China EV sales to decline amid rising COVID cases

Yahoo Finance's Pras Subramanian discusses the outlook for electric vehicle sales in China as the country faces COVID outbreaks.

Video Transcript

JULIE HYMAN: The surge in COVID-19 cases in China is likely to hit the nation's electric vehicle market, as disrupted production and weakened demand weigh on the industry. This according to a report cited by the South China Morning Post. Yahoo Finance's Pras Subramanian is here with the details. And we know, Pras, that this is something that the industry there has been struggling with. We were just talking about it with regards to the oil industry and Phil Streible. There was this desire that they open back up, but now the opening is sort of so abrupt and messy that it's causing its own set of problems.

PRAS SUBRAMANIAN: Yeah, I mean, the reopening is taking its bite now, right?

JULIE HYMAN: Right.

PRAS SUBRAMANIAN: You know, so this South Morning Post citing a CICC, that's a China-- state-owned China bank-- the report on the EV scene there. 40% loss of sales in Q1 potentially that would be 600-- so they will lose 600,000 EV sales in Q1 because of the kind of rising infection rate hitting, affecting sales and production. That would be a 40% decline from Q4 actually. So not insignificant numbers there. So they'll probably deliver around 1.5 million EVs for the quarter in China, all the automakers there right now domestically. So still a good amount, but a dramatically lower amount than Q4.

We're starting to see that happen actually right now with Tesla reportedly extending their Christmas break by a day because of rising COVID rates. So that's not good. But however, the report does say that by Q2 2023, we should see some normalcy, more kind of return to people-- foot traffic coming to stores, more production. So that should actually be kind of, like, maybe a quarter bump potentially.

But we had a guest on yesterday from the China Beige Book, and they talked about how we don't-- they don't see it normalized till the second half of 2023. So potentially, it could last even more than a quarter.

BRIAN SOZZI: Pras, what else are you looking for on Tesla? I mean, we've seen a stunning reversal here in the stock at least today. Every day, there seems to be a new negative development from this company.

PRAS SUBRAMANIAN: Yeah, I mean, look. I mean, but bad week, bad month, bad quarter, today possibly snapping that, I guess, seven-day losing streak, that seven-day losing streak for Tesla, you know. But like we said, it's hitting levels that people couldn't imagine, right? People talking about a $100 price target or price level as the floor to watch. I mean, that's crazy, right, for a stock that's down so much.

But we're going to have Q4 delivery numbers coming out next week. Potentially, the fundamental story hasn't changed that much for the company. They're ramping up in Austin, ramping up in Berlin. China is-- yeah, they're going to shut down for a few days in January, but still doing pretty well. We talk about the IRA effect in this country. It might boost sales here. So we'll see if they can actually sort of rebound here next year. But the big question is, can you take the spotlight off of Elon Musk and put it back on Tesla, the company, which seems to be OK other than a few sort of demand issues here and there.

BRIAN SOZZI: Pras Subramanian, thanks so much.