Tesla’s EU sales slump continues; China’s premier warns global trade tensions ‘intensifying’ – business live

Tesla's EU sales plummeted 40.5% in May to 8,729 units, significantly shrinking its market share despite a 25% surge in the broader EV market, attributed to increased competition and an aging model lineup. Concurrently, UK defense contractor Babcock reported a 52% pre-tax profit increase and upgraded its medium-term outlook, signaling robust growth fueled by rising global defense spending. Broader market sentiment remains cautious as Goldman Sachs forecasts potential oil price declines contingent on the Israel-Iran ceasefire, while escalating global trade tensions are highlighted by EU threats of retaliation against US tariffs and China's warning of intensifying protectionism.

Analysis

Tesla is facing significant headwinds in the European Union, with May sales plummeting 40.5% year-over-year to 8,729 vehicles, causing its market share to contract from 1.6% to 0.9%. This sharp decline occurred despite the overall EU battery-electric vehicle market expanding by 25%, indicating severe company-specific issues such as an aging model lineup and intensifying competition, which the upcoming updated Model Y is intended to address. In stark contrast, the defense sector shows exceptional strength, exemplified by UK contractor Babcock, whose shares surged 13% after reporting a 52% rise in pre-tax profit, upgrading its medium-term profit margin guidance to 9%, and announcing a £200m share buyback. This performance is directly attributed to what the company calls a 'new era for defence' fueled by global insecurity. The broader market operates under a cautious tone, shaped by volatile energy prices—with Brent crude falling to ~$68/barrel—and Goldman Sachs' forecast of a potential drop to the mid-$60s if the fragile Israel-Iran ceasefire holds. This is compounded by escalating global trade tensions, highlighted by the EU's threat of retaliation against potential US tariffs and Chinese warnings of rising protectionism.

Key Decisions for Investors

• Investors in Tesla should closely monitor EU sales data following the updated Model Y launch to gauge its ability to reverse the significant 40.5% sales decline and market share erosion.
• Babcock's robust performance, including a 52% profit increase and upgraded guidance, signals that companies in the defense sector with strong government contracts continue to offer a compelling investment case amid sustained geopolitical tensions.
• Given the potential for oil price volatility linked to the Middle East ceasefire and escalating US-EU-China trade frictions, it is prudent to assess portfolio exposure to energy price fluctuations and companies sensitive to tariffs.