China to Open It's Borders: What That Means for Tesla
The issue with Tesla is not if it can sell cars, but if it can make cars without raising too much capital.
Tesla Stock Price as of Publication: $293 per share.
China’s lifetime president announced last week in his latest speech that China will allow foreign auto manufacturers to have full ownership of their Chinese operations by 2022. While that is a great news for auto OEMs which are required to share their expertise with Chinese JV partners, we do not believe that matters for Tesla, at least for the short/medium-term.
Since announcing the news, Tesla stock is up around 5%. The news is encouraging over the long-term, however that do not that applies over the short-term as Tesla is a supply-story, not a demand-story. The issue with Tesla is not if it can sell cars, but if it can make cars without raising too much capital. So, by our estimates, opening the Chinese market for the company may not affect its top-line for the coming 5 years even though the Chinese operations contribute to nearly 18% of total revenues.
On the other hand, we believe that the market is not taking the full picture of what happened during this month, which should reduce the stock price further from current levels.
