The sales of Tesla in the European Union dropped by 37 percent annually in August, the second month in a row that the Chinese competitor BYD has sold more vehicles than the electric vehicle leader in the region. Tesla lost sales to about 8200 vehicles in the European market (compared to 2018 sales of about 11 vehicles) as the overall electric vehicle market grew, with BYD increasing its sales three times.
Chinese rival BYD holds European EV market
According to AOL, Tesla keeps losing its competitive edge over EVs with regard to new sales. European Automobile Manufacturers Association (ACEA) sales data in August indicated that Tesla car sales decreased 37.5% annually in the European Union. Meanwhile, August was a record month for the Chinese competitor BYD. Its sales in August tripled compared to previous years. Tesla was again beaten by BYD in the two months in Europe.
Year to date, the European sales of BYD increased by 280 percent, and Tesla’s have dropped by 33 percent compared to the previous year. Tesla leader Elon Musk has attempted to draw investor attention to autonomous driving and robotics technologies used at the company. However, with a 25 percent rise in Tesla shares in the past month, its sales of EVs might start falling, and this gives some investors a chance to cash in. With the rest of Europe (the U.K., Norway, and the other EFTA countries) included, Tesla was also the top absolute unit in August, although the number of registrations fell by approximately 22% year on year, another indicator of continued pressure in the area.
Stock market responds to dismal registration information
Tesla stock has been in a massive run, except that it lost momentum today. Electric vehicle (EV) manufacturer shares fell as much as 5.4% in trade on Thursday. The stock dropped by 4.3 percent. Though the company has been dedicating more of its message to the possibility of artificial intelligence (AI) and robotics, investors appear to remain worried about declining sales of EVs.
European market challenges Tesla’s global strategy
Tesla European Union registrations decreased approximately 37 percent annually in August to approximately 8,200 vehicles, and represent the second consecutive month Tesla was outsold globally by the China-based BYD in the bloc. Such winning of softness comes in Europe after the electric car maker experienced a rough second quarter. During Q2, Tesla sold slightly more than 384,000 vehicles, -13 percent of approximately 444,000 of the previous year.
The tone of the company on the most recent earnings call is also worth remembering. CEO Elon Musk admitted that the coming months may not be as smooth, with things possibly becoming rough before they get better within the next few quarters. That statement does not indicate poor third-quarter deliveries, but it puts the headlines on Tesla deliveries to Europe into context of how the company cautioned about the recovery journey of higher growth.
Valuation issues build up due to competitive pressures
In the meantime, the valuation of the stock does not serve the purpose of the bull case. The stock carries high expectations well beyond what can be delivered in a quarter, at a market value of over $1 trillion and a high price-earnings ratio of 252 by the time this paper is written. With such a high valuation, there is less room to unwind in the event of poor third-quarter deliveries, or in case of commentary treatises of a weak demand trend leading to year-end.
As the company shifts towards AI and robotics, more conventional automotive performance indicators are still going to strain investor appetite. The sudden change in the European market conditions when BYD has been gaining 3 times more sales than Tesla is losing 3 times more as a sign of the radical change in the world EV situation, which might redefine the industry leaders over a decade.