Why Tesla stock is reversing early gains despite strong China numbers

Tesla stock rose modestly in early trading on Tuesday, lifted by hopes that December could bring a “Santa Claus rally” for equities.

Shares were up 0.4% at $431.75 in early trading. However, those gains quickly evaporated.

At the time of writing, Tesla stock had reversed into the red, falling more than 1% as the early broader market gains cooled.

The stock was down 1.53% to trade at around $423.15.

China sales rebound sharply in November

Tesla’s China-made vehicle sales provided a rare bright spot.

According to data from the China Passenger Car Association, sales of the Model 3 and Model Y produced at Tesla’s Shanghai plant rose 9.9% year over year in November.

Month over month, sales jumped 41%, helped by the introduction of a longer-range rear-wheel-drive Model Y, alongside new versions of the Model 3 and the six-seat Model Y L.

The annual growth rate was the strongest in 14 months. The performance comes as Tesla faces intense competitive pressure in China, where domestic rivals continue to expand aggressively.

EV newcomer Xiaomi exceeded its annual target of 350,000 vehicles, while Tesla’s largest Chinese competitor, BYD, posted a record 130,000 overseas shipments last month.

BYD has also extended its lead over Tesla in Europe, where it has outsold the US carmaker in recent months.

European registrations show ongoing weakness

Tesla’s Europe performance remains uneven.

Registrations declined sharply in several key markets in November, including Sweden, Denmark, the Netherlands, Portugal and Spain, according to official data.

Declines ranged from 9% to 49%. Monthly sales in France tanked by around 58% to 1,593 vehicles.

There were pockets of strength—Norway registrations nearly tripled to 6,215 vehicles, surpassing the country’s annual sales record with a month to spare, while Italy saw a 58% jump.

But year-to-date Italian sales remained down 28%.

Overall, Tesla’s European market share fell to 1.6% between January and October, down from 2.4% in the same period last year.

The data underscores the company’s struggle to defend its position in a market now filled with more than 150 EV models and intensifying price competition.

Michael Burry renews criticism of Tesla’s valuation

Michael Burry, best known for predicting the 2000s US housing crash, questioned Tesla’s valuation in a new post to subscribers of his paid Substack.

He focused on stock-based compensation practices and dilution at major technology companies, singling out Tesla as a prime example.

“Tesla’s market capitalization is ridiculously overvalued today and has been for a good long time,” Burry wrote.

He argued that Tesla’s practice of adding roughly 3.6% to its share count annually destroys shareholder value over time, especially as the company does not conduct buybacks to offset dilution.

Burry suggested that approval of Elon Musk’s $1 trillion compensation plan—backed by 75% of voting shares—ensures further dilution.

He shared a chart illustrating what he described as “present value destruction” caused by rising share counts.

“With recent news of Elon Musk’s $1 trillion dollar pay package, dilution is certain to continue,” he wrote.

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