About a year ago, Tesla Motors Inc (NASDAQ:TSLA) CEO Elon Musk told The Wall Street Journal that for Tesla to be a success in China for 2014, the company would have to sell north of 5,000 vehicles in the country.
Well, Tesla’s China sales didn’t quite reach Elon Musk’s threshold.
Although the company hasn’t commented on Tesla China sales in 2014, data on license-plate registrations for Tesla in China have been tallied and analyzed by industry research firm JL Warren Capital, and the numbers fell well below Tesla’s China target.
According to JL Warren, Tesla’s China shipments added up to 4,761 cars; however, only around 2,500 were registered for license plates.
The discrepancy here between Tesla’s China shipments and the number of new registered Tesla vehicles in China is an interesting phenomenon, but I suspect it has more to do with China’s cultural milieu than anything else. You see, unlike here in the U.S., some well-heeled Chinese Tesla buyers are likely to just ignore the registration process and simply take their Tesla Model S out for a ride sans official government sanction.
Another possibility, and one that JL Warren also suspects, is that Model S “scalpers” of sorts are buying the prestigious all-electric luxury cars and just holding on to them for resale at a later date. Whatever the case may be, Elon Musk doesn’t seem the least bit deterred by the Tesla China numbers.
In fact, the company is planning to put the pedal to the metal, releasing two new Tesla models in China.
China Problems Won’t Plague Tesla Stock Forever
According to Tesla business-development chief Diarmuid O’Connell, Tesla plans to introduce China to the “D,” which is the dual-motor supercar version of its Model S sometime in the coming months. O’Connell also told The Wall Street Journal that the company would like to release its Model X all-electric sport-utility vehicle there early next year.
Of course, one of the biggest problems facing Tesla in China actually is the same problem the company faces nearly everywhere, and that is the perception that there is insufficient charging stations and/or problems adequately powering up the all-electric vehicles.
This is problem Elon Musk is acutely aware of, hence his selection of Tom Zhu to head Tesla’s China operations. Zhu is widely regarded as a top technical expert on the charging issue, and his sensitivity and technical acumen here should serve Musk and company well as they expand China operations.
So, what does Tesla plan to do to boost its sales in China and ultimately help Tesla stock?
According to O’Connell, Tesla’s China strategy is to “go deeper” in key cities such as Beijing, Shanghai and Shenzhen — cities where the company already has demonstrated its ability to generate solid sales. Basically, Tesla plans to market its vehicles to the very status-oriented cities where a Tesla Model S connotes wealth, status, power and a cutting-edge Western technological lifestyle.
Hey, in the nouveau riche urban centers of what now is the world’s largest economy, a Tesla means you’ve made it. Elon Musk is keenly aware of this, and that’s why it’s pedal to the metal for Tesla in China.
As for the effect on Tesla stock, I suspect the China factor will likely take a bit of time to materialize into a big positive. However, according to analyst Daniel Galves of Credit Suisse, the slight weakening of recent China orders combined with Tesla’s Model S production will translate into what he described as a “substantial uptick” in order flow for North America and Europe.
In a note to clients released Tuesday morning, Galves reiterated his “Outperform” rating on Tesla stock, and kept his $325 price target on the shares. If he’s correct, then we’re looking at a 58% increase in the price of Tesla stock by the end of the year — exactly the kind of fast-paced profits TSLA shareholders have been used to for years.
As of this writing, Jim Woods was long TSLA
