Investor's Corner
Elon Musk signs agreement for Tesla factory in China with 500k vehicle capacity
Elon Musk has signed a preliminary agreement with the Shanghai government to build a Tesla factory in China. According to reports, the upcoming China factory will be capable of manufacturing 500,000 vehicles per year, rivaling the output of Tesla’s main electric car plant in Fremont, CA.
Reports of Musk’s trip to China emerged yesterday after people familiar with the proceedings revealed that the Tesla CEO will be at an “event” in Shanghai on Tuesday, followed by a visit to Beijing sometime on Wednesday or Thursday. Few other details were provided about Musk’s trip to China, though pictures emerged on social media on Tuesday revealing that the Tesla CEO briefly stopped over in Thailand to drop off the minisub he and SpaceX engineers designed to help rescue the remaining 5 members of the stranded soccer team in the Tham Luang Nang Non cave complex. Reports of Musk’s signing of an agreement with the Shanghai government emerged soon after.
$TSLA CEO @elonmusk in Shanghai after signing agreement to build Tesla plant in China. pic.twitter.com/5qX85rQcPw
— Phil LeBeau (@Lebeaucarnews) July 10, 2018
Tesla’s upcoming China factory is a key component to the company’s attempts at breaching the world’s largest market for electric vehicles. Amidst the ongoing trade war with the United States, China has opted to place steep tariffs on vehicles imported from abroad, including Tesla’s electric cars. With the new taxes in place, Tesla was forced to raise the prices of its Model S luxury sedan and its Model X SUV by 150,000 yuan ($22,647) to 250,000 yuan ($37,744).
With its own facility in the country, Tesla would be able to bypass China’s steep tariffs regardless of the presence of a trade war. In a previous statement during an earnings call last year, Musk remarked that a factory in China is pretty much the only way for Tesla to rival the price of local electric car manufacturers such as BYD. Musk further noted that a China facility, if and when it does get built, would likely be tasked with the production of the Model Y crossover SUV, a vehicle that is estimated to see a demand of up to 1 million units per year. Apart from the Model Y, Musk further noted that some of the Model 3 would probably be manufactured in the China facility as well.
Tesla’s approval for its China site from the Central Committee of the Communist Party of China. [Credit: vincent13031925/Twitter]
Tesla was able to capitalize on China’s adjustments to its ownership laws that were implemented earlier this year. Prior to the US and China’s ongoing trade dispute, the Asian economic superpower removed ownership restrictions for facilities owned by foreign companies. This opened the way for Tesla to get an approval for a solely-owned facility in the country. Just recently, an image of Tesla’s approval for its China site from the Central Committee of the Communist Party of China emerged online, giving yet another sign that the facility is likely to break ground soon.
Tesla’s success in the world’s largest market for electric cars will likely be dependent on how the company could target the greater Chinese auto industry with its lower-priced vehicles. While the Model S and Model X are currently seen as status symbols for the successful and wealthy in the country, the luxury sedan and SUV nonetheless cater to the country’s upper class, which represents a much smaller market. With vehicles such as the Model Y and the Model 3 saturating China as well, Tesla could tap into the country’s ever-growing mainstream electric car market, which is on pace to hit a milestone of 1 million EVs sold in 2018.
Tesla stock (NASDAQ: TSLA) closed at an all-time high on Tuesday, jumping over 3 percent during the day and finishing at $489.88.
The price beats the previous record close, which was $479.86.
Shares have had a crazy year, dipping more than 40 percent from the start of the year. The stock then started to recover once again around late April, when its price started to climb back up from the low $200 level.
This week, Tesla started to climb toward its highest levels ever, as it was revealed on Sunday that the company was testing driverless Robotaxis in Austin. The spike in value pushed the company’s valuation to $1.63 trillion.
Tesla Robotaxi goes driverless as Musk confirms Safety Monitor removal testing
It is the seventh-most valuable company on the market currently, trailing Nvidia, Apple, Alphabet (Google), Microsoft, Amazon, and Meta.
Shares closed up $14.57 today, up over 3 percent.
The stock has gone through a lot this year, as previously mentioned. Shares tumbled in Q1 due to CEO Elon Musk’s involvement with the Department of Government Efficiency (DOGE), which pulled his attention away from his companies and left a major overhang on their valuations.
However, things started to rebound halfway through the year, and as the government started to phase out the $7,500 tax credit, demand spiked as consumers tried to take advantage of it.
Q3 deliveries were the highest in company history, and Tesla responded to the loss of the tax credit with the launch of the Model 3 and Model Y Standard.
