Tesla sales in China down 70%, but market not indicative of its success

Tesla sold 8,621 cars in China in July, accounting for just 3.9 percent sales of battery electric vehicles in the country, down nearly 70 percent from its 12.6 percent share in June, according to the China Passenger Car Association.

Analyst Gordon Johnson said that Tesla overbuilt Chinese capacity when compared to domestic demand, which will result in further price cuts and margin pressure.

But Tesla investors seemed unfazed by the sales decline, with shares dropping less than 2 percent in early trading Tuesday.

Last month, Tesla exhibited that its declining numbers in China didn't stop it from posting better than expected global sales for the full quarter, according to Wedbush Securities tech analyst Dan Ives. He noted that its numbers in China had not been the best indicator of Tesla's success.

Nonetheless, Ives warned that if Tesla's sales in China don't improve, it could eventually face serious problems.

Meanwhile, the export of Tesla cars built at its Shanghai plant soared to 24,347 for July, compared with 5,017 in June.