Sales of Tesla's Model 3 appear to have bounced back in China last month, according to initial reports.
The China Passenger Car Association (CPCA) reported that Tesla sold 11,095 Shanghai-produced Model 3 vehicles in May, about triple the number sold in April. Tesla (TSLA) - Get Report shares rose 5% on Monday to $928.75.
In a note on Monday, Wedbush analyst Dan Ives called the report an indicator that demand for Tesla vehicles in China is ramping up.
"We continue to believe EV demand in China is starting to accelerate with Tesla competing with a number of domestic and international competitors for market share with Giga 3 remaining the linchpin of success," he wrote, referring to Tesla's factory in Shanghai.
Tesla sold 10,160 units in March, according to the CPCA, followed by a steep drop in April tied to the COVID-19 pandemic.
Tesla said on an April earnings call that it was slashing the starting price of Model 3 sedans in China, viewed as a move to stimulate demand in a difficult economic environment. The price cut was equivalent to about 16%, or 24,750 yuan ($3,552), after government rebates, according to Tesla's China website.
Tesla appears to be on pace to hit 100,000 vehicle deliveries in China this year, and roughly 400,000 globally, Ives added. He estimated that growth in China could add $300 per share to Tesla's valuation over the next 12 to 18 months.
Tesla had originally guided for 500,000 total vehicle deliveries in 2020, but analysts doubt the viability of that target because of significant supply and demand disruptions tied to COVID-19.
The company's main Fremont, Calif. factory was operating only at minimal capacity for several weeks this spring owing to a Bay Area shelter-in-place order that temporarily shuttered all but essential businesses.
Tesla has not formally updated its vehicle delivery guidance for 2020, but said on its first quarter earnings call that it would "revisit" its forecasts in its second quarter update.
Shares of Tesla have risen 115% so far this year.