Tesla Inc (TSLA)

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Tesla Gets Good News From China. Stock Is Forming a Bottom. -- Barrons.com
8:34 am ET November 30, 2022 (Dow Jones) Print
Al Root
Shares of electric vehicles leader Tesla have been reeling for several reasons in 2022 -- including supply and demand problems in China, the world's largest market for new cars and new electric vehicles (EVs). There are now signs of improvement in the country, which should be met with a sigh of relief from Tesla bulls.

Citi analyst Jeff Chung tracks EV sales in China using insurance registration data. He estimates that Tesla sold more than 16,000 units in China this past week. That's up about 100% compared with the last week of October.

Tesla serves the European and Chinese markets from its most productive manufacturing plant in Shanghai, making weekly comparisons of domestic sales difficult to contextualize. Still, 16,000 vehicles in a week is a lot. It shows demand is solid. It also shows production isn't being impacted by China's zero-Covid policies.

Chung estimates that overall Chinese November EV sales will come in at more than 520,00 units, up almost 20% compared with October. That's more good news. Auto demand has been down in recent months in China. Covid-19 lockdowns are still hitting production as well as demand for new cars. XPeng (XPEV) President Brian Gu told Barron's that dozens of the company's stores are closed because of local lockdowns. That affects XPeng's's ability to deliver cars.

There are signs the Covid-19 restrictions are easing. "China officially lifted the lockdown on Zhengzhou, also known commonly as iPhone city with Foxconn's main Apple production artery located in this key area," wrote Wedbush analyst Dan Ives in a Wednesday report. "This is some good news."

He is talking about good news for Apple (AAPL), but it's good news for any manufacturer in the country. What's more, some workers are being allowed back into offices in Guangzhou.

Tesla investors could do with some good news -- the stock has been cut almost in half so far in 2022 and the shares are down 20% since owner Elon Musk completed his purchase of Twitter. The Nasdaq Composite is up about 0.1% over the same span.

Musk being distracted by running Twitter has been a concern. That remains. But investors have also been worried about Chinese EV data points. With sales rising in November, some of those fears can fade.

And as fears fade, Tesla shares may move. Technical analysts have pointed out that the stock chart pattern looks weak, but shares have been holding the $180 level. That's notable for Evercore ISI technical stock market analyst Rich Ross. Microsoft (MSFT), Google parent Alphabet (GOOGL) and Tesla "have bottomed atop long-term support," wrote Ross in a Monday note.

The $180 level could be a base of support from which Tesla stock can rise if fundamental data points, such as Chinese fourth-quarter deliveries, impress investors.

Tesla stock is up about 0.7% in premarket trading Wednesday. S&P 500 and Dow Jones Industrial Average futures are up about 0.2% and 0.1%, respectively.

Write to Al Root at [e-mail]