By
Svetlana Soroka
April 18th, 2024
U.S. electric vehicle maker Tesla Inc said it will start taking orders in China on Friday for a lower-priced version of its Model 3 car, as it seeks to accelerate China sales hit by trade friction between Washington and Beijing.
After gaining a significant foothold in the United States, American electric car company Tesla Inc. is aiming to accelerate global sales with the focus on European Union and China. Following the trade issues between Washington and Beijing, Tesla adopted a smart strategy to ensure it remains competitive in world’s most populous country. The company broke ground on its first Gigafactory manufacturing plant in China, as well as lowered its prices to keep a profitable foothold in the country.
Some Past Performance Review
Tesla’s troubles are piling up. During January, the electric car maker shed 7% of its workers, saw one of its largest investors reduce its stake and reported a mixed bag of results. Then in the closing minutes of its earnings call on Wednesday with analysts, chief executive Elon Musk dropped the bombshell — the company’s chief finance officer was retiring just two years after rejoining the business. The unexpected departure of Deepak Ahuja is the latest in an exodus that has seen a wholesale turnover among senior management at the electric car maker.
After resolving early production problems for its make-or-break Model 3, Tesla was able to generate enough cash by the end of last year to underpin its balance sheet and head off the threat from a looming $920m convertible bond repayment.
Tesla’s solid end to 2018 marked a continuation of its surprisingly strong Q3 performance. After finally overcoming some of the persistent production problems on its Model 3, the company enjoyed a favourable — but temporary — margin boost. The first buyers for the Model 3 were willing to pay far more than the $35,000 Mr Musk has set as a base price for the car, enabling the company to reach a very strong gross margin of more than 20% on the car in each of the past two quarters.
Expansion Into China
The California-based company made a deal with the Chinese government to lease land in the country for 50 years. As a part of land acquisition, Tesla’s founder and CEO was also offered a permanent residency in China, as reported by Daily Mail.
Currently Tesla exports all the cars from its California plant to China, but the company is now in the process of building a factory in Shanghai, where in the first phase it will produce batteries and Model 3. Second phase will see the manufacturing of upcoming Model Y, an SUV built on the Model 3 platform, completing Elon Musk’s naming plan of ‘S3XY’.
“We need to bring the Shanghai factory online. I think that’s the biggest variable for getting to 500,000-plus a year,” Tesla owner Elon Musk told CNBC. “Our car is just very expensive going into China. We’ve got import duties, we’ve got transport costs, we’ve got higher costs of labor here. And we’ve never been eligible for any of the EV tax credits.”
“A lot of people criticize Tesla for being so dependent on incentives. In fact, for a company making EVs, we have the least access to incentives. It’s pretty crazy. Because there’s so many countries that have put price caps on the EV incentive which differentially affect Tesla. And in China, which is the biggest market for EV’s, we’ve never had any subsidies or tax incentives for vehicles.
The company confirmed that Chinese customers are now allowed to place orders for a long-range, rear-wheel drive Model 3 variant, which should cost 433,000 Chinese Yuan ($64,300.56), with the cheapest, entry level medium-range Model 3 starting at mere 243,000 CNY ($35,950). Previous rumors pitched the starting price for a long-range, all-wheel-drive Model 3 at 499,000 Yuan but that figure proved to be off by almost $10,000.
Meanwhile, Tesla, Inc stock seems to be in a good long-term stock predictions.
Analysts say that Tesla can be a profitable investment option. With a 5-year investment, the revenue is expected to be around +51.83%. The current $100 investment may be up to $151.83 in 2024.