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Tesla tries to start uptrend despite worsening fundamentals

This article discusses the electric car industry in China, the impact of the Zero Covid policy on the industry, and the challenges facing Tesla.

The well-known carmaker, Tesla, has had some troubles this year, sharply lowering the stock price. However, it looks like the bulls are ready to step up the game again.

In the past two years, Tesla’s rivalry in the electric car industry has intensified as additional EV manufacturers have increased production and deliveries.

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As competing automakers continue to increase production, Elon Musk’s Austin, Texas-based firm has seen its share of the EV market decrease from around 79% in 2020 to 75.8% in June 2022 to approximately 65% currently.

Tesla (TSLA) had a lot of positive news to report during the first three quarters of 2022, as the company is well on its way to delivering 1 million EVs, having delivered 908,000 in the year to September 30 and 343,000 in the third quarter. In addition, with the delivery of its Semi Trucks on December 1, the firm also debuted its newest electric vehicle.

Chinese market is getting competitive

However, the Chinese market is applying increasing pressure on Tesla. In November, Chinese competitors Nio (NIO), Li Auto (LI), and BYD all had remarkable results.

In November, BYD reported selling 113,915 completely electric vehicles, a 147% increase year-over-year. It also sold 116,027 plug-in hybrids, a 164% increase year-over-year.

Nio said on December 1 that it delivered a record-breaking 14,178 automobiles in November, an increase of 30.3% year-over-year. As of the 30th of November, cumulative deliveries of Nio automobiles hit 273,741.

Lastly, Li Auto said on December 1 that it delivered a record 15,034 EVs in November, an increase of 11.5% year-over-year. As a result, the cumulative number of shipments through November was 236 101.

In China, Tesla will have tough times when competitors start selling even more of their cars.

Zero Covid policy causes issues in China

Two sources with knowledge of the situation stated on Monday that Tesla planned to reduce Model Y production at its Shanghai facility by more than 20% in December compared to November.

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China has partially loosened COVID-19 restrictions on individuals and enterprises, although significant limitations remain in effect. Difficulties in getting component supply have resulted in a decline in demand and a slowdown in local car sector production.

Despite this, Tesla’s retail sales in China nearly doubled in the first four weeks of November compared to the same period a year ago, according to statistics from CMBI, as the carmaker reduced pricing and offered incentives on its Model 3 and Model Y variants.

Tesla’s stock price has climbed above the short-term 21-day moving average (the red line), somehow changing the short-term outlook to bullish. However, the critical resistance stands at previous cycle lows near $210, and the price must advance above that level to start a more meaningful rally.

On the downside, the support could be near $180, followed by the current cycle lows of $170.

TSLA daily chart, Source: Author´s analysis, tradingview.com

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