? Tesla’s sales in China tumbled to just 3,070 vehicles last week, the worst performance since the start of Q2, driven by low volumes of the new Model Y. Despite the volatility in such high-frequency data, the market is crucial for Tesla. The brand can sell more cars in seven days there than in major European countries over the course of several months.

The gulf between Tesla’s $1 trillion market value and its underlying fundamentals like sales and earnings continued to widen after weekly data from China revealed a worrying trend.

On Tuesday, insurance data indicated Tesla’s EV sales dropped to just 3,070 vehicles during the week to May 11, a sequential plunge of 58%, and 69% below the comparable period last year.

Unfortunately for Tesla, sales of its lower volume Model 3 sedan were broadly stable. The declines came entirely from the new Model Y, responsible for two-thirds of all Teslas delivered worldwide. Only 1,270 vehicles were sold, its lowest weekly tally since going on sale in late February.

Tesla investors scrutinize this high-frequency data since China is Tesla’s single biggest market, eclipsing even the United States. In fact it’s so large, more cars can be sold there over seven days than in a major European country like Germany over the course of several months.

Weekly figures by their very nature tend to be volatile, and when viewed alone could just be noise distorting the underlying trend. But a closer look shows Tesla’s cumulative sales since the start of the second quarter are tracking 25% below the comparable period one year prior and even down over the first few weeks of Q1, which is seasonally the weakest in China.

This drop has begun to worry Tesla fans, who had expected a clear improvement by now. Fundamentals are weakening just as Tesla’s stock market value continues to expand, reclaiming the $1 trillion mark on Monday. This leaves the share trading at an eye-watering 110 times consensus profit estimates for next year and 167 times for 2025 earnings.

“Something is definitely going on in China,” wrote Roland Pircher, who regularly posts Tesla’s international EV sales data.

Musk blames malaise: ‘Absent macro issues, we don’t see any reduction in demand’

This could signal the kind of hiccups Tesla had early last year when its Fremont plant struggled to efficiently change over to the Model 3 Highland—a supply issue in other words. No other major car company has attempted a mid-cycle refresh of a vehicle responsible for well over 1 million vehicles sold worldwide, so there’s no historical parallel.

Yet during the Q1 earnings call late last month, execs assured investors that production run rates of the new Model Y across all four car factories had already caught up to the older version, which trained assembly line workers could build at industrial-scale with the precision pace of a metronome.

So if supply is not a problem, that leaves declining interest from customers. Only here too Tesla denied any issue, since test drives hit record highs in the first quarter.

“Absent macro issues, we don’t see any reduction in demand,” Musk said on the call. In his view there was only one culprit to then blame—general malaise unrelated to the brand or its products. “When there is economic uncertainty, people generally want to pause on buying, doing a major capital purchase like a car,” he explained.

Yet even domestic EV brands much smaller than industry leader BYD, such as Nio, Xpeng, Li Auto and Xiaomi, could all boast higher sales. This suggests they are suffering less from continued volatility around U.S.-China trade talks.

‘The lack of new models is finally hurting Tesla in China’

Motoring site CarNewsChina argued Tesla’s strategic decision to keep selling the same product line-up with periodic touch ups simply wasn’t going to cut it anymore, no matter how many incentives were added. Prospective Model Y customers that had waited to see what the refreshed Model Y would offer are not finding enough compelling value to purchase what is ultimately a five-year-old vehicle.

Crossovers from Chinese brands like the Xpeng G6, Onvo L60, Li Auto L6, BYD Sealion 7 and Zeekr 7X are speeding past Tesla as a result.

These domestic brands innovate at “China speed”, reducing development cycles on new models to just two to three years from the industry standard six to seven. Meanwhile Tesla has never even fully replaced a single car—even the Model S is still the same construction underneath as the version that launched in 2012.

By comparison, Chinese EVs provide 800 volt charging, twice as fast in theory as Tesla’s 400v electrical architecture, and are loaded with digital connectivity features. They often come equipped with free advanced driver assist systems far more powerful than Tesla’s Autopilot and also offer a dash of good old fashioned patriotism as a bonus.

“Competition in the Middle Kingdom is simply too much,” CarNewsChina argued on Tuesday. “Young Chinese buyers don’t have the fear of buying Chinese products like their parents, who still remember the 90s. The lack of new models is finally hurting Tesla in China.”