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7 Major Takeaways as Tesla China approaches 3 million sales

6–8 minutes

Tesla China delivered 74,117 vehicles in July 2024, a record-breaking start of a quarter. Here are 7 major takeaways as Tesla China approaches 3 million sales.

On August 1st, we learned from CPCA's data that Tesla has delivered 74,117 vehicles (wholesale), 46,000 of which were retail sales in China, a record-breaking first month of any previous quarter.

Tesla began selling in China in January of 2020, four and a half years ago, and has since delivered a total of 2.77 million vehicles, 1.6m of which are Tesla Model Y.

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Tesla's Gigafactory Shanghai claims to have become the world's most efficient vehicle factory. Thanks to its reliance on domestic supply chains and first-class manufacturing capabilities in China, an average of one vehicle rolls off from the assembly line every 30 seconds.

July's results reveal 7 major takeaways from Tesla China as it approaches 3 million deliveries:

1. 2nd-best month in 2024: 74,117 wholesale sales

First of all, 74,117 wholesale sales (including China & export) in July 2024 represent the second-best delivery month of 2024, just behind March's 89,064.

July results also reflect a 15.3% year-over-year growth from 64,285 in July 2023 and a 4.4% month-over-month growth from 71,007 in June 2024.

Each of the last three months has exceeded 70,000 vehicles sold at the wholesale level.

2. Remarkably resilient 2024: 500,750 wholesale sales YTD

Cumulatively, as of July 2024, Tesla has delivered 500,750 vehicles, which trails 2023 at which point Tesla had delivered 540,824 vehicles.

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However, considering that Tesla China only sells two vehicle models (Model 3 and Y), as well as the intense competition in China coming from new vehicles like the Li Auto L6 (EREV), ZEEKR 001, and NIO ET5/T, to name a few, Tesla sales have been remarkably resilient.

3. Record start of a quarter: 46,000 retail sales

Ignore that 46,000 retail sales is a 22.3% month-over-month decline from 59,261 vehicles in June because you will notice a decline at the beginning of each financial quarter. Instead, you need to focus on the YoY growth of 46.4% from 31,423 in July 2023.

In fact, 46,000 vehicles in July is the best first month of any previous quarter in terms of deliveries. Tesla, particularly, adopts a staggered approach to domestic and export deliveries, delivering most of the export vehicles at the beginning of the quarter, while deliveries ramp up for deliveries in China through the end of the quarter.

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Tesla China's record quarter start can partly be attributed to its new 5-year, 0% interest financing plan introduced on July 1. Tesla also decided to extend the promotion through August 31.

The financing plan includes all optional features such as paint, interior upgrades, wheels, Enhanced Autopilot (EAP), and Full Self-Driving (FSD) capabilities. For those opting for the Model 3 rear-wheel drive version, this 5-year, 0% interest plan means consumers can pay as little as 85 yuan per day on their car loans.

4. Closing the gap with 2023: 324,317 retail sales YTD

Given the strong start of Q3-2024 sales at the retail level, Tesla has nearly matched cumulative 2023 sales, with 324,317 Tesla sold in China year-to-date. Last year at this time, Tesla had delivered a total of 325,528 vehicles and finished 2023 with 603,664 units sold.

However, three important Model Y competing vehicles are set for launch later this year, starting with Geely's ZEEKR 7X. The launch of the Luxeed R7 is also imminent, a coupe SUV jointly developed by Huawei and Chery. Lastly, NIO's new sub-brand will launch a battery-swap-enabled ONVO L60 coupe SUV in Q3 of 2024.

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As of June 2024, the Tesla Model Y is still uncontested in the CNY 250,000 - 350,000 pure electric SUV segment with 207,817 units sold year-to-date. ZEEKR 001 and NIO ES6 trails by a large margin with 54,568 and 31,907 retail sales, respectively.

5. NEV penetration: 48.4% in June and over 50% in July 2024

New energy vehicles, which include battery electric vehicles and plug-in hybrids (also including EREVs), have reached a penetration rate of 48.4% in June 2024.

Reports also suggest that the NEV market share in China exceeded 50% in July, which would represent a fifth consecutive month of positive market share growth.

6. Robust automotive market in 2024: over 22 million retail sales

Despite a "sharper-than-expected" growth slowdown of the Chinese economy that prompted Goldman Sachs to revise its GDP growth forecast from 5.0% in 2024 to 4.9%, the automotive industry can only be described as robust.

One measure that is particularly important to observe is "trailing 12 months" (T12), which is the sum of the last 12 months as of a given month, because it controls the seasonal effect of sales.

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Looking at the T12 retail sales in China, every month in 2024 has exceeded the 22 million sales level. We would have to go back to February 2019 for the last time this feat was achieved.

Much of that was fueled by sales growth from pure electric and hybrid vehicles with T12 BEV and PHEV retail sales reaching 3.3m and 5.5m, respectively.

7. PHEV/EREV dominates pure electric: 4x growth rate

Looking at the % change of the T12 month retail sales of each segment, the transition to NEV is clearly irreversible. Trailing 12 months ICE sales declined further by -2.3% in June, while BEV and PHEV continued to grow their market share with 0.8% and 4.6% growth, respectively.

What is more important to note is that much of the NEV growth is disproportionately driven by plug-in hybrids (incl. EREV), with T12 growth rates far superior to pure electric throughout the entire period of the above chart.

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This trend is obvious when considering the recent popularity of BYD's DM plug-in hybrids or Li Auto, AITO, and Leapmotor's extended-range electric vehicles.

In the last four months since March, three of four months showed sub-1.0% growth for the T12 months sales of the BEV segment, demonstrating continued but slowing adoption of pure electric vehicles. Meanwhile, the PHEV segment has hovered around the 4.0% T12 months growth rate.

Whilst July results were better than anticipated, Tesla's 2024 cumulative sales "slowdown" is partly driven by Chinese consumers' growing preference for hybrid vehicles, as they offer ample electric range for in-city driving while solving range anxiety with the combustion engine (or extended range).