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Tesla could benefit as South Korea pushes to update EV incentives

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South Korea is the world’s 11th largest car market according to IHS Automotive but 5th in sales of luxury cars like the Mercedes S Class and BMW 7 Series. That means it could be an important market for Tesla’s Model S and Model X. The country ranks in the top six in terms of the number of reservations for the upcoming Tesla Model 3 midsize sedan.

South Korea offers buyers of electric cars a subsidy equivalent to 22 million won or approximately $18,000 dollars but the incentive only applies to cars that can be recharged in 10 hours or less using 220 volt household current.The rule was enacted in 2012 and was intended to encourage manufacturers to limit the charging time required for electric cars. But electric cars today have much larger batteries than they did then. Those larger batteries may take more than 10 hours to recharge on household current, making them ineligible for the subsidy.

Minister of Environment Cho Kyeung-kyu says it may be time for his country to revisit that rule. A ministry official tells Reuters that a government appointed panel will submit recommendations “by June, but it could be much earlier. We haven’t decided whether to keep the rule alive, or kill it, or come up with complementary rules.”

Last month, opposition lawmaker Lee Sang-don called the rule an “unreasonable non-tariff barrier” that discourages drivers from considering long range EVs. “The rule is meaningless,” Kim Pil-soo, president of the Korean Electric Vehicle Association, told Reuters. “We have kept telling the government they should remove it.” In October, Tesla Vice President of North Asia and SEA Nicolas Villeger said the company is working with the government to change a “unique rule” that does not reflect advances in battery technology.

Tesla is about to open its first showroom in the upscale Starfield shopping district east of Seoul. In fact, it was supposed to be open before the end of 2016, but a sign in the window saying “Opening Soon” was still in the window as of last week. A delay in obtaining the permits required to begin sales has pushed the opening to early next year, a person familiar with the matter told Reuters.

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Tesla has been accepting orders from Korean customers since August for its Model S and Model X as well as reservations for the Model 3. With the present rule in place, a car that the company expects to sell strongly in the South Korean luxury car market — the Model S 90D — will not be eligible for the electric car incentive because its battery is too large to recharge in less than 10 hours on household current.

Chinese automaker BYD also intends to offer its long range electric car, the e6, for sale in Korea but has delayed starting sales until the incentive rule is amended. The e6 also will require more than 10 hours to fully recharge on household current.

Sales of electric cars in South Korea have been weak so far. To date, there are only about 4,000 EVs registered in the entire country despite the generous subsidy. South Korea has been proactive when it comes to building charging infrastructure. There are 750 fast chargers available to Korean EV drivers at present and the government plans to increase that number to 3,000 by 2020. Tesla is also planning to construct Supercharger locations in Seoul, Busan and Pyeongchang.

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Tesla Cybercab spotted testing on public roads for the first time

The car was spotted just minutes from Tesla’s Engineering Headquarters in Los Altos, California. There are a few interesting tidbits we can gather from the photo and the information shared with it.

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Credit: Teslarati

The Tesla Cybercab has been spotted testing on public roads for the first time, marking a substantial step forward in the vehicle’s development.

The car was spotted just minutes from Tesla’s Engineering Headquarters in Los Altos, California. There are a few interesting tidbits we can gather from the photo and the information shared with it:

The vehicle had a driver and side view mirrors equipped on it, which seems to be pretty expected, especially at this stage.

Tesla might have been using its Full Self-Driving software with the vehicle as it enters this new stage of testing on public roads. This seems most likely, especially as the car, which has long been developed to be void of a steering wheel and pedals, will totally rely on autonomous tech to transport one or two passengers to their destination.

Additionally, side view mirrors are required by law at delivery, and Tesla was likely looking to keep things as safe and elementary as possible, especially with this early stage of testing.

As this is the first time the vehicle has been spotted on public roads and the first time it was likely testing on them, Tesla was being cautious.

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There have been a lot of developments with Cybercab over the past few weeks, as the car has been spotted testing on the Fremont Factory’s test track, units have been seen outside of Gigafactory Texas’s crash testing facility, and there has been some additional speculation about what the vehicle’s standard equipment will be.

There have also been quite a few job postings by Tesla for manufacturing and production roles related to Cybercab over the past few weeks.

Yesterday, Tesla’s Board Chair, Robyn Denholm, revealed that the company could end up building Cybercab with a steering wheel and pedals, contrary to what Tesla and CEO Elon Musk have wanted to do.

Tesla Cybercab might be getting a huge change

The vehicle has yet to reach that stage of regulatory testing, but Tesla wants to start volume production in Q2. If it wants to release the vehicle without any manual controls, that means that Full Self-Driving will need to be completed within the next eight months.

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Tesla hints it could see ‘a few more vehicles’ released soon

Denholm said on CNBC yesterday that “we do have a few other vehicles coming out.”

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Tesla Board Chair Robyn Denholm hinted the company could see “a few more vehicles” coming out and being released soon, although there is no indication of what could be on the way based on her comments.

However, Tesla has hinted toward several potential releases in the coming years, as other executives, including Chief Designer Franz von Holzhausen, have talked briefly about what could be on the way.

