Tesla Inc.’s stock rose 4% on Tuesday, as excitement built about Chief Executive Elon Musk’s visit to China, his first in about three years.
Wedbush analyst Dan Ives said the visit comes at a key time for the electric vehicle maker
TSLA,
as it braces for the challenge from Chinese EV companies operating in the biggest EV market in the world.
“We would expect Musk to spend most of his visit around the key Shanghai Gigafactory plant which remains the hearts and lungs of the Tesla production globally,” Ives wrote in a note to clients.
“With Giga Shanghai now producing over 80k units per month the production scale and scope of Tesla in China remains one of its key advantages as Musk & Co. face increasing domestic competition from the likes of BYD
002594,
Nio
NIO,
Xpeng
XPEV,
and others with an EV price war underway within the country.”
Musk is also expected to spend time meeting key officials in Beijing, which may even include Premier Li Qiang, said Ives.
“While the geopolitical tensions between the U.S. and China are increasing, Tesla (as well as Apple
AAPL,
) finds itself in a tight wire act to balance its success and production within China which remains a vital market on both the supply and demand front,” said the analyst.
“Playing nice in the sandbox in Beijing is something the Street is laser focused on to make sure there are no disruptions to Tesla’s expansion and tentacles within China for the coming years as this remains the number 1 EV market in the world.”
Ives had an outperform rating on Tesla stock, the equivalent of buy. His $215 price target is about 11% above its current price.
Tesla stock has gained 57% in the year to date, while the S&P 500
SPX,
has gained 9.5%.
