Tesla's China sales took a major hit after months of PR crises

• Tesla's sales in China fell 27% in April compared to March.
• Sales of locally built Teslas soared to record highs in March.
• Tesla has had to navigate numerous PR crises and heightened scrutiny in China in 2021.

Tesla is hitting turbulence in one of its most crucial markets, and its sales may be taking a hit because of it.

In April, the electric automaker sold 25,845 locally made Model 3 and Model Y vehicles in China, according data from China's Passenger Car Association released Tuesday. That's a 27% decrease from March when Tesla delivered a record 35,478 Shanghai-made cars in the country.

Shares of Tesla sank roughly 4% in early trading, following a 6.5% drop on Monday.

The sales drop follows months of public-relations crises for Tesla in China.

In February, Chinese regulators summoned the carmaker for a meeting about quality issues like unintended acceleration and battery fires. And in March, multiple outlets reported that Chinese officials had restricted the use of Teslas among government personnel over security concerns related to the cars' built-in cameras. Following the new rules, Tesla CEO Elon Musk appeared at a state conference to assure officials that the company's cars don't pose a privacy risk, Reuters reported.

The following month, a woman's protest at the Shanghai auto show triggered new scrutiny of Tesla's cars by Chinese regulators and sparked a public backlash against the company.

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Tesla's April sales still represent a significant increase over the 15,484 and 18,318 units the carmaker moved in January and February, respectively. But some on Wall Street think the automaker needs to patch up relations with Beijing or risk sales sinking further.

"Clearly Musk & Co. need to play nice in the sandbox with Beijing and smooth out PR issues in the region which have been a black eye for Tesla over the last month and clearly impacted China sales negatively in the month of April," Wedbush Securities analyst Daniel Ives said in a Tuesday note.

Tesla faces competition in China from several electric-vehicle startups, including state-backed Nio, which announced this month that it will begin selling its cars globally.

Tesla did not return a request for comment.