Tesla's China Sales Bump Fails to Offset Structural Bearish Concerns

What happened

Tesla reported a nearly 10% sales increase in China for November 2025, contrasting with a decline for its rival BYD. However, this monthly gain occurs against a backdrop of stalling global delivery growth, including a 13% year-over-year drop in Q1 2025. The DeepValue master report highlights that Tesla lost production leadership to BYD in 2024 and faces intense competition from Chinese OEMs. Moreover, Tesla's valuation remains excessively high at ~259x P/E, pricing in optimistic outcomes for unproven technologies like Robotaxis and FSD. This single data point does not alter the broader financial and competitive challenges facing the company.

Implication

The November sales gain in China provides a temporary sentiment boost but does not address core issues: Tesla's delivery growth has stagnated, margins are compressing due to price wars, and the stock trades at a premium of ~259x P/E based on speculative future earnings. Competition from BYD and other OEMs continues to erode Tesla's market share and profitability. Without evidence of sustained re-acceleration in volumes and margin expansion, the current valuation lacks fundamental support. Therefore, while the news may spur short-term volatility, it reinforces the need for a critical stance on Tesla's long-term prospects. A DCF analysis suggests intrinsic value is ~90% below the current price, emphasizing the disconnect from cash flow realities.

Thesis delta

This sales data point is insufficient to shift the 'STRONG SELL' thesis. Tesla's fundamental challenges—including stalling auto growth, margin pressure, and overvaluation—remain unaddressed, and no material change in investment recommendation is warranted.