Tesla boosted by China sales, Shanghai plant

China is becoming a crucial market for Tesla, with the American electric-vehicle maker offering incentives to boost sales there and its Shanghai factory recently exporting its millionth vehicle.

Tesla, based in Austin, Texas, is expected on Wednesday to report an 8 percent increase in third-quarter deliveries of its electric vehicles in China, according to Wall Street estimates, powered by extended incentives and financing plans.

"China, which accounts for one-third of Tesla's sales, is a major growth driver," said Scott Acheychek, chief operating officer of REX Financial, which offers exchange-traded funds that track Tesla's stock performance.

Deutsche Bank analysts estimated that in the third quarter, Tesla would deliver about 139,000 Model 3 sedans, 296,400 Model Y SUVs, a combined 13,350 of its larger Model S sedans and Model X SUVs and about 13,500 Cybertruck pickups in China.

The Model 3 and Model Y are manufactured at Tesla's Gigafactory in Shanghai.

With slowing demand for EVs in the United States and a lack of subsidies in Europe, Tesla delivered about 831,000 vehicles in the first half of 2024. To prevent a drop in deliveries, it needs to hit about 979,000 vehicles in the second half.

Shares of Tesla closed at $261.63, up $1.17, in Nasdaq Stock Market trading on Monday.

Sales in China also were boosted by increased government subsidies to encourage consumers to switch their gas-powered vehicles to battery-powered ones.

Responding to rising competition from domestic Chinese automakers such as BYD, Tesla introduced a range of offers in the spring, including insurance deals, discounts on certain paint choices and a zero-interest loan of up to five years.

The incentives helped it boost sales in July and August, according to data from the China Passenger Car Association (CPCA), after two straight quarters of declining deliveries.

Analysts said the trend continued through the quarter; 12 analysts, polled by LSEG, expect the company to deliver 469,828 vehicles, which would be its best third quarter, up from about 435,000 vehicles a year earlier.

Tesla cars also became eligible for government purchases in the country, with its best-selling Model Y included in a list of vehicles government entities can purchase as a service car.

Ken Mahoney, CEO of Mahoney Asset Management, which invests in Tesla, said the boost from China, along with benefits of a recent interest rate cut by the US Federal Reserve, could help the automaker match the record 1.8 million vehicles delivered in 2023.

Earlier this year, Tesla CEO Elon Musk said the company was on track for higher deliveries in 2024.

Tesla started deliveries of the Cybertruck late last year, and the EV maker expects to increase production to 250,000 units next year.

That will be crucial to address investor concerns around EV demand as they focus on Tesla's unveiling of a robotaxi on Oct 10 — a shift in strategy since the company dropped its affordable car project and one that some see unlocking trillions of dollars in value for Tesla, Reuters reported.

Tesla also is seeing strong output from its Gigafactory in Shanghai, where it exported its 1 millionth vehicle, Tesla Asia said on X on Saturday. "Thanks to all Tesla owners and supporters!", the post said.

Tesla Vice-President Tao Lin posted on Weibo that "the one-millionth exported China-made Tesla car sets sail from Shanghai's Nangang Port", techopedia.com reported.

"While the automotive market in China remains among the most competitive globally, we feel that our cost structure and focus on core functionality that drives value for customers — including autonomy — position us well for the long-term," the company said in its second-quarter earnings report in July.

Musk said earlier this month that the Shanghai plant, which opened in January 2019, is running at "max capacity."

Tesla also is building a Mega Factory in the Shanghai Lin-gang Special Area. The facility is nearly 60 percent completed, according to techopedia.com, which cited a local news report.

"DavidCyberCab", whose profile says he is a computer scientist and Tesla investor, posted about the new factory on X on Saturday: "It broke ground on 23 May 2023. It was 45 percent done on Aug 20, 2024. It is now done 60 percent today, on Sept 28, 2024. China speed is truly out of this world."

Agencies contributed to this story.

hengweili@chinadailyusa.com