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Tesla’s impending made-in-China Model 3 assault should scare critics

(Photo: Tesla)

Published

6 years ago

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Earlier today, Tesla stock (NASDAQ:TSLA) received yet another negative outlook from Wall Street. This time around, it was Barclays analyst Brian Johnson, who reduced his price target for TSLA to a very conservative $133 per share. According to the analyst, his low price target is due to demand for the Model 3 stagnating in the United States and the company lacking a path to significant profitability.

Such a conclusion, which is likely driven by Tesla’s lower-than-expected numbers in the first quarter, is shortsighted at best and flat-out inaccurate at worst. There is an elephant in the room with all the negativity surrounding Tesla’s capability to survive and thrive this year, and it comes in the form of a gargantuan factory whose shell was all but completed in the span of five months in Shanghai. Tesla is poised to start producing the Model 3 at Gigafactory 3 later this year, and this development could shift the winds back in the electric car maker’s favor.

The potential of Gigafactory 3 or the advantages it could give Tesla has been strangely absent in a notable number of critical analysis surrounding the electric car maker as of late. Considering the negative narrative surrounding Tesla and Elon Musk today, this is no surprise. Tesla critics appear to have largely dismissed Gigafactory 3’s progress, as exhibited by skeptics describing the site mostly as a pile of dirt with some digging going on (videos of which are still being distributed today). Such statements have not been accurate since work took off in the Gigafactory 3 site.

Gigafactory 3 as of May 26, 2019. (Credit: Jason Yang/YouTube)

Refusing to acknowledge Gigafactory 3’s impending operations, or discounting its capability to help Tesla’s numbers, could be a grave mistake for the company’s critics. Industry experts that actually deal with China on a regular basis, after all, have expressed their belief that Model 3s produced in Gigafactory 3 will be no joke. Take Michael Dunne, the CEO of consultancy firm ZoZo Go, for example. In a recent appearance at Autoline This Week, Dunne noted that Gigafactory 3’s presence would most definitely be a difference maker for Tesla.

“(They’re the) first foreign company to be allowed to own 100% of their operation. They’re in Shanghai. Shanghai will want to make sure they’re a success. The government will make sure that they’ve got their plant built in time and they have everything working. And on top of it all, Chinese consumers really do like the Tesla brand and really admire Elon Musk. So you’ve got a premium market — 2 million units a year — you have the government wanting electrics to succeed, and you’ve got a very strong American brand. So they’d be one to bet on,” Dunne said.

Dunne’s points are largely missed by the persistent “no demand” narrative surrounding Tesla in the United States today. It should be noted that Dunne holds a notable amount of experience with China’s automotive sector, as well, making him an authority on the subject. And it’s not just Dunne either. Automotive teardown expert Sandy Munro, who quite literally analyzed every nut and bolt in the Model 3, previously noted that Elon Musk could make a “gazillion bucks” in China if Tesla sets up Gigafactory 3’s production systems right. “I guarantee it,” Munro said during an appearance at Autoline After Hours. Munro later remarked that a Standard Model 3 produced in Gigafactory 3 could generate 25% gross margins for Tesla.

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Tesla is poised to start producing the Model 3 at Gigafactory 3 later this year. (Credit: Vincent Yu/Twitter)

If there are any valid concerns about Tesla’s Gigafactory 3 operations, it would be on the electric car maker’s capability to set up the facility on time for its target initial vehicle production date, not on the market’s demand for the vehicle. Contrary to what analysts such as Morgan Stanley’s Adam Jonas have noted (Jonas recently pointed out during an investor call that Tesla is no longer a growth story, and that it is more of a “distressed credit and restructuring story”), it appears that there is still much growth left for the company. It’s just not happening in the United States at present. Between the statements of the Morgan Stanley analyst, who likely looks at the company’s short-term numbers, and Michael Dunne, who is immersed in China’s automotive sector by trade, one would likely be inclined to believe the latter.

Just as Tesla stock experienced a steep drop due to a perfect storm of lower-than-expected Q1 deliveries, negative analyst sentiments, misinformation, and sheer bad luck (such as the company’s delivery troubles in China during the first quarter), the electric car maker might be poised to experience yet another perfect storm with the impending completion of Gigafactory 3. With the Chinese government rooting for its success, and with customers in the country still perceiving the company and its vehicles in a positive light, the electric car maker’s made-in-China Model 3 push might prove once more that it is never wise to underestimate Tesla, and Elon Musk for that matter.

Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.

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Simon is an experienced automotive reporter with a passion for electric cars and clean energy. Fascinated by the world envisioned by Elon Musk, he hopes to make it to Mars (at least as a tourist) someday. For stories or tips--or even to just say a simple hello--send a message to his email, simon@teslarati.com or his handle on X, @ResidentSponge.

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Investor's Corner

Tesla stock surges on Wednesday, but there’s still more room to go

Published

6 days ago

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March 12, 2025

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Credit: Tesla

Tesla stock (NASDAQ: TSLA) surged over 7 percent on Wednesday, canceling out some of the losses it has felt this week.

It has been a less-than-ideal start for Tesla in 2025, as the company has wiped out all of its gains felt from the victorious election campaign of President Donald Trump. The stock is down 34 percent so far this year.

The losses have mostly been felt due to reports of decreased demand due to pushback against CEO Elon Musk and his support of President Trump, as well as investor concern over the CEO’s personal use of time between the Department of Government Efficiency (DOGE) and Tesla itself.

