Tesla's China-Made EV Sales Drop Y/Y in May: Is Price War a Suspect?

Tesla's TSLA sales of China-made EVs continued to decline for the eighth consecutive month in May due to intensifying price wars in the world's largest auto market. Per the China Passenger Car Association data, combined domestic and export deliveries to Europe and other markets of the Model 3 and Model Y dropped 15% year over year in May to 61,662 units, following a drop of 6% in April. 

Tesla’s EV sales slump persisted across much of Europe last month, primarily due to its aging lineup and the negative impact of CEO Elon Musk’s political involvement on consumer sentiment.

To boost demand in China, its largest market in the first quarter, Tesla allowed smart-assisted driving features to be transferred to new vehicles in China starting in late May and continuing through the end of June. Additionally, the Model 3 and Model Y were included in a government initiative promoting EV adoption in rural areas for the first time this year. TSLA carries a Zacks Rank #5 (Strong Sell) at present. 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Tesla, which triggered a price war in 2023 that now involves more than 40 brands and shows no signs of easing, is under pressure from new, competitively priced EVs offering strong performance. China has called for an end to aggressive price wars, especially after BYD Company Limited BYDDY introduced new incentives on more than 20 models in late May, leading Geely Automobile Holdings Limited GELYY and Chery to adopt similar measures. 

BYD, Tesla’s key contender, slashed the price of its cheapest model, the pure battery-powered Seagull EV, to 55,800 yuan. BYD’s global passenger car sales rose 14.1% year over year in May, but the growth slowed from April’s 19.4%.

Geely Auto, an auto manufacturer based in Hangzhou, China, also reduced prices, offering discounts between 9,000 yuan and 16,000 yuan on selected models, such as the Xingyuan EV and entry-level Galaxy E8 sedan. Through these limited-time promotions, which ended June 1, Geely Auto aimed to stimulate sales, reduce inventory and benefit from government incentives intended to support EV transitions.

Tesla’s Price Performance, Valuation and Estimates

Tesla has underperformed the Zacks Automotive-Domestic industry year to date. TSLA shares have lost 17.8% compared with the industry’s decline of 14.8%.

YTD Price Performance

From a valuation perspective, Tesla appears overvalued. Going by its price/sales ratio, the company is trading at a forward sales multiple of 10.23, higher than its industry’s 2.75.

EPS Estimates Revision

The Zacks Consensus Estimate for 2025 and 2026 EPS has moved down 13 cents and 16 cents, respectively, in the past 30 days. 

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This article originally published on Zacks Investment Research (zacks.com).

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