Investor's Corner
Tesla gets reprieve from tariffs as China pledges to cut auto import taxes
Tesla’s operations in China could be getting a reprieve soon, after Chinese President Xi Jinping announced that he would be cutting auto import taxes. During a speech at a business conference on Tuesday, Xi pledged to open China’s markets and improve conditions for foreign companies.
The new development came as the Chinese president was speaking at the Boao Forum for Asia on the Southern island of Hainan, according to a report from the Associated Press. Amid a trade dispute against the United States, Xi stated that China would be opening its doors wider. The president explicitly mentioned the auto industry in his speech, saying that China will be easing restrictions for foreign automakers.
“China’s door of opening up will not be closed and will only open wider. Beijing will significantly lower tariffs on auto imports this year and ease restrictions on foreign ownership in the auto industry as soon as possible,” Xi said.
China’s softened stance stands to benefit American automakers such as Tesla. Prior to Xi’s announcement, Tesla is operating in the country on a handicap, with its flagship vehicles — the Model S and the Model X — facing a steep 25% import tax, which causes the electric cars to be sold at higher prices than local competitors.
In a recent tweet, Tesla CEO Elon Musk described Xi’s announcement as a “very important action.”
This is a very important action by China. Avoiding a trade war will benefit all countries.
— Elon Musk (@elonmusk) April 10, 2018
Elon Musk addressed this issue in a series of tweets to US President Donald Trump last month, with the Tesla CEO stating that operating a car business in China is akin to playing an unfair game.
“No US auto company is allowed to own even 50% of their own factory in China, but there are five 100% China-owned EV auto companies in the US. I am against import duties in general, but the current rules make things very difficult. It’s like competing in an Olympic race wearing lead shoes,” Musk tweeted.
Xi’s promise of easing restrictions on foreign ownership also stands to benefit Tesla’s manufacturing capability. China, after all, is widely speculated to be the country where Tesla is planning to manufacture its upcoming crossover SUV — the Model Y — as well as some of the Model 3. So far, Tesla and local Chinese officials are reportedly disagreeing about the ownership of the planned factory. With the lighter restrictions in place, however, the company could tap into a formidable workforce that could help Tesla achieve its ambitious manufacturing goals.
Prior to Xi’s announcement on Tuesday, US President Donald Trump also adopted a less confrontational rhetoric against China. In a tweet on Sunday, Trump stated that he and Xi would be friends regardless of what happens in the ongoing trade dispute. Trump also said that there is “great future for both countries.”
Overall, the recent developments in the US-China trade dispute are encouraging overall, according to IHS Markit Senior Director and Asia-Pacific Chief Economist Rajiv Biswas. In a statement to the AP, Biswas noted that Xi’s recent speech could create a good platform to launch a dialogue between the two countries.
“President Xi’s speech could create a very good platform to launch U.S.-China dialogue at the WTO to find a deal on intellectual property rights that will address US concerns. This would be a victory for the world trading system and an important step away from the abyss of rising global protectionism,” he said.
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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