Tesla becomes critically dependent on Chinese market sales
Elon Musk (Photo:Mike Blake / Reuters)
Tesla Motors is so dependent on the Chinese market, it should be treated as a Chinese tech company, Morgan Stanley analysts said, as reported by Business Insider on Oct. 25.
Tesla Motors is so dependent on the Chinese market, it should be treated as a Chinese tech company, Morgan Stanley analysts said, as reported by Business Insider on Oct. 25.
“We estimate Tesla generates as much as one-half of its profitability from the Chinese market, arguably making the stock a derivative of a Chinese tech stock,” the team led by equity analyst Adam Jonas said.
Accosting to the assessment, Tesla shares could start trading like any other tech stock traded on Chinese exchanges – Hang Seng and Shanghai Composite. This dependency could last until at least 2030.
This comes as draconian COVID restrictions and deepening real estate crisis raise concerns about Beijing’s ability to meet its official 2022 goal of 5.5% economic growth: annualized Chinese GDP growth was only at 3.9% in Q3.
The apparent economic slowdown was reflected in Hang Seng Tech index declining by almost 50% in 2022. Morgan Stanley suggested Tesla stock could soon begin to mirror this dynamic, following a 9% reduction in Model 3 and Model Y prices in China.
“Price cuts announced by Tesla China may affect already-weak market sentiment,” the report said.
The deepening dependence of Tesla Motors on the Chinese market comes in the midst of rising Washington-Beijing tensions and escalating trade wars.
Tesla shares declined by 43% in 2022 – far outpacing the 21% fall of S&P500 index.
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