Investor's Corner
Tesla rises amid reports of China’s reduced auto tariffs, Model 3 production milestone
Tesla shares (NASDAQ:TSLA) are up more than 3% in Monday’s intraday trading, amid news of a possible reduction of auto tariffs for vehicles being exported to China, as well as reports pointing to a recent milestone in Model 3 production.
China’s apparent reduction of its 40% tariffs for American-made vehicles was initially announced by US President Donald Trump on Twitter, following his meeting with Chinese President Xi Jinping during the 2018 G20 meeting in Buenos Aires, Argentina this past weekend. On his social media post, Trump noted that China has agreed to the “reduction and removal” of the 40% duties placed on US-made vehicles entering the Asian country today. China has not confirmed or provided details about its deal with the US President so far.
China has agreed to reduce and remove tariffs on cars coming into China from the U.S. Currently the tariff is 40%.
— Donald J. Trump (@realDonaldTrump) December 3, 2018
Not long after Trump’s Twitter post, US Treasury Secretary Steven Mnuchin echoed the US President’s announcement in a statement to reporters outside the White House. While Mnuchin pointed out that he could not give the specifics of Trump and Xi’s meeting, he nonetheless noted that the “first part” of the deal was to “reduce the surcharge” on vehicles entering the Asian country.
“The first part was to reduce the surcharge, but yes there have been specific discussions on where auto tariffs will come down to, but I’m not prepared to talk about the specifics,” he said.
A reduction of import tariffs bodes well for Tesla, particularly since its two flagship vehicles have experienced massive price hikes since the US-China trade war began. When the additional duties took effect last July, the prices of the Model S and X were increased by 150,000 yuan ($22,647) to 250,000 yuan ($37,744). This resulted vehicles such as a fully loaded Model S P100D costing 1.47 million yuan ($221,937) in China — far higher than the electric car’s $147,000 price in the United States.
The US-China trade war has challenged Tesla’s operations in the country, as noted by the electric car maker in its third-quarter vehicle production and deliveries report. Late last month, Tesla even rolled out a program that reduced the prices of its vehicles by 12 to 26%, by “absorbing” a significant part of the 40% import tariff placed on its vehicles. Tesla noted that the program was aimed at making the Model S, X, and 3 more affordable for its Chinese customers.
Apart from a possible end to China’s steep 40% tariffs, a leaked email reportedly sent by Elon Musk also pointed to a recent milestone in Model 3 production. In his message, Musk noted that some teams have achieved a production level of 1,000 Model 3 per day. Musk also reportedly called on Tesla employees to help the company achieve a steady output of 1,000 Model 3 per day while maintaining quality.
“If you are able to help in any way with getting Model 3 production to a steady 1000 per day at excellent quality, everyone at the company should please consider this their top priority. Body production currently appears to be our limiting factor, so it needs the most support right now. Please focus on simplification and reducing cycle time first and then uptime,” the leaked email read.
A production rate of 7,000 Model 3 per week would be yet another breakthrough for the electric car maker, particularly as the company prepares to manufacture the $35,000 base variant of the electric sedan. The base Model 3 could prove to be Tesla’s most disruptive vehicle to date, particularly since it is priced competitively against some of the most popular sedans in the market such as the Toyota Camry.
As of writing, Tesla is trading +3.18% at $361.62 per share.
Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.
There are a lot of Tesla bulls out there who have astronomical expectations for the company, especially as its arm of reach has gone well past automotive and energy and entered artificial intelligence and robotics.
However, some of the most bullish Tesla investors believe the company could become worth $100 trillion, and CEO Elon Musk does not believe that number is completely out of the question, even if it sounds almost ridiculous.
To put that number into perspective, the top ten most valuable companies in the world — NVIDIA, Apple, Alphabet, Microsoft, Amazon, TSMC, Meta, Saudi Aramco, Broadcom, and Tesla — are worth roughly $26 trillion.
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Cathie Wood of ARK Invest believes the number is reasonable considering Tesla’s long-reaching industry ambitions:
“…in the world of AI, what do you have to have to win? You have to have proprietary data, and think about all the proprietary data he has, different kinds of proprietary data. Tesla, the language of the road; Neuralink, multiomics data; nobody else has that data. X, nobody else has that data either. I could see $100 trillion. I think it’s going to happen because of convergence. I think Tesla is the leading candidate [for $100 trillion] for the reason I just said.”
Musk said late last year that all of his companies seem to be “heading toward convergence,” and it’s started to come to fruition. Tesla invested in xAI, as revealed in its Q4 Earnings Shareholder Deck, and SpaceX recently acquired xAI, marking the first step in the potential for a massive umbrella of companies under Musk’s watch.
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Now that it is happening, it seems Musk is even more enthusiastic about a massive valuation that would swell to nearly four-times the value of the top ten most valuable companies in the world currently, as he said on X, the idea of a $100 trillion valuation is “not impossible.”
It’s not impossible
— Elon Musk (@elonmusk) February 6, 2026
Tesla is not just a car company. With its many projects, including the launch of Robotaxi, the progress of the Optimus robot, and its AI ambitions, it has the potential to continue gaining value at an accelerating rate.
Musk’s comments show his confidence in Tesla’s numerous projects, especially as some begin to mature and some head toward their initial stages.
Elon Musk
Tesla director pay lawsuit sees lawyer fees slashed by $100 million
The ruling leaves the case’s underlying settlement intact while significantly reducing what the plaintiffs’ attorneys will receive.
The Delaware Supreme Court has cut more than $100 million from a legal fee award tied to a shareholder lawsuit challenging compensation paid to Tesla directors between 2017 and 2020.
The ruling leaves the case’s underlying settlement intact while significantly reducing what the plaintiffs’ attorneys will receive.
Delaware Supreme Court trims legal fees
As noted in a Bloomberg Law report, the case targeted pay granted to Tesla directors, including CEO Elon Musk, Oracle founder Larry Ellison, Kimbal Musk, and Rupert Murdoch. The Delaware Chancery Court had awarded $176 million to the plaintiffs. Tesla’s board must also return stock options and forego years worth of pay.
As per Chief Justice Collins J. Seitz Jr. in an opinion for the Delaware Supreme Court’s full five-member panel, however, the decision of the Delaware Chancery Court to award $176 million to a pension fund’s law firm “erred by including in its financial benefit analysis the intrinsic value” of options being returned by Tesla’s board.
The justices then reduced the fee award from $176 million to $70.9 million. “As we measure it, $71 million reflects a reasonable fee for counsel’s efforts and does not result in a windfall,” Chief Justice Seitz wrote.
Other settlement terms still intact
The Supreme Court upheld the settlement itself, which requires Tesla’s board to return stock and options valued at up to $735 million and to forgo three years of additional compensation worth about $184 million.
Tesla argued during oral arguments that a fee award closer to $70 million would be appropriate. Interestingly enough, back in October, Justice Karen L. Valihura noted that the $176 award was $60 million more than the Delaware judiciary’s budget from the previous year. This was quite interesting as the case was “settled midstream.”
The lawsuit was brought by a pension fund on behalf of Tesla shareholders and focused exclusively on director pay during the 2017–2020 period. The case is separate from other high-profile compensation disputes involving Elon Musk.
Investor's Corner
Tesla (TSLA) Q4 and FY 2025 earnings call: The most important points
Executives, including CEO Elon Musk, discussed how the company is positioning itself for growth across vehicles, energy, AI, and robotics despite near-term pressures from tariffs, pricing, and macro conditions.
Tesla’s (NASDAQ:TSLA) Q4 and FY 2025 earnings call highlighted improving margins, record energy performance, expanding autonomy efforts, and a sharp acceleration in AI and robotics investments.
Executives, including CEO Elon Musk, discussed how the company is positioning itself for growth across vehicles, energy, AI, and robotics despite near-term pressures from tariffs, pricing, and macro conditions.
Key takeaways
Tesla reported sequential improvement in automotive gross margins excluding regulatory credits, rising from 15.4% to 17.9%, supported by favorable regional mix effects despite a 16% decline in deliveries. Total gross margin exceeded 20.1%, the highest level in more than two years, even with lower fixed-cost absorption and tariff impacts.
The energy business delivered standout results, with revenue reaching nearly $12.8 billion, up 26.6% year over year. Energy gross profit hit a new quarterly record, driven by strong global demand and high deployments of MegaPack and Powerwall across all regions, as noted in a report from The Motley Fool.
Tesla also stated that paid Full Self-Driving customers have climbed to nearly 1.1 million worldwide, with about 70% having purchased FSD outright. The company has now fully transitioned FSD to a subscription-based sales model, which should create a short-term margin headwind for automotive results.
Free cash flow totaled $1.4 billion for the quarter. Operating expenses rose by $500 million sequentially as well.
Production shifts, robotics, and AI investment
Musk further confirmed that Model S and Model X production is expected to wind down next quarter, and plans are underway to convert Fremont’s S/X line into an Optimus robot factory with a capacity of one million units.
Tesla’s Robotaxi fleet has surpassed 500 vehicles, operating across the Bay Area and Austin, with Musk noting a rapid monthly expansion pace. He also reiterated that CyberCab production is expected to begin in April, following a slow initial S-curve ramp before scaling beyond other vehicle programs.
Looking ahead, Tesla expects its capital expenditures to exceed $20 billion next year, thanks to the company’s operations across its six factories, the expansion of its fleet expansion, and the ramp of its AI compute. Additional investments in AI chips, compute infrastructure, and future in-house semiconductor manufacturing were discussed but are not included in the company’s current CapEx guidance.
More importantly, Tesla ended the year with a larger backlog than in recent years. This is supported by record deliveries in smaller international markets and stronger demand across APAC and EMEA. Energy backlog remains strong globally as well, though Tesla cautioned that margin pressure could emerge from competition, policy uncertainty, and tariffs.
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