Al Root

Tesla stock was falling in early trading Wednesday.

First-quarter earnings are a week away and investors are consumed with tariffs, sales, and protests. They should be thinking about China -- and the impact of President Donald Trump's trade war on Tesla in that country, too.

Shares of the electric vehicle maker were down 2% in premarket trading at $249.65, while S&P 500 and Dow Jones Industrial Average futures were 1.5% and 0.2%, respectively.

It's been a volatile few months for Tesla stock. Shares were roughly $250 each at the time of the election on Nov. 5 and $480 a few weeks later. Investors were convinced the second Trump administration would benefit the company, possible by creating standards that speed the adoption of self-driving technologies.

Gains didn't last. Shares were down some $200 each, just north of $280, on April 2, after Tesla reported weaker-than-expected first-quarter deliveries. Disappointing numbers fueled fears that CEO Elon Musk's political activities were hurting Tesla's brand.

Tesla sold about 128,000 cars to Americans in the first quarter, down 9% year over year. Tesla's market share slipped from about 53% to 43%.

Things turned out much better in China. Tesla sold 135,000 cars in the first quarter, up 2% year over year. The company eked out a gain despite a sales lull related to the Model Y refresh. Updates to existing models can create a sales headwind while buyers wait for the newer model.

The most recent weekly sales tracked by Citi analyst Jeff Chung, however, dropped 15%. It's only one week, but it corresponds to the escalation of the Chinese-American trade war.

"You're seeing some consumers in China now choosing BYD [vehicles] over Teslas," said Cantor Fitzgerald analyst Andres Sheppard. "There's now the sentiment in China that they're essentially encouraging the consumer to purchase non-American products, or in this case, Chinese products."

That isn't good news for Tesla investors. China is the largest global market for new cars and new EVs. It accounted for more than 20% of Tesla's 2024 revenue.

A buyer strike in China is a watch item for Sheppard, who rates shares Buy and has a $425 price target for the stock. He upgraded shares in March after they dropped more than 50% from December highs.

There is a lot to worry about but a lot of catalysts coming, too, he said -- including a new lower-priced model, planned robotaxi service, and eventually sales of AI-trained robots. All of those can drive shares higher the further investors get away from the first-quarter disappointment.

One week of sales data doesn't make a trend, but its something else for investors to track and represents another potential unintended consequence of the White House's tariff policies.

Write to Al Root at allen.root@dowjones.com

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April 16, 2025 04:40 ET (08:40 GMT)

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