Chinese electric vehicle leader BYD experienced a challenging start to the year, indicating that Tesla may struggle to surpass Wall Street's first-quarter delivery expectations.

In January, BYD delivered a total of 201,019 passenger vehicles. This figure includes 105,304 all-electric vehicles and 95,715 plug-in hybrid models. Unfortunately, sales decreased by 41% compared to December 2023. While January is typically a slow period for the industry, the sequential drop in 2024 exceeded the 36% decline seen in January 2023.

According to a recent report by Citi analyst Jeff Chung, inventories at Chinese car dealerships are high. To address this issue, auto companies have resorted to price cuts, impacting their revenues as they attempt to clear their lots.

BYD's stock saw a marginal increase of 0.6% in overseas trading. Nevertheless, the share price has dropped by approximately 18% year to date. In comparison, NIO stock is down 38%, while XPeng shares have dipped by 43%.

Wall Street anticipates Tesla's first-quarter delivery figures to reach around 494,000 units, up slightly from the fourth quarter of 2022 when it delivered approximately 485,000 units. However, a weak Chinese market may pose a challenge to achieving this target. Baird analyst Ben Kallo highlighted that disruptions in shipping in the Red Sea have also affected production at Tesla's German assembly plant.

In response to the January delivery data, Tesla's stock experienced a decline of around 25% leading up to Thursday's trading session. However, both BYD and Tesla shares rebounded on Thursday. During premarket trading, Tesla's stock was up by 1.3%, while futures for the S&P 500 and Nasdaq Composite increased by approximately 0.4% and 0.6%, respectively.

Despite the challenges faced, Chung remains optimistic about the Chinese market in 2024. He predicts a 16% growth in sales of battery-electric vehicles, resulting in a total of approximately 7 million units. Additionally, he forecasts a 3% growth for the overall Chinese car market. If these projections hold true, battery-electric vehicle models will account for approximately 27% of all car sales in China in 2024, up from 24% in 2023.

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