band of Guangzhou Automobile Group, gain ground, she added.
China is the second biggest market for Tesla after North America, where it has a big factory. It is also where most of its sales are made and is crucial to its profitability. The Austin, Texas-based company focuses on selling vehicles in the premium market segment, offering a more expensive alternative to traditional gasoline-powered cars.
Sales in the country have been volatile since the coronavirus pandemic began in late 2018, with demand slumping as people stayed home and restrictions on travel and airline capacity put off tourists. But in recent months, sales have recovered as people have rediscovered their need for a car, and the government has eased quarantine rules and travel limitations.
In April, Tesla sold more than 10,000 units of its Model X SUV in China, becoming the first Chinese brand to do so and establishing it as a strong player in this lucrative sector. In May, it sold more than 21,000 vehicles and posted its best sales in China in seven months, a sign of a rebound after a slow start this year.
Despite the gains in China, Tesla’s global deliveries fell in the first quarter, which was expected to be its worst quarterly performance since the COVID-19 crisis. It has attributed the decline to a slowdown in demand in the U.S., Europe, and other markets.
Analysts have said that while Tesla remains a niche player in the premium segment, it is making inroads into the mass-market market. CEO Elon Musk will eventually shift his strategy to focus on these segments. They have also pointed to the rapid expansion of its Gigafactory as a sign that it is shifting its focus toward these markets.
Tesla’s China sales will likely be boosted in the coming weeks by its tendency to boost sales over the final two weeks of every quarter. The company often delivers its most significant volume of cars in this period, with employees from across the business pitching in to help with deliveries.
