This is What Happened in China that Made Tesla Shares Drop

Shares of electric vehicle maker Tesla were dropping on Thursday after a report of a steep May sales decline in China.

According to a single source citing in a report from The Information, Tesla’s “monthly net orders in China dropped to about 9,800 in May from more than 18,000 in April.”

Tesla saw its shares fall over 5% on Thursday after the report said that the company’s vehicle orders dropped in the country.

CNBC has not corroborated the report from The Information.

Tesla’s factory in Shanghai should have the capacity to produce roughly 500,000 electric vehicles a year for deliveries in China and exports to Europe and other parts of Asia.

The company has been dealing with recalls as well as safety investigations in China.

Additionally Tesla has faced PR backlash following high-profile vehicle crashes, price changes, and quality complaints from customers in the country.

JL Warren Capital CEO Junheng Li said in an e-mail to CNBC that these incidents are expected to be material.

“We see a definitive material impact on Tesla branding, orders and deliveries for future months, although it’s hard to quantify exactly to what extent the declining demand is driven by concerns on Tesla’s safety features, or rising competition especially from Chinese automakers,” she said.

Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.