Investor's Corner
Tesla Model 3 production in Gigafactory 3 to begin in second half of 2019: report
The development of Tesla’s Gigafactory 3 continues to move at a rapid pace, with recent reports suggesting that electric car production in the upcoming facility could begin as early as the second half of 2019. Provided that there are no delays in the construction of the factory itself, and provided that Tesla can ship and set up its production lines on time, the latter half of 2019 could signal the beginning of Model 3 production in China.
Local media outlet Caijing.com noted that the factory is about to begin construction, particularly since the 864,885-square meter plot of land in the Lingang Industrial Zone has been leveled. In a post on its official WeChat account, the Shanghai government further indicated that Mayor Ying Yong and Vice Mayor Wu Qing have met with Tesla’s leaders in China while checking the company’s new vehicles like the Model 3. During their visit, the Shanghai officials reportedly encouraged parties involved in the project to expedite the construction of Gigafactory 3 even more.
The progress of Tesla’s Gigafactory 3 has been nothing short of remarkable. When Elon Musk announced the target timeline for the project earlier this year, the company’s critics were immediately skeptical. Tesla initially noted that vehicle production in Gigafactory 3 would start roughly two years after the facility’s construction begins, ramping to an output of 500,000 vehicles per year 2-3 years after. The timeline, which could only be described as classic Elon Musk, was met with doubts from Wall Street. Consumer Edge Research senior auto analyst James Albertine, for one, dubbed Gigafactory 3’s timeline as “not feasible.”
Despite its initial timeline already being met by raised eyebrows from Wall Street, Tesla announced an even more aggressive target for the project after its stellar third quarter. In its Q3 vehicle production and deliveries report, Tesla noted that it was accelerating the construction of Gigafactory 3. The company also noted that it expects the facility’s construction to be rapid and capital-efficient, thanks to lessons learned from the Model 3 ramp in the United States.
Beyond the lessons from the Model 3 ramp, credit is due to the Chinese government for its support for Tesla and the upcoming factory. Local state media has been openly supportive of the project and Tesla as a whole, and the government even bent its rules a little by allowing the electric car maker to become the sole owner of Gigafactory 3. The government’s support became particularly evident when Tesla went unchallenged in its bid for an 864,885-square meter plot of land in Shanghai’s Lingang area, as well as in the rapid release of low-interest loans for the project from local Shanghai banks.
November 29th 2018, Tesla Direct Experience Center officially grand opening at the Wenzhou Fortune Experience Center. To date, Tesla has more than 44 direct experience centers and service centers in mainland China 🇨🇳 .$TSLA #Tesla #China #TeslaChina pic.twitter.com/X8nJHVJCNz
— vincent (@vincent13031925) November 30, 2018
The Chinese government’s favor for Tesla has allowed the company to maintain a strong brand in the country, despite challenges posed by a 40% import tariff placed on the Model S and Model X due to the trade war between China and the United States. Even before US President Donald Trump announced on Twitter that the Chinese government has agreed to “reduce and remove” import tariffs on vehicles from the United States, Tesla’s electric cars, particularly the Model 3, have been garnering a lot of interest among Chinese consumers. This interest became evident during a recent job fair at the Lingang Industrial Zone, when Tesla was forced to extend its hiring hours due to the overwhelming number of applicants for job openings at Gigafactory 3.
Considering China’s reputation for building large-scale facilities in record time, an initial Model 3 production run in Gigafactory 3 by the second half of 2019 is actually quite feasible. With the country’s capability to construct the facility quickly, the start of Model 3 production in China next year would likely be limited only by Tesla’s capability to ship and set up its vehicle production lines on time. If Tesla can accomplish this, there is very little that can go in the way of Gigafactory 3 producing the Model 3 for the local Chinese market before 2019 ends.
Tesla has the potential to be a force in China’s auto market, particularly as the country is aggressively pushing the electrification of its transport sector. China is on track to sell 2 million electric vehicles by 2020 and attain an ICE to EV ratio of 1:1 by 2030. Tesla’s Gigafactory 3, which is expected to produce 500,000 cars per year, could go a long way in helping the country achieve its own ambitious electric car goals, particularly as the company is expected to produce its two mass-market vehicles in the facility — the Model 3 sedan and the Model Y SUV.
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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