According to a trade group report, Tesla Inc (NASDAQ: TSLA) sales dropped in China sharply, indicating the company is losing ground in the world’s largest market for traditional and electric vehicles. The China Passenger Car Association reported that Tesla’s sales in China fell 70% compared to June to 8,621 cars in July.

Tesla’s car sales dropped by 70%

The China Passenger Car Association indicated that Tesla’s sales in July in China dropped to 8,621 cars, down almost 70% compared to June. On the positive front, the car exports at the company’s Shanghai facility increased to 24,347 vehicles in July, compared to 5,017 vehicles in June. Considering the total sales, sales of Tesla dropped by a mere 1%. As per the critics, the sharp dropped in sales represents a sign of tough competition Tesla faces in China. 

Tesla is competing with higher competition from Chinese Electric Vehicle (EV) makers also. In addition, the company also faced protests by the company (TESLA) owners at this Shanghai auto show. The protest was mainly over poor car quality and various safety concerns flagged by Chinese regulators. As per the industry data, Tesla accounts for ~3.9% of sales of battery vehicles in China in July. But it is sharp dropped from 12.6% in June.

Tesla investors are unfazed by the drop in sales

As per the industry, Tesla has built Chinese capacity, which is higher when compared to domestic demand. It will result in further price cuts and margin pressure for the car manufacturers in China. Despite the sharp drop in sales, the company’s investors are unfazed, as the stock reaction was merely 1% on the news, which is in sharp contrast to the performance in April and May. Despite the drop in performance, the company still believes that China will be almost 40% of the company’s delivery by the end of next year. If the sales didn’t pick up in China, the company would face serious problems.

The China Passenger Car Association reports the numbers for July. However, the company doesn’t convey the monthly numbers; and instead, they report the quarterly numbers. So the numbers of the Association are not confirmed.