Tesla’s China narrative swiftly shifts from expansion to exports

In April, one Tesla Inc. analyst speculated after its blowout first quarter of vehicle deliveries that the company might build a second car plant in China. Just six weeks later, the view is far less effusive.

Months of local media attention on the safety of Tesla’s vehicles and the company’s data gathering and storage practices have raised concerns about demand. After the tech website The Information reported that net orders fell nearly by half last month, a Credit Suisse analyst said the carmaker may end up exporting more cars from China to Europe.

If that shift plays out, it will mark a swift reversal of fortunes for Tesla. Days after a customer protested the company from atop the roof a Model 3 during the Shanghai auto show, Morgan Stanley’s Adam Jonas acknowledged that investors were dialing back their enthusiasm about the company’s China prospects. Still, he predicted Tesla would keep growing its manufacturing presence.

“We expect to see the narrative around Tesla for the remainder of the year to be one word—EXPANSION,” Jonas wrote in an April 22 report. He referred to the possibility the company would go beyond constructing new plants in Texas and near Berlin and could build another factory in China.

Tesla hasn’t commented on The Information’s report, which cited an unidentified person familiar with internal data. China’s Passenger Car Association will release information next week about sales for May.

The group said last month that Tesla’s sales of locally made vehicles dropped more than a quarter in April from March. Of the 25,845 vehicles sold, more than half were exported.

“We did see a drop in sales,” said Steve Man, a Bloomberg Intelligence analyst. “Increasing exports will definitely be a good offset strategy if China’s order growth remains weak, as Tesla’s German factory is still in delay while production costs are lower in China versus the U.S.”

Tesla shares rose as much as 1.9% before the start of regular trading Friday after plunging 5.3% on Thursday. The stock has dropped 35% from its peak in late January.