Denholm said on CNBC yesterday that “we do have a few other vehicles coming out.”

It was a vague and almost cryptic sentence, as, in all honesty, it was not completely clear whether she was talking about recent releases that are just making their way to market, like the Model 3 and Model Y “Standard,” or new vehicles altogether.

Nevertheless, it’s worth dissecting.

Tesla “Standard” Models

On October 7, Tesla launched the Standard Model 3 and Model Y, stripped-down versions of their now “Premium” siblings. The Standard trims lack premium features like leather seats, a rear touchscreen, and a glass roof, among other features.

Tesla begins deliveries of its affordable Model Y Standard

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These cars are just starting to be delivered for the first time, so it is possible that Denholm was referring to these cars.

Potential Model 2 Hint?

There has always been a looming vehicle model that many Tesla fans and owners have been intrigued by: the Model 2.

This car was hinted at being the $25,000 model that Tesla was rumored to be developing, and many thought that was the vehicle that would be released earlier this month, not the Standard Model 3 and Model Y.

Instead, the Model 2 could be something that would enable Tesla to reach an entirely new consumer base, including those who are not able to swing the payment for the company’s more premium offerings.

It seems Tesla will have to launch some sort of extremely affordable model in the future, and with the Cybercab being slotted at that rough price point, it would not be out of the question for it to be in the realm of possibility for future releases.

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It’s worth noting, however, that it is probably unlikely this will happen. Tesla is so deadset focused on autonomy, it seems Cybercab would take extreme precedence over the unconfirmed “Model 2.”

Cybertruck-inspired SUV

Tesla fans have been begging the company to develop a full-size SUV that would compete with the Ford Expedition or Chevrolet Tahoe, but the company has not given any indication that this would be something it would build.

Nevertheless, there was a very subtle hint in a recent promotional clip that showed a Cyber SUV mock-up placed strategically next to a clay model of a Model 3:

Tesla appears to be mulling a Cyber SUV design

The Model X is simply not what people want when it comes to an SUV, as it does not have the seating capacity and cargo space that many need with a full-sized SUV.

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This issue, in particular, has been one that has been extremely relevant to the company’s future lineup as consumers have shown they would be interested in a Tesla vehicle that fit this description.

Additionally, von Holzhausen said in September that a Cyber SUV or a smaller electric pickup with a more traditional design is “definitely things we’ve considered…We’re working on so many innovative and fun things.”

Tesla gives big hint that it will build Cyber SUV, smaller Cybertruck

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Investor's Corner

Tesla enters new stability phase, firm upgrades and adjusts outlook

Dmitriy Pozdnyakov of Freedom Capital upgraded his outlook on Tesla shares from “Sell” to “Hold” on Wednesday, and increased the price target from $338 to $406.

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Credit: Tesla China

Tesla is entering a new phase of stability in terms of vehicle deliveries, one firm wrote in a new note during the final week of October, backing its position with an upgrade and price target increase on the stock.

Dmitriy Pozdnyakov of Freedom Capital upgraded his outlook on Tesla shares from “Sell” to “Hold” on Wednesday, and increased the price target from $338 to $406.

While most firms are interested in highlighting Tesla’s future growth, which will be catalyzed mostly by the advent of self-driving vehicles, autonomy, and the company’s all-in mentality on AI and robotics, Pozdnyakov is solely focusing on vehicle deliveries.

The analyst wrote in a note to investors that he believes Tesla’s updated vehicle lineup, which includes its new affordable “Standard” trims of the Model 3 and Model Y, is going to stabilize the company’s delivery volumes and return the company to annual growth.

Tesla launches two new affordable models with ‘Standard’ Model 3, Y offerings

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Tesla launched the new affordable Model 3 and Model Y “Standard” trims on October 7, which introduced two stripped-down, less premium versions of the all-electric sedan and crossover.

They are both priced at under $40,000, with the Model 3 at $37,990 and the Model Y at $39,990, and while these prices may not necessarily be what consumers were expecting, they are well under what Kelley Blue Book said was the average new car transaction price for September, which swelled above $50,000.

Despite the rollout of these two new models, it is interesting to hear that a Wall Street firm would think that Tesla is going to return to more stable delivery figures and potentially enter a new growth phase.

Many Wall Street firms have been more focused on AI, Robotics, and Tesla’s self-driving project, which are the more prevalent things that will drive investor growth over the next few years.

Wedbush’s Dan Ives, for example, tends to focus on the company’s prowess in AI and self-driving. However, he did touch on vehicle deliveries in the coming years in a recent note.

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Ives said in a note on October 2:

“While EV demand is expected to fall with the EV tax credit expiration, this was a great bounce-back quarter for TSLA to lay the groundwork for deliveries moving forward, but there is still work to do to gain further ground from a delivery perspective.”

Tesla has some things to figure out before it can truly consider guaranteed stability from a delivery standpoint. Initially, the next two quarters will be a crucial way to determine demand without the $7,500 EV tax credit. It will also begin to figure out if its new affordable models are attractive enough at their current price point to win over consumers.

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