Tesla Slips as Musk Scraps Plaid+ and China Sales Slide; Wedbush Holds $1,000 Target

Tesla shares opened Monday morning down 2.2 per cent, trading at $586.60 each. At that price the stock sits roughly 17 per cent lower for the year. Two things were weighing on it: lingering worry about how many cars the company is selling in China, and a decision by founder and CEO Elon Musk to cancel the top-tier version of the Model S Plaid sedan.

The cancelled model is the Plaid+, which had been marketed with a driving range of 520 miles. Musk said it is no longer needed because the standard Model S Plaid is, in his words, just so good. The Plaid itself is due to be unveiled at a media event on June 10.

The China concern comes from a report published last week by the Information. It said Tesla's May orders in China, the world's largest car market, fell 45 per cent from April to just under 10,000. That figure is a report rather than an official count. The China Passenger Car Association is scheduled to publish official numbers on Friday.

China matters a great deal to Tesla. It accounted for just over a third of the 184,800 cars the company delivered in the three months ending in March, a record quarter. The CPCA put first-quarter sales in China at 69,280 units, following the 2019 launch of Tesla's Shanghai gigafactory. In April the association pegged the tally at 25,845.

The company has also been navigating friction with Beijing. Tesla has set up data centres to store information generated by cars sold in China, a step that follows renewed engagement with authorities amid a wider crackdown on technology companies and the collection of customer data. Bloomberg reported last month that Chinese officials had barred Tesla vehicles from military bases and housing compounds, out of concern that sensitive data from the onboard cameras could be gathered and stored on Tesla servers.

Competition is also building. Reuters reported that Geely, one of Tesla's main China-based rivals, is preparing to unveil a range of newly branded EVs that could challenge Tesla in the high-end market. Geely owns a majority stake in Volvo and close to 10 per cent of Germany's Daimler AG, and has long said it wants to build premium-priced EVs, as domestic rival Nio does.

Wedbush analyst Dan Ives, however, kept his 'outperform' rating and $1,000 (U.S.) price target. He noted that only about 5 per cent of car sales in China are EVs, and he expects EV deliveries there to double over the next two years, with Tesla and domestic rivals such as Nio the main beneficiaries. He wrote that Tesla, with a strong second half, could approach 900,000 annual deliveries this year and head toward 1.3 million in 2022, with the Cybertruck adding to demand.

Ives argued the real dividing line for bulls and bears is not the chip shortage, which he called temporary, but Tesla's ability to deepen its footprint in China. He said the recent back and forth between Beijing and Tesla has hurt demand there for now, and that China is poised to represent more than 40 per cent of global deliveries by 2022. Friday's official CPCA figures will be the first hard check on how deep the May slide really went.