After reporting second-quarter 2024 adjusted profits that fell short of Wall Street’s expectations, Tesla (NASDAQ:TSLA) really needs some good news. Despite positive news for Tesla in China, considering the big picture, we can’t recommend Tesla stock.
Tesla is entering an untested Chinese market. This will be another business venture to distract Tesla CEO Elon Musk from manufacturing and selling EVs. Don’t rush into buying Tesla shares without knowing the full story.
Tesla’s China EV Deliveries: A Closer Look
Tesla has already faced challenges in China’s fierce EV market for a while. Reportedly, the company scrapped its plans to produce a low-cost EV in China because of fierce competition there.
For what it’s worth, Tesla managed to grow its China EV sales by 15.3% year over year to 74,117 units in July. Don’t be too quick to celebrate this statistic, though.
A Bloomberg report put this information into context. The report stated that Tesla’s “pace of production in China is still lower than it was through the first seven months of last year.” Moreover, this reflects “slowing demand” for Tesla’s EVs.
Also, a hugely popular China-based EV maker, BYD (OTCMKTS:BYDDY), grew its July EV sales by 31% year over year to 340,799 units. This makes Tesla’s growth look unimpressive, comparatively speaking.
Another Distraction for Musk
In case Musk weren’t already busy overseeing X (formerly known as Twitter), the Boring Company, SpaceX, xAI and Neuralink, now he’s jumping headfirst into China’s car-insurance market.
Investors might wonder whether Musk’s attention will be spread too thinly to properly run Tesla’s EV-manufacturing business.
Here’s the scoop, fresh from a Reuters report. At the end of July, Tesla registered an insurance-broker firm, to be located in Beijing, China’s Central Business District. Thus, it’s probably safe to conclude that Tesla and Musk seek to sell vehicle-insurance products in China.
Tesla and Musk succeeded (more or less) in selling EVs in the U.S. However, this doesn’t automatically mean they’ll succeed at selling EV insurance in China. It’s a risky proposition that could prove to be a costly mistake for Tesla.
Besides, Tesla will probably have to deal with competition from BYD in this area. According to Reuters, BYD “was approved to take over a bankrupt online insurance unit Yi’an P&C Insurance Co last May.”
Tesla Stock: Note the Risks and Don’t Be Overconfident
Tesla and its shareholders could certainly use a victory now. So, was Tesla’s July China EV sales growth a real victory? putting the data into context, it’s hasty to call Tesla a winner in China.
Musk might regret distracting himself with a speculative, unproven foray into China’s insurance market. Therefore, Tesla’s investors shouldn’t be overly confident now.
Instead, they should take note of the risks and exercise caution when it comes to Tesla stock.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.