As Tesla (NASDAQ:TSLA) expands its electric vehicle business worldwide, the Chinese market may become a less critical factor for the firm than in the past. This might come as welcome information to stockholders who have grown accustomed to Tesla stock price fluctuating in response to geopolitical, supply chain, or COVID developments coming out of China.
It is not the case that Tesla (NASDAQ:TSLA) is having difficulty expanding its operations in China. The Wuling HongGuang Mini has the highest year-to-date BEV market share in China this year, but the Tesla Model Y is in second place with the highest year-to-date market share. Regarding year-to-date market share, Tesla stock is third overall, behind BYD and SGMW. However, Tesla (NASDAQ:TSLA) China is experiencing the most significant competition it has ever encountered in China from an increasing number of domestic Chinese EV competitors. It has been reported that Tesla is beginning to provide more regional discounts.
The team led by Adam Jonas, an analyst at Morgan Stanley, believes that over the next year, Tesla stock will move past the stage in which it is most dependent on China for its revenue. They suggested that “capacity growth in the United States and Europe will be linked with significantly higher degrees of vertical integration,” which would be boosted by tax incentives and production subsidies, both of which are areas in which Tesla (NASDAQ:TSLA) appears to be significantly advantaged.
According to the opinion of Morgan Stanley, the remaining years of this decade will witness rapid industrialization of Tesla (NASDAQ:TSLA) supply chains in the NAFTA and European Union to achieve compliance with programs such as the Inflation Reduction Act and a potential European Union equivalent. This will substantially dilute China’s role in Tesla’s (NASDAQ:TSLA) demand footprint and supply ecosystem. These developments in the supply chain may set the company apart from other electric vehicle startups in the United States that have tight ties to China.
Tesla stock is currently rated as Overweight at the company, and the price objective is $383.
Tesla stock gains when it is speculated that its competitive edge will be less dependent on China.
Featured Image – Megapixl © Sergiomonti