In a note this week from Wedbush, analyst Dan Ives wrote:

“Musk needs to step up as Tesla CEO at this critical juncture. In a nutshell, the word ‘balance’ has been missing with Elon Musk and his ability to run Tesla as CEO….while instead focusing all of his energy and time driving his DOGE initiative within the Trump Administration. Since Trump’s White House 2nd term kicked off in January, we have seen Musk and Trump connected at the hip with Musk essentially living at the White House and Mar-a-Lago in Palm Beach. There has been little to no sign of Musk at any Tesla factory or manufacturing facility the last two months and perception has become reality for Tesla shares. Trump getting elected President was a huge moment for Musk and Tesla in our view as this will create the fast track for an autonomous federal roadmap…however the DOGE efforts have now intertwined Tesla into this brewing political firestorm.”

Wednesday’s slight bump for Tesla shares is likely related to the support the company received from President Trump yesterday, who purchased a Model S sedan at the White House and pledged to pay for it with a check.

President Donald Trump buys a Tesla at the White House – Here’s which model he chose

The move was one that signaled a buying spree from high-profile Republicans, including Sean Hannity, among others, who announced their support for Musk and Tesla:

Tesla shares closed at $248.09 on Wednesday, up 7.59%.

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Investor's Corner

Tesla bull ARK loads up on over $20M in TSLA shares after stock slide

Published

7 days ago

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March 11, 2025

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(Credit: Tesla)

Tesla bull ARK Invest loaded up on over $20 million worth of the automaker’s shares on Monday after the company saw its largest slide on the market since late 2020.

Shares dropped over 15 percent on Monday, mostly due to pushback on the stock as CEO Elon Musk heads the Department of Government Efficiency (DOGE). His involvement with the U.S. government directly has sent some investors into a predicament over Musk’s dedication to Tesla.

There are also concerns regarding Q1 deliveries, which will be a big indication of where the year could be headed for Tesla.

The Monday slide was the biggest since late 2020 when shares dropped over 21 percent.

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However, the slide presents a massive buying opportunity for investors, especially those who operate ETFs, like ARK. Long term, ARK believes Tesla shares (NASDAQ: TSLA) will be exponentially more expensive, especially leaning on the thesis that Robotaxi and AI/Optimus will translate to major growth in yet another sector for the company.

ARK bolstered its position on $TSLA in its ARKK Innovation ETF with a purchase of 68,164 shares. Tesla is the largest holding in ARKK with over $531 million in value. Tesla makes up exactly 10 percent of the ARKK ETF.

It also bought another 11,154 shares in its ARKQ Autonomous Technology & Robotics ETF.

It’s no secret Tesla shares have taken a substantial hit in 2025, especially as the company’s price on Wall Street exploded following President Trump’s successful election campaign last year.

So far in 2025, Tesla shares are down over 38 percent. They are up nearly 5 percent as of 2:30 p.m. on the East Coast. Even bullish analysts are hoping some focus returns to Tesla on Musk’s part.

Dan Ives of Wedbush said in a note last night following the broad sell off:

“This is a gut check moment for the Tesla bulls (including ourselves) after this massive sell-off in Tesla shares with fears mounting/accelerating. The bears own the Tesla narrative in the near-term as lackluster sales numbers from Europe, China, and the US in January/February along with Musk protests/brand worries have created many concerns.”

He continued:

“While the DOGE/Trump Musk iron clad partnership has created major brand worries for Tesla…..we estimate less than 5% of Tesla sales globally are at risk from these issues despite the global draconian narrative for Musk. Importantly, we expect Musk will better balance his time between DOGE and Tesla/SpaceX over the course of 2025 and some of these distraction issues will fade.”

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Investor's Corner

Elon Musk praises Ray Dalio’s Bridgewater for accumulating TSLA stock

Published

1 month ago

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February 14, 2025

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Credit: Tesla Asia/X

A recent 13-F filing from legendary investor and billionaire Ray Dalio’s Bridgewater Associates has revealed that the hedge fund has added over $62 million worth of Tesla stock (NASDAQ:TSLA) to its portfolio.

Elon Musk has praised the billionaire’s investment in a post on X.

Bridgewater’s TSLA stake:

  • As per Bridgewater’s 13-F filing, it currently holds 153,589 shares of TSLA, which costs $62,025,382.
  • The firm added the TSLA shares in the fourth quarter.
  • Tesla shares gained momentum after its Q3 2024 earnings call, and it only gained more strength after the election of U.S. President Donald Trump.
  • At the end of 2024, Tesla shares were up 62%, as noted in a MarketWatch report.
  • Tesla stock is still up 88% over 12 months despite a steep drop over the past month.

A vote of confidence: 

  • Bridgewater Associates is one of the largest hedge funds in the world, so the firm’s stake in TSLA could be interpreted as a vote of confidence in the electric vehicle maker.
  • Elon Musk has praised the firm’s investment. In a post on X, Musk noted that Bridgewater’s investment was a “smart move.”
  • Elon Musk has been quite consistent on his idea that Tesla could eventually become the world’s most valuable company. He emphasized this point during the Q4 2024 earnings call.
  • “I see a path. I’m not saying it’s an easy path but I see a path of Tesla being the most valuable company in the world by far. Not even close. There is a path where Tesla is worth more than the next top five companies combined,” Musk said.

Don’t hesitate to contact us with news tips. Just send a message to simon@teslarati.com to give us a heads up.

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