Tesla production rumors supported by China auto sales data - Piper Sandler
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Piper Sandler told clients that auto sales in China for the month of November, which imply slowing annual auto sales, explain the rumors of production pullbacks by Tesla (NASDAQ:TSLA) in the market.
Equity analyst Alexander Potter told clients that COVID restrictions figure prominently in sliding sales for the month. While Tesla specifically saw a strong gain year over year as NEV penetration continues to progress in the region, overall retail vehicle sales fell 9.5% year over year, slowing down for the first time since the spring's lockdowns. 
âThe November result implies an annualized sales rate of only 17.2M units; it's been 9 years since China's auto market annualized at such a low rate (excluding months impacted by COVID lockdowns),â Potter explained. âDecember is typically the strongest month of the year, historically accounting for 10.9% of full-year sales, so if recent downward momentum isn't addressed through loosening COVID restrictions, then widespread production cuts may be necessary.â
He added that the drop in retail sales year over year marks the first such decline for both October and November, typically two of the strongest months of the year, since 2008. As such, the production cuts rumored by the likes of Bloomberg and Reuters are unsurprising and perhaps prudent for Tesla to pursue.
Read more on why Potter doesnât see competition as an impetus for Teslaâs pared production.