Investor's Corner
Tesla is “absorbing” part of import tariffs to lower Model S and X prices in China
In an effort to make its electric cars more affordable to customers in China, Tesla has announced that it is cutting the prices of the Model S and Model X by 12 to 26% despite the ongoing trade war between the United States and the Asian economic powerhouse. Apart from lowering the prices of its two flagship vehicles, Tesla also opted to adjust the price of the Model 3, which is currently open for orders in the country.
China is the world’s largest electric car market, and the segment is only bound to get more prominent in the coming years due to the country’s aggressive push towards renewable transportation. That said, China has opted to place steep import taxes for vehicles entering the country, resulting in Tesla’s electric cars, which are produced in the United States, being weighed down with a 40% tariff.
When the additional duties took effect last July, Tesla had no choice but to raise the prices of the Model S and X by 150,000 yuan ($22,647) to 250,000 yuan ($37,744), resulting in a fully loaded Model S P100D costing as much as 1.47 million yuan ($221,937) in China — significantly higher than the $147,000 price of the electric car in the United States.
2/ Tesla Zhejiang (China 🇨🇳) Members Club meeting photos$TSLA #Tesla #China #TeslaChina pic.twitter.com/iIn82BMw76
— vincent (@vincent13031925) November 19, 2018
In a statement to Reuters, Tesla noted that the company would be lowering the prices of its vehicles in the country by “absorbing” part of the 40% import tariffs placed on its electric cars.
“We are absorbing a significant part of the tariff to help make our cars more affordable for customers in China,” Tesla stated.
Tesla further remarked that the Model 3, which is currently open for orders for Chinese reservation holders, is being given a price adjustment. When Tesla initially opened pre-orders for the vehicle, the Long Range Model 3 AWD started at 580,000 RMB (~$84,000) and the Model 3 Performance was listed with a starting price of 690,000 RMB (~$100,000). In the United States, the Long Range Model 3 AWD currently starts at $53,000 while the Model 3 Performance stars at $64,000.
With its recent price adjustments in place, Tesla noted to the publication that the Long Range Model 3 AWD would now start at 540,000 RMB (~$78,000), while the Model 3 Performance would start at 595,000 RMB (~$86,000). These prices, while still notably higher than the vehicle’s cost in the United States, offers a significant reduction from the Model 3’s initial price in China nonetheless.
Tesla Model 3 Performance ( China 🇨🇳 ) option pricing breakdown.
MP3: 689,000 RMB ($100K)
Red exterior (China addition):
26,900 RMB ($3.9K)White interior: 10,800 RMB ($1.5K)
19inch Wheel: Free
Advanced autopilot: 54,000 RMB
($7.8k)@TeslaPodcast $TSLA #Tesla #Model3 #China pic.twitter.com/XcKLjTTgvf— vincent (@vincent13031925) November 16, 2018
Such adjustments could bode well for Tesla’s business in the country. Before the US and China’s trade war resulted in a 40% tariff for Tesla’s vehicles, after all, China’s Customs Tariff Commission under China’s cabinet announced that it would reduce car import duties from 20-25% to just 15%. The announcement was met with much enthusiasm by electric car buyers in the country, resulting in a Tesla gallery in Shanghai clearing out its entire Model X 75D inventory in 24 hours.
Tesla’s lowered prices for its vehicles in China is but the tip of the iceberg in the company’s plans for the country’s growing electric car market. Last month, reports emerged from local Chinese media that Tesla’s Gigafactory 3 in Shanghai — which would allow the company to produce vehicles locally, thereby avoiding import taxes — is getting funding from local banks. Tesla has also announced in its third quarter vehicle and production delivery report that it is accelerating the construction of Gigafactory 3, which is expected to produce both batteries as well as the Model 3 and Model Y.
Elon Musk
Tesla locks in Elon Musk’s top problem solver as it enters its most ambitious era
The generous equity award was disclosed by the electric vehicle maker in a recent regulatory filing.
Tesla has granted Senior Vice President of Automotive Tom Zhu more than 520,000 stock options, tying a significant portion of his compensation to the company’s long-term performance.
The generous equity award was disclosed by the electric vehicle maker in a recent regulatory filing.
Tesla secures top talent
According to a Form 4 filing with the U.S. Securities and Exchange Commission, Tom Zhu received 520,021 stock options with an exercise price of $435.80 per share. Since the award will not fully vest until March 5, 2031, Zhu must remain at Tesla for more than five years to realize the award’s full benefit.
Considering that Tesla shares are currently trading at around the $445 to $450 per share level, Zhu will really only see gains in his equity award if Tesla’s stock price sees a notable rise over the years, as noted in a Sina Finance report.
Still, even at today’s prices, Zhu’s stock award is already worth over $230 million. If Tesla reaches the market cap targets set forth in Elon Musk’s 2025 CEO Performance Award, Zhu would become a billionaire from this equity award alone.
Tesla’s problem solver
Zhu joined Tesla in April 2014 and initially led the company’s Supercharger rollout in China. Later that year, he assumed the leadership of Tesla’s China business, where he played a central role in Tesla’s localization efforts, including expanding retail and service networks, and later, overseeing the development of Gigafactory Shanghai.
Zhu’s efforts helped transform China into one of Tesla’s most important markets and production hubs. In 2023, Tesla promoted Zhu to Senior Vice President of Automotive, placing him among the company’s core global executives and expanding his influence beyond China. He has since garnered a reputation as the company’s problem solver, being tapped by Elon Musk to help ramp Giga Texas’s vehicle production.
With this in mind, Tesla’s recent filing seems to suggest that the company is locking in its top talent as it enters its newest, most ambitious era to date. As could be seen in the targets of Elon Musk’s 2025 pay package, Tesla is now aiming to be the world’s largest company by market cap, and it is aiming to achieve production levels that are unheard of. Zhu’s talents would definitely be of use in this stage of the company’s growth.
Tesla analyst Andrew Percoco of Morgan Stanley teased the company’s dominance in its self-driving initiative, stating that its lead over competitors is “not even close.”
Percoco recently overtook coverage of Tesla stock from Adam Jonas, who had covered the company at Morgan Stanley for years. Percoco is handling Tesla now that Jonas is covering embodied AI stocks and no longer automotive.
His first move after grabbing coverage was to adjust the price target from $410 to $425, as well as the rating from ‘Overweight’ to ‘Equal Weight.’
Percoco’s new note regarding Tesla highlights the company’s extensive lead in self-driving and autonomy projects, something that it has plenty of competition in, but has established its prowess over the past few years.
He writes:
“It’s not even close. Tesla continues to lead in autonomous driving, even as Nvidia rolls out new technology aimed at helping other automakers build driverless systems.”
Percoco’s main point regarding Tesla’s advantage is the company’s ability to collect large amounts of training data through its massive fleet, as millions of cars are driving throughout the world and gathering millions of miles of vehicle behavior on the road.
This is the main point that Percoco makes regarding Tesla’s lead in the entire autonomy sector: data is King, and Tesla has the most of it.
One big story that has hit the news over the past week is that of NVIDIA and its own self-driving suite, called Alpamayo. NVIDIA launched this open-source AI program last week, but it differs from Tesla’s in a significant fashion, especially from a hardware perspective, as it plans to use a combination of LiDAR, Radar, and Vision (Cameras) to operate.
Percoco said that NVIDIA’s announcement does not impact Morgan Stanley’s long-term opinions on Tesla and its strength or prowess in self-driving.
NVIDIA CEO Jensen Huang commends Tesla’s Elon Musk for early belief
And, for what it’s worth, NVIDIA CEO Jensen Huang even said some remarkable things about Tesla following the launch of Alpamayo:
“I think the Tesla stack is the most advanced autonomous vehicle stack in the world. I’m fairly certain they were already using end-to-end AI. Whether their AI did reasoning or not is somewhat secondary to that first part.”
Percoco reiterated both the $425 price target and the ‘Equal Weight’ rating on Tesla shares.
Tesla stock (NASDAQ: TSLA) just got a price target boost from its biggest bear, Gordon Johnson of GLJ Research, who raised his expected trading level to one that is 95 percent lower than its current trading level.
Johnson pushed his Tesla price target from $19.05 to $25.28 on Wednesday, while maintaining the ‘Sell’ rating that has been present on the stock for a long time. GLJ has largely been recognized as the biggest skeptic of Elon Musk’s company, being particularly critical of the automotive side of things.
Tesla has routinely been called out by Johnson for negative delivery growth, what he calls “weakening demand,” and price cuts that have occurred in past years, all pointing to them as desperate measures to sell its cars.
Johnson has also said that Tesla is extremely overvalued and is too reliant on regulatory credits for profitability. Other analysts on the bullish side recognize Tesla as a company that is bigger than just its automotive side.
Many believe it is a leader in autonomous driving, like Dan Ives of Wedbush, who believes Tesla will have a widely successful 2026, especially if it can come through on its targets and schedules for Robotaxi and Cybercab.
Justifying the price target this week, Johnson said that the revised valuation is based on “reality rather than narrative.” Tesla has been noted by other analysts and financial experts as a stock that trades on narrative, something Johnson obviously disagrees with.
Dan Nathan, a notorious skeptic of the stock, turned bullish late last year, recognizing the company’s shares trade on “technicals and sentiment.” He said, “From a trading perspective, it looks very interesting.”
Tesla bear turns bullish for two reasons as stock continues boost
Johnson has remained very consistent with this sentiment regarding Tesla and his beliefs regarding its true valuation, and has never shied away from putting his true thoughts out there.
Tesla shares closed at $431.40 today, about 95 percent above where Johnson’s new price target lies.
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