Tesla shares fall as the company’s deliveries continue to underwhelm

Tesla (NYSE: TSLA), which fell nearly 30% last month to wrap its second-worst month on record, is trading lower in early US price action today amid reports that the company’s deliveries in China tumbled last month.

Tesla’s deliveries were weak in the US in January, while sales in Europe have plummeted too. With sales falling in China – its biggest market outside the US – troubles seem to be compounding for Tesla.

TSLA’s sales plunge in China

According to preliminary data from China’s Passenger Car Association, Tesla shipped 30,688 cars in China last month which was almost half of what it did in the corresponding month in 2024.

The fall in Tesla’s deliveries at the beginning of the year is not surprising as it tends to push deliveries towards the end of the year, including through promotions. Moreover, the Elon Musk-run company has refreshed its Model Y – its best-selling model – so some buyers might have deferred purchases to get the latest model.

However, there are fears of a “buyers strike” as Musk’s politics haven’t gelled well with many potential Tesla buyers. Meanwhile, Tesla’s China sales fell at a time when BYD’s deliveries have been strong in the world’s biggest market for electric cars.

BYD sells both BEVs (battery electric vehicles) and PHEVs (plug-in hybrid vehicles) and is the biggest global seller in the combined category known as NEV (new energy vehicles).

In February, BYD sold 322,876 NEVs, which took its total deliveries in the first two months of the year to 623,384 – a YoY rise of 92.5%. Notably, while other Chinese EV companies reported a sequential fall in deliveries, the February deliveries of BYD, Zeekr, and Xpeng Motors were high compared to January. BYD sold 67,025 vehicles in international markets in February, which was a new record.

Chinese EV companies reported strong numbers in February

Xpeng Motors delivered 30,453 EVs in February, which was 570% higher YoY. While the rise is admittedly coming from a lower base, as the company’s deliveries were quite subdued in the first half of 2024, the numbers are nonetheless quite reassuring and came in ahead of estimates. NIO – once hailed as the “Tesla of China” – also reported a 62.2% YoY rise in its February deliveries.

Meanwhile, Tesla is also offering free Supercharging for its Cybertruck in a sign of tepid demand. Cybertruck sales haven’t anyways been as strong as once expected partially because of the high price tag for the pickup truck.

Separately, many Cybertruck owners have complained of negative reactions from people to their vehicles, including being shown the middle finger.

Analysts on Tesla shares

Bank of America lowered its target price on Tesla by $100 to $390 while maintaining its “neutral” rating, which analyst John Murphy attributed to “renewed uncertainty” from President Donald Trump’s tariffs.

“We note that potential tariffs on Mexico and Canada pose significant risk to our NA production estimates and could create a supply shock similar to COVID,” said Murphy in his note.

According to Murphy, “Early in 2025, there are material and potentially disruptive changeovers at F (Ford Motor, Kentucky Truck) and TSLA (Tesla, Model Y globally), while GM (General Motors) is largely clear.”

He added, “The resulting volume disruption and macroeconomic headwinds should continue to haunt suppliers, but cost actions flowing through the P&L should support flat to up margins.”

Morgan Stanley reiterated Tesla as a top pick

Meanwhile, Morgan Stanley reiterated Tesla as its top pick, and analyst Adam Jonas predicted nearly 50% rally in the shares. Jonas said that Tesla’s 2025 deliveries might dip YoY – a far cry from the up to 30% rise Musk predicted last year. However, the long-time Tesla bull sees Tesla as an artificial intelligence (AI) play.

“Tesla’s YTD auto deliveries have been mostly below expectations, but not particularly narrative changing. Tesla’s softer auto deliveries are emblematic of a company in the transition from an automotive ‘pure play’ to a highly diversified play on AI and robotics,” said Jonas in his note.

He sees Tesla’s Optimus humanoid “becoming serious enough to move the stock.” Musk, who believes that the bulk of Tesla’s current valuation is linked to progress on autonomous driving, sees Optimus as a long-term growth driver, touting it as a multi-trillion dollar revenue opportunity.

Tesla offers advanced self-driving

Tesla markets its advanced autonomous driving as FSD (full self-driving). However, it is worth noting that the nomenclature could be misleading as it is not level 4 autonomous driving, and even Tesla advises drivers to keep their hands on the steering wheel all the time, even when it is on Autopilot. There have been multiple instances of crashes involving Autopilot, and the US NHTSA is investigating the company.

Meanwhile, Musk’s proximity to Trump might mean enabling regulations for self-driving technology, which is crucial for its upcoming robotaxi, whose rides are set to begin next month in Austin.

BYD offers self-driving features for free

That said, there are fears of a price war in autonomous driving just as in electric cars. Last month, BYD released an assisted driving system named “DiPilot” in partnership with DeepSeek. The Chinese AI (artificial intelligence) startup created waves with its low-cost AI model, which performed better than models from OpenAI and Meta Platforms on some parameters. BYD would offer assisted driving for free and would become the only automaker offering these features in cars priced below $10,000.

While one may argue that players like Tesla and Xpeng Motors offer a more advanced version of autonomous driving, BYD offering assisted driving for free has raised fears about other companies’ ability to charge premium pricing for their self-driving features.

As for Tesla, the shares have continued their dismal 2025 run and now risks paring all its post-election gains.