Tesla (TSLA) sales in China climbed in February while local rivals saw declines, indicating market share gains in the world's biggest auto market. Tesla stock jumped.
XThe China Passenger Car Association reported that Tesla sold 18,318 Shanghai-made Model 3s and Model Ys in February, up 8% increase from the 15,484 sold in January.
Meanwhile, Xpeng (XPEV) delivered 2,223 EVs vs. 6,015 in January. Nio (NIO) sold 5,578 vs. 7,225 in January. Li Auto (LI) delivered 2,300 Li ONEs, down from 5,379 in January. Warren Buffett-backed BYD (BYDDF) sold 10,355 new energy vehicles last month vs. January's 20,178.
While consumer activity slowed last month during the Lunar New Year holiday, Wall Street was bullish Tesla's monthly gains.
"We believe price cuts and the Model Y introduction were key to some of these changing market dynamics in China," Wedbush analyst Daniel Ives said in a note to clients. "That said, overall EV demand in the region looks robust with EV penetration set to go from 4.5% in China for 2020 to 10% by 2022 in this EV arms race with Tesla and its Giga footprint front and center."
Overall, February EV sales hit 97,000 electric cars in China, the CPCA said, a 38% drop from January, due in part to the weeklong holiday.
Tesla is "on track to be on a 200,000+ unit trajectory in China for the year, which remains a linchpin for the company hitting its 750,000 to 800,000 annual numbers for the year," Ives added.
He maintains a neutral rating on Tesla stock with a price outlook of 950. Meanwhile, New Street Research analyst Pierre Ferragu upgraded Tesla stock to a buy with a price target of 900.
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Shares surged 19.6% to close at 673.58 on the stock market today, rebounding after five straight declines but still below its 50-day moving average. Tesla stock has tumbled in recent weeks, and is 25% off its 52-week high of 900.40, according to MarketSmith chart analysis. Its relative strength line is trending downward.
Nio stock surged 17%, Xpeng jumped 11.3% and Li Auto bounced 8.2%. BYD added 10.2%.
A global chip shortage has interrupted production at Tesla factories and other automakers. But some industry watchers have long singled out Tesla stock as overvalued. They've also pointed out it is increasingly vulnerable to declining demand and price cuts, as competition heats up in the EV market.
Most recently, Ford (F) reported it sold 3,739 Mustang Mach-E electric vehicles in February, a rival to Tesla's Model Y.
Morgan Stanley analysts said in a recent note that the Ford Mustang Mach-E gained EV share at the expense of Tesla last month. U.S. EV sales rose 34% in February, while Tesla's share fell to 69% from 81% the prior year, they wrote. "The Ford Mustang Mach-E accounted for nearly 100% of the share loss," they said.
But Wedbush's Ives is optimistic that the sharp downturn in Tesla stock is temporary.
"Tesla's stronghold on the EV market will continue both domestically as well as in Europe and China during 2021 on the heels of Model 3 success especially with a green tidal wave catalyzing consumer demand globally," he said.
Please follow Adelia Cellini Linecker on Twitter @IBD_Adelia.
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