Tesla may be losing the consumer demand battle in China, according to Bank of America. The electric vehicle maker experienced several months of strong demand in China after it lowered prices on the Model 3 and Model Y last December. However, the brand saw its deliveries in China tumble 31% month over month in July, suggesting that the initial uptick was temporary, according to analyst John Murphy. “With the 31% MoM drop, TSLA’s July deliveries on [an] absolute basis were well below the YTD average of ~80k and closer to the level seen in early 2022,” Murphy said in a Tuesday note. “Meanwhile, BYD, which is TSLA’s largest EV competitor in China, showed its 6th straight month of positive MoM growth in July, increasing 4% MoM and 60% YoY to 261,105,” Murphy added. “This seems to indicate that the drop in demand for TSLA vehicles was not driven by broader economic factors in China.” The analyst reiterated his neutral rating on shares. He maintained his price target of $300, which implies 19% upside from Monday’s close. The price cuts have created a negative price spiral, according to the analyst. He forecasts the downturn continuing until the launch of a lower-priced model in 2025 or 2026. Other automakers followed Tesla’s lead and announced their own price cuts or incentives, including BYD and Xpeng. “As such, while the price cuts helped TSLA in clearing out inventory at the end of 2022 and spurred demand in China through 1H, those benefits appear to have been short-lived,” said Murphy. — CNBC’s Michael Bloom contributed to this report.
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