What happened
For the fourth day in a row, Tesla (TSLA 12.06%) stock drove higher, up 4.9% as of 11:45 a.m. ET after a Reuters report revealed why the EV maker is raising production numbers at its Shanghai Gigafactory: Turns out, when the price is right, Chinese car shoppers are happy to buy Teslas.
So what
Yesterday, Tesla announced plans to increase production rates in Shanghai, to the point where it will be churning out 20,000 EVs per week by the end of February -- or more than 1 million electric cars per year. And what's inspiring this sudden production ramp, you ask?
Tesla's sales in China jumped 18% sequentially in January.
Tesla sold 66,051 EVs in China last month, according to data from the China Passenger Car Association cited by Reuters. That number was up 18% from December, and 10% higher versus January 2022. Not coincidentally, this sales explosion came on the heels of Tesla announcing price cuts -- not just in the U.S., but in China as well -- where the company has lowered prices by as much as 24% since September.
Now what
Conclusion: At the right price, Tesla can sell a lot of electric cars in China. It follows logically that what's true over there might also be true here in the U.S., where the EV maker famously slashed prices by as much as 20% just last month. And this means that, the next time Tesla reports sales figures -- perhaps for January but almost certainly by February -- then the data are probably going to look really good.
Granted, there's still a question as to how profitably Tesla can sell a lot of EVs if it's cutting prices in order to get them sold. But as I explained yesterday, there's reason to believe that if sticker prices are falling and input costs are also falling, then it's possible the company won't be taking as big a hit on profit margins as the bears predict.
Fingers crossed.