Additionally, analysts have announced high expectations this week for the company on Wall Street as Robotaxi continues to be the focus. With autonomy within Tesla’s sights, things are moving in the direction of Robotaxi being a major catalyst for growth on the Street in the coming year.
Elon Musk
Tesla needs to come through on this one Robotaxi metric, analyst says
“We think the key focus from here will be how fast Tesla can scale driverless operations (including if Tesla’s approach to software/hardware allows it to scale significantly faster than competitors, as the company has argued), and on profitability.”
Tesla needs to come through on this one Robotaxi metric, Mark Delaney of Goldman Sachs says.
Tesla is in the process of rolling out its Robotaxi platform to areas outside of Austin and the California Bay Area. It has plans to launch in five additional cities, including Houston, Dallas, Miami, Las Vegas, and Phoenix.
However, the company’s expansion is not what the focus needs to be, according to Delaney. It’s the speed of deployment.
The analyst said:
“We think the key focus from here will be how fast Tesla can scale driverless operations (including if Tesla’s approach to software/hardware allows it to scale significantly faster than competitors, as the company has argued), and on profitability.”
Profitability will come as the Robotaxi fleet expands. Making that money will be dependent on when Tesla can initiate rides in more areas, giving more customers access to the program.
There are some additional things that the company needs to make happen ahead of the major Robotaxi expansion, one of those things is launching driverless rides in Austin, the first city in which it launched the program.
This week, Tesla started testing driverless Robotaxi rides in Austin, as two different Model Y units were spotted with no occupants, a huge step in the company’s plans for the ride-sharing platform.
Tesla Robotaxi goes driverless as Musk confirms Safety Monitor removal testing
CEO Elon Musk has been hoping to remove Safety Monitors from Robotaxis in Austin for several months, first mentioning the plan to have them out by the end of 2025 in September. He confirmed on Sunday that Tesla had officially removed vehicle occupants and started testing truly unsupervised rides.
Although Safety Monitors in Austin have been sitting in the passenger’s seat, they have still had the ability to override things in case of an emergency. After all, the ultimate goal was safety and avoiding any accidents or injuries.
Goldman Sachs reiterated its ‘Neutral’ rating and its $400 price target. Delaney said, “Tesla is making progress with its autonomous technology,” and recent developments make it evident that this is true.
Investor's Corner
Tesla gets bold Robotaxi prediction from Wall Street firm
Last week, Andrew Percoco took over Tesla analysis for Morgan Stanley from Adam Jonas, who covered the stock for years. Percoco seems to be less optimistic and bullish on Tesla shares, while still being fair and balanced in his analysis.
Tesla (NASDAQ: TSLA) received a bold Robotaxi prediction from Morgan Stanley, which anticipates a dramatic increase in the size of the company’s autonomous ride-hailing suite in the coming years.
Last week, Andrew Percoco took over Tesla analysis for Morgan Stanley from Adam Jonas, who covered the stock for years. Percoco seems to be less optimistic and bullish on Tesla shares, while still being fair and balanced in his analysis.
Percoco dug into the Robotaxi fleet and its expansion in the coming years in his latest note, released on Tuesday. The firm expects Tesla to increase the Robotaxi fleet size to 1,000 vehicles in 2026. However, that’s small-scale compared to what they expect from Tesla in a decade.
Tesla expands Robotaxi app access once again, this time on a global scale
By 2035, Morgan Stanley believes there will be one million Robotaxis on the road across multiple cities, a major jump and a considerable fleet size. We assume this means the fleet of vehicles Tesla will operate internally, and not including passenger-owned vehicles that could be added through software updates.
He also listed three specific catalysts that investors should pay attention to, as these will represent the company being on track to achieve its Robotaxi dreams:
- Opening Robotaxi to the public without a Safety Monitor. Timing is unclear, but it appears that Tesla is getting closer by the day.
- Improvement in safety metrics without the Safety Monitor. Tesla’s ability to improve its safety metrics as it scales miles driven without the Safety Monitor is imperative as it looks to scale in new states and cities in 2026.
- Cybercab start of production, targeted for April 2026. Tesla’s Cybercab is a purpose-built vehicle (no steering wheel or pedals, only two seats) that is expected to be produced through its state-of-the-art unboxed manufacturing process, offering further cost reductions and thus accelerating adoption over time.
Robotaxi stands to be one of Tesla’s most significant revenue contributors, especially as the company plans to continue expanding its ride-hailing service across the world in the coming years.
Its current deployment strategy is controlled and conservative to avoid any drastic and potentially program-ruining incidents.
So far, the program, which is active in Austin and the California Bay Area, has been widely successful.
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