Tesla has reportedly started to deliver the China-made Model Y in China. So far, the company was delivering China-made Model 3 and imported Model S/X in China.
The competition in the EV (electric vehicle) industry has been intensifying. This especially holds true for China, the world’s largest market for new energy vehicles. Domestic Chinese automakers like NIO, XPeng, and Li Auto are competing with foreign automakers like Tesla. Legacy automakers like Volkswagen and General Motors are also working to grab a share of the Chinese EV