Tesla stock is closing in on being worth half what it was at its peak in 2017. It’s down more than half from the $420 share valuation Elon Musk last fall suggested Tesla would reach when (if) he took the company private. (No, you can’t do predict things like that without annoying the SEC.) Tesla has had its ups and downs. Long-term investors have mostly been rewarded. But now?

No one’s saying Tesla is going belly-up or, more to the point, that you’ll no longer be able to buy the only EV that matters. (In the minds of Tesla purists.) But Tesla is traveling unfamiliar roads now. The biggest issue facing Tesla may be whether China wants to buy that many Teslas. Meanwhile, Tesla knocked a couple thousand off the list prices of the Model S and Model X. And then Consumer Reports issued a safety warning about Tesla’s Autopilot lane change features.

CR Says Auto-Lane Change Isn’t Always Safe

Let’s take a look at Tesla’s key issues this week: another Autopilot safety issue, how Tesla cars are faring, the stock price, and the market outside the US, particularly China.

Wednesday, Consumer Reports said, “[The] latest version of Tesla’s automatic lane-changing feature is far less competent than a human driver.” According to Jake Fisher, Consumer Reports’ senior director of auto testing, “[T]he system does the easy stuff, but the human needs to intervene when things get more complicated.”

With the current version of Autopilot software, issued April 3, automatic lane changes are now part of Enhanced Autopilot or Full Self-Driving Capability. The latter, despite its name, is not full self-driving. Consumer Reports test drivers had mixed impressions:

In early May, our Model 3 received a software update that allowed Navigate on Autopilot to make automatic lane changes without requiring driver confirmation. We enabled the feature and drove on several highways across Connecticut. In the process, multiple testers reported that the Tesla often changed lanes in ways that a safe human driver would not—cutting too closely in front of other cars, and passing on the right. [We couldn’t help but add emphasis here. – Ed.] In practice, we found that Navigate on Autopilot lagged far behind a human driver’s skill set: The feature cut off cars without leaving enough space and even passed other cars in ways that violate state laws, according to several law enforcement representatives CR interviewed for this report. As a result, the driver often had to prevent the system from making poor decisions.

Tesla’s comment didn’t appear to directly address the problems CR found: “Navigate on Autopilot is based on map data, fleet data, and data from the vehicle’s sensors. However, it is the driver’s responsibility to remain in control of the car at all times, including safely executing lane changes.”

Soft Sales Hurt Tesla Everywhere

Tesla’s production and sales figures are notoriously hard to fathom. When a new model is announced, Tesla crows about how many thousands of intenders have put down deposits. When it’s not a good quarter for sales, Tesla talks about production and then, as surely as Boston sports fans grow obnoxious when they smell a third title in sight, Tesla talks about how there’s an insanely large number of sales that haven’t yet been delivered (which to many means they haven’t been sold yet) because they’re on transporters crisscrossing the country, or on boats to distant lands.

It’s simple, really: When the full US tax credit of $7,500 per car expired at the end of 2018 and became $3,750 for the next six months, Tesla’s 2019 Q1 deliveries slipped badly. They were up 110 percent 2019 Q1 versus 2018 Q1, which is how you normally compare. But they were 31 percent less in 2019 Q1 versus 2018 Q4 after the full tax credit expired.

Here is Bloomberg opinion writer Liam Denning Apri 3 describing the early-April reporting days for January to April 2019 sales/deliveries and how Tesla sees the year shaping up:

Tesla issued guidance of 360,000 to 400,000 vehicle deliveries in 2019. Within hours, CEO Elon Musk raised that (verbally) to 350,000 to 500,000 Model 3s alone. Then he tweeted some stuff, walked it back within hours, and the Securities and Exchange Commission got involved.

Tesla this week lowered the starting prices of the Model S by $3,000 (to $71,250) and the Model Y SUV by $2,000 (to $71,950). That either makes up for earlier price hikes or anticipates the July cutback in tax credits in the US from $3,750 to $1,875. The $1,875 credit lasts for six months and then, for Tesla, it’s gone.

Is the China Market Really Tesla’s to Conquer

With US sales slowing and the Europe market not yet having the same love affair with Tesla as US buyers showed, Tesla CEO Elon Musk talked about opportunities in China. Auto sales last year in China were 28 million versus 17 million in the US, the second largest auto market. The conventional wisdom on why China was a good thing for Tesla was:

China has pollution, big-time. The government declared 20 percent of the automotive fleet needs to be electrified by 2025. China needs EVs, especially if Tesla builds them in China. Not everyone in China can afford a Tesla but with a population of 1.39 billion versus the US’ 0.33 billion — forgetting what’s left of the decimal point, China is still more populous — it’s probably big enough to surpass the US. And they need a battery factory, too, which can be a joint venture. (Actually, has to be a joint venture with a Chinese group.)

Tesla’s plan was to build a Shanghai factory for $500 million. The company broke ground in January, it’s supposed to be building cars by end-of-year, and the loan is due to the syndicate of Chinese banks next spring. Given Tesla’s challenges getting its factory in Fremont, California, to run smoothly, the timeline for Shanghai production could be iffy. Some critics are sniping: If Shanghai opens on schedule, the production-line testing might be compromised. And if Tesla waits to debug the line, it won’t build cars in China until 2020. The first cars built there would be Tesla Model 3s, followed by Model Ys, the upcoming, affordable SUV.

Back in 2016, Anne Stevenson-Yang of J Capital Research wrote:

Tesla … has a corona of glamour in the China market … [it] seems to make its sales to companies, not individuals … Tesla debuted its Model S in China in April 2014 and derived 15.3% of its revenue from China in 2014. But registrations did not keep track with sales, as many vehicles sat in the channel or at Tesla’s bonded warehouse. Most buyers, it turned out, used their Teslas for commercial purposes, whether property developers or hotels parking the cars outside almost like props, to demonstrate affluence to potential buyers.

It’s unclear how well equipped Tesla is for a China market that may value high production numbers over innovation and luxury. The Tesla Model 3, which is just beginning to be sold in China, is an economy car only in contrast to the Model S. In China, the Model 3 Long Range, the cheapest Tesla there, costs $64,300. In comparison, the BYD e5 electric sedan starts at $21,000. Tesla had the misfortune of having a Model S sedan catch fire in a Shanghai garage and be captured on camera.

Every EV maker, not just Tesla, also faces the problem of charging. The majority of China’s city dwellers live in apartment buildings. Single-car garages are rarities, so finding places to charge are challenging.

Outside of China, Teslas are finding more intense competition in Europe from Audi and Jaguar, with more automakers emerging. Europe, too, is pushing hard to lower pollution through the increased use of EVs and less reliance on diesels. Research and analysis firm Jato Dynamics says diesel sales there were down to 31 percent of the market in March. In comparison, sales of electrified vehicles (EVs, plug-in hybrids, hybrids) passed 100,000 for the first time.

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