Investor's Corner

Tesla still ‘miles ahead of competition’ despite 24% registration drop in China, says analyst

A Tesla Model 3 driving at night. (Photo: Andres GE)

Tesla stock (NASDAQ:TSLA) is on a tear on Monday, and part of it appears to be due to momentum from Wedbush’s optimistic note on the company. In his note, Wedbush analyst Dan Ives highlighted the importance of Gigafactory Shanghai and battery tech to Tesla’s numbers. And in a recent interview with Yahoo Finance, the analyst explained why he has turned bullish on the electric car maker despite possible headwinds to the company. 

Tesla China’s vehicle sales in July actually fell 24%, which was considered as a bearish sign by critics. However, Ives noted that these drops could very well be balanced out by strong numbers in August and the following months. This is a notable observation from the analyst, especially since Tesla tends to push its vehicle delivery ramps at the tail end of its quarters. Despite July’s numbers, the Wedbush analyst notes that he expects Tesla to sell about 150,000 units from China this year. 

Ives also explained to the Yahoo Finance hosts that Tesla’s headwinds in the US due to the pandemic would likely be balanced out by strength in other regions such as Europe and China. This reflects his stance on Giga Shanghai and its ramping operations. “I think right now, in the EV market, it continues to be Tesla’s world and everyone else is paying rent, especially in those core markets,” Ives said. 

When asked if he was worried about the coming competition, the Wedbush analyst noted that Tesla’s lead is simply too much, at least for the near future. There are current and upcoming competing vehicles from rival automakers, and they will likely narrow the gap eventually, but for now, Tesla is pretty much like a freight train that is incredibly difficult to stop. 

“Competition’s definitely going to be out there. We’re seeing Rivian, obviously, everything that GM’s done, you see competition across Europe as well as in China. But at least right now, they (Tesla) are miles ahead of the competition. You see that in terms of the overall demand numbers, as well as the profitability. I think obviously, they will narrow the gap at one point. But at least right now, which is why we’re bull case $2,500, I don’t see anything stopping the freight train at least in the next few quarters,” Ives said. 

Explaining further, the Wedbush analyst stated that part of Tesla’s edge is its brand and identity itself. Everything, from its CEO to the Apple-esque ownership ecosystem offered by its vehicles, are things that are likely key differentiators for consumers. 

“It’s the brand. Remember, for a company that doesn’t market, it’s the Musk DNA, it’s the Tesla brand in EV, which has established itself in many ways similar to Apple and the iconic Apple brand. And it’s something where the quality is what consumers are looking for. And it all comes down to what’s under that hood in terms of the battery technology. That’s the differentiator,” he said. 

As of writing, TSLA stock is trading 7.08% at $1,768.28 per share. 


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