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Tesla's Sales in China Drops in October Amid High Tariffs

Tesla, Inc.’s TSLA car sales in China incurred a 70% year-over-year drop in the last month, per Reuters. China Passenger Car Association, the country's passenger car association also reported that this American automaker sold only 211 vehicles in October. This waning sales figure in the world’s largest automotive market, along with the ongoing tariff war between China and the United States, is expected to strain Tesla’s financials.

Since July, the government in China has imposed a counter tariff of 40% on all U.S. vehicles that are imported to China.

In fact, in October, this U.S-based electric carmaker announced that tariff hikes are hampering its sales in China as it imports all of its vehicles that are sold in the country. However, in spite of lowered revenue generation, Tesla recently reported a price cut for its Model X and Model S cars in China. With an aim to make the cars more affordable, the company slashed prices of the two models by 12-25%.

Tesla, Inc. Price and Consensus

 

Tesla, Inc. Price and Consensus | Tesla, Inc. Quote

In a bid to avoid steep tariff charges and lower costs, Tesla acquired a plot in China to set up its new factory outside the United States. In the last month, the company bought an 864,885-square meter plot in Shanghai by investing 973 million yuan or $140 million. With an initial production target of 250,000 vehicles and battery packs a year, the factory is expected to manufacture its first batch of vehicles in three years.

Demand for clean-energy vehicles is witnessing a growth in China majorly due to initiatives taken by its government. However, the broader automotive industry is observing its first major sales decline in nearly three decades.

Price Performance

Over the past three months, Tesla’s stock has gained 10.9%, outperforming 3.6% decrease recorded by the industry it belongs to.

 

Zacks Rank & Other Key Picks

Tesla currently carries a Zacks Rank #1 (Strong Buy). A few other top-ranked stocks in the auto space are Oshkosh Corporation OSK, O’Reilly Automotive, Inc. ORLY and Toyota Motor Corporation TM, each carrying a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Oshkosh has an expected long-term growth rate of 14.6%. Shares of the company have increased 29.8% over the past month.

O’Reilly has an expected long-term growth rate of 15.7%. Shares of the company have rallied 5.7% over the past three months.

Toyota has an expected long-term growth rate of 6%. Over the past month, shares of the company have gained 5.1%.

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