As most us know, the Chinese economy is highly regulated and any entry to their economy takes time alongside skillful navigation of international law. Over the past ten years, China has been heavily investing in electric vehicles. Starting in 2007, China invested over 300 million USD in clean energy vehicle development.
In 2010, plans were set forth to create a domestic electric vehicle that would provide the country with sustainable and energy efficient travel. It is now 2017, and the plans haven’t moved anywhere and that is where Elon Musk enters the frame. It is no question that China has large amounts of rural land, an available workforce, and relatively cheap labor.
The Chinese government is eager to get a head start on the pro-environmental policy because of international pressure and accusation about forging documents regarding CO2 outputs. Tesla is currently positioned to begin rolling out their new lines of cars in mass production as well as a new electric semi-truck. China has had a growing middle class and an increasing demand for luxury goods, shown by GDP growth which has been 8-10% year over year since the start of the millennium. With this new demand for luxury goods and a need for energy efficient vehicles, China is perfect for a Tesla alignment on all fronts.
In June, Tesla signed a preliminary production agreement which indicates clear plans to produce in Shanghai and just recently announced that China would be receiving access to 1,000 superchargers as well as mini-Superchargers to cities to facilitate the ease of owning a Tesla. This is all coming at a unique time in the stock’s history in that it has recently plummeted over 10% after hitting highs of 389.61. It is believed that if the expansion to China and the rollout of the new edition of vehicles is without major hiccups, by January of 2018 the stock could reach 400 or more dollars per share. While the balance sheet itself indicates the stock should be trading for a significantly lesser value, many retail and industry investors are placing their bets on Elon Musk’s vision for tomorrow rather than the financial statements of today.
It will all come down to Teslas ability to grow at the rates that are currently priced in.