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.
Tesla has scheduled its Earnings Call for Q4 and Full Year 2025 for next Wednesday, January 28, at 5:30 p.m. EST, and investors are already preparing to get some answers from executives regarding a wide variety of topics.
The company accepts several questions from retail investors through the platform Say, which then allows shareholders to vote on the best questions.
Tesla does not answer anything regarding future product releases, but they are willing to shed light on current timelines, progress of certain projects, and other plans.
There are five questions that range over a variety of topics, including SpaceX, Full Self-Driving, Robotaxi, and Optimus, which are currently in the lead to be asked and potentially answered by Elon Musk and other Tesla executives:
- You once said: Loyalty deserves loyalty. Will long-term Tesla shareholders still be prioritized if SpaceX does an IPO?
- Our Take – With a lot of speculation regarding an incoming SpaceX IPO, Tesla investors, especially long-term ones, should be able to benefit from an early opportunity to purchase shares. This has been discussed endlessly over the past year, and we must be getting close to it.
- When is FSD going to be 100% unsupervised?
- Our Take – Musk said today that this is essentially a solved problem, and it could be available in the U.S. by the end of this year.
- What is the current bottleneck to increase Robotaxi deployment & personal use unsupervised FSD? The safety/performance of the most recent models or people to monitor robots, robotaxis, in-car, or remotely? Or something else?
- Our Take – The bottleneck seems to be based on data, which Musk said Tesla needs 10 billion miles of data to achieve unsupervised FSD. Once that happens, regulatory issues will be what hold things up from moving forward.
- Regarding Optimus, could you share the current number of units deployed in Tesla factories and actively performing production tasks? What specific roles or operations are they handling, and how has their integration impacted factory efficiency or output?
- Our Take – Optimus is going to have a larger role in factories moving forward, and later this year, they will have larger responsibilities.
- Can you please tie purchased FSD to our owner accounts vs. locked to the car? This will help us enjoy it in any Tesla we drive/buy and reward us for hanging in so long, some of us since 2017.
- Our Take – This is a good one and should get us some additional information on the FSD transfer plans and Subscription-only model that Tesla will adopt soon.
Tesla will have its Earnings Call on Wednesday, January 28.
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.
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