Tesla (TSLA) shares closed Monday at $408.97, up 4.63%, and were poised to open higher on Tuesday after new data showed a sharp recovery in China retail sales. The electric vehicle maker sold 47,281 vehicles at retail in China in May, a 22.53% increase year-over-year and an 82.16% jump from April, according to the China Passenger Car Association (CPCA). This broke a two-month streak of year-on-year declines, giving investors a concrete reason to revisit the stock ahead of Tuesday's open.
China Sales Rebound Fuels Optimism
The May sales figures mark a significant turnaround for Tesla in its second-largest market. The company delivered 85,982 China-made Model 3 and Model Y vehicles in May, including exports, a 39.4% increase from a year earlier, as reported by Reuters. This rebound comes as Tesla's main Chinese competitor, BYD, continues to ship large volumes overseas. However, year-to-date retail sales in China from January to May remain down 7.87% year-on-year, indicating that the recovery is still fragile.
Market Context: Growth Stocks Find Support
The broader market provided a tailwind for Tesla and other high-growth tech stocks. U.S. stock index futures climbed early Tuesday, with Nasdaq 100 futures adding 0.81% by 5:57 a.m. ET. Chip stocks continued their rebound, and concerns over Middle East tensions eased, according to Reuters. The supportive tape helped growth shares find their footing after a rocky period.
Robotaxi Ambitions and Valuation Debate
While the China sales data provided a near-term catalyst, Tesla's longer-term narrative remains tied to its robotaxi ambitions. Last week, Tesla announced it had begun running unsupervised robotaxis in the Austin area, but Reuters reported that city officials estimate Tesla has about 50 cars there, compared to Alphabet's Waymo, which operates over 250 vehicles. The modest size of Tesla's robotaxi fleet underscores the gap between the company's ambitions and its current reality.
Wall Street is increasingly valuing Tesla as more than just an automaker. J.P. Morgan analysts, led by Rajat Gupta, upgraded the stock to "neutral" from "underweight" last week and raised the price target to $475 from $145. The team noted that Tesla's combination of hardware and software is still "somewhat under-appreciated and misunderstood," according to Reuters. This bullish argument hinges on investors paying up for Tesla as a bet that it can integrate cars, software, robots, and ride-hailing into a single platform.
Risks Remain: Inflation, Autonomy, and Competition
Despite the positive China data, several risks loom. U.S. inflation numbers are due Tuesday, and any hotter-than-expected reading could weigh on growth stocks like Tesla. Additionally, the company's Full Self-Driving software remains the linchpin linking its core car business to the ride-hailing future that investors are trying to price in. Any hold-up in autonomy approvals could dampen enthusiasm.
Kathleen Brooks, research director at XTB, noted that hype over big listings like SpaceX has left Wall Street bankers and CEOs "beside themselves," but she also observed "some caution" creeping into the market. Tesla's year-to-date sales in China are still down, and the country's new-energy vehicle market, while at record penetration, remains spotty. Weakness in June sales or a broader market pullback could leave Monday's jump looking like a dead cat bounce.
As Tesla heads into Tuesday's session, the stock must prove that one good month in China is enough to justify its elevated valuation, which already prices in significant future growth. The real test begins now.
