Bearish analysts are fearing a sort of “Valentine’s Day Massacre” in Tesla (NASDAQ:TSLA) stock today. This comes after the company reported weak deliveries in China.
Tesla is a leading maker of luxury electric vehicles (EVs) in China, thanks to its plant in Shanghai. However, rising tensions between the U.S. and China as well as the presence of EV alternatives could mean Chinese buyers are turning away from the company.
Tesla’s market capitalization fell 1% in early trading on Feb. 14, mainly due to a hot inflation report. As of this writing, shares currently change hands for about $202 apiece, up nearly 5% for the day. Tesla currently has a market cap of around $640 billion.
TSLA Stock: Adjusting on the Fly
Tesla became the world’s most valuable car company because its prices were fixed and it had a long waitlist of buyers. But as production has ramped up, the EV company has been moved to change prices regularly. Its latest price announcement is its fourth change in two months, per Reuters.
Tesla also needs to refresh its designs. Its current lineup of cars is several years old. It now has to compete with EVs from Nio (NYSE:NIO), XPeng (NYSE:XPEV) and Li Auto (NASDAQ:LI).
In addition, Tesla faces increasing competition in China’s mid-market from BYD (OTCMKTS:BYDDY) and on the low end from the Hong Guang MINI EV, which is produced via a joint venture between state-owned SAIC, Liuzhou Wuling Motors and General Motors (NYSE:GM).
On top of that, there’s politics over which Tesla has no control. With tensions brewing, many in China may become further disenchanted with American brands. Tesla is one such brand that could be readily discarded by consumers, thanks especially to the abundance of EV competition in the country.
Lastly, China’s home market dominance makes it harder for Tesla in Europe as well. Many of China’s EV makers are already moving into Europe at competitive prices, challenging the U.S. company in a big way.
What Happens Next?
Most American analysts focus on the premium between Tesla’s market cap and U.S. competitors worth less than one-tenth of its value. But Tesla holds a similar lead over its Chinese competitors. BYD is worth just $110 billion as of this writing. Meanwhile, Nio, Xpeng and Li Auto are worth less than half of that market cap.
It’s this premium that investors need to watch as China seeks to “out-Tesla” Tesla.
On the date of publication, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
