Many Tesla shareholders have lost the ability to think critically about the company. Many of these investors enter a never-questioning world of “group think” amplified by social media and Tesla’s celebrity CEO, Elon Musk.
The latest group think narrative involves a common view around the dramatic July decline in Tesla China vehicle sales. Sales of China-made vehicles declined by 69% from the prior month. The popular group think explanations are:
Tesla exported over 24,000 vehicles from its Shanghai factory to take advantage of higher profit sales in Europe versus lower profit sales in China, and
Tesla always produces cars for export in the first half of a quarter, then produces cars for local sales in the second half of the quarter.
What these investors willfully ignore are other credible explanations for the July sales collapse. It seem Chinese officials have actively driven demand for Tesla vehicles lower. There was the very public protest by a dissatisfied owner during the Shanghai auto show in April that went viral. This was followed by a series of vehicle accident reports in the country, as well as increased scrutiny around customer service.
Following these events, Reuters and others reported that Tesla China vehicle orders fell by half in May. Of course the investor fanbase attacked this information because it contradicted their collective view of the company’s performance. Yet it seems that dramatically lower May orders reported by Reuters actually resulted in the significantly lower July sales in China.
Some believe Tesla’s red carpet welcome in China has run its course, at least for now. As Michael Dunne (China business expert) wrote on Twitter and in his ZoZo Go newsletter recently, “In the People’s Republic, you must always secure the blessings of the people in charge.” According to Dunne, the people making the rules for the automotive industry are the Cyberspace Administration of China and the State Administration of Market Regulation. Tesla has run afoul with both organizations this year. I believe the company will figure out how to operated in China eventually like the VW Group and General Motors have learned over many years operating in the country. In fact, Tesla is already adding to its government relations team to begin building a “harmonious environment” in China according to Dunne.
One investor in a Twitter rant asked me if I though I was smarter than Elon Musk.
For the investor, stepping outside the company fanbase bubble is useful. During one Twitter exchange with an in-the-bubble Tesla investor about the July sales, he asked me, “Do you think you’re smarter than Elon Musk?” My answer, “No!” But it’s my money invested in the company. As a shareholder, I should frequently question the company line, particularly when results are dramatically worse than expected.
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Disclaimer
TaaSMaster, LLC is not a registered investment advisor or broker/dealer. All investment opinions expressed by TaaSMaster, LLC are from personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors may occur.