Economist Mohamed El-Erian says the latest news about Tesla Inc.'s (NASDAQ:TSLA) performance in China signals deeper challenges for U.S. corporations operating in the world's second-largest economy.
US Companies Face ‘A Stark Strategic Choice’
On Monday, in a post on X, El-Erian noted Tesla’s recent struggles in China, with falling sales amid tepid demand and rising competition, based on a CNBC report.
According to El-Erian, this news illustrates something that is more than “just about the car company,” while pointing to the shifting “supply and demand dynamics” playing out across the region. This comes amid intensifying competition in China, where major domestic EV manufacturers have expanded aggressively with strong state support and cost advantages.
El-Erian said that “on the supply side, it confirms the forceful emergence of China's EV industry, including its state-backed players.”
He is referring to companies such as BYD Company (OTC:BYDDY), XPeng Inc. (NYSE:XPEV) and Li Auto Inc. (NASDAQ:LI), among others, which have been rapidly growing their market share both domestically and internationally.
On the other side of the equation, El-Erian pointed to weakening sales momentum for U.S. firms operating in China. He noted that “on the demand side,” things aren’t as robust as they once were for American companies.
As a result, “US companies face a stark strategic choice,” he said, having to choose between making a strategic bet on the East Asian giant by leaning into the “current tactical geopolitical peace,” or using this moment to “aggressively reduce their sensitivity to Chinese markets and suppliers.”
Tesla Stalls In China, But Others Are Doing Well
Tesla’s sales momentum has stalled in China, with October sales dropping 9.9% year-over-year, despite seeing strong results in September.
The company’s deliveries hit a three-year low during the month, and it is on track to report its first full-year decline in its second-largest market, on a year-over-year basis.
However, other U.S. automakers are beginning to do well in the region, with General Motors Co. (NYSE:GM) seeing strong momentum during its third quarter, with a 10.1% year-over-year surge in sales, driven by strong sales in its Buick brand, alongside its new energy vehicles.
This comes as Chinese President Xi Jinping expressed optimism on U.S.-China trade relations during a call with President Donald Trump.
Tesla shares were up 6.82% on Monday, closing at $417.78, and are up 0.28% overnight. The stock scores high on Momentum and Quality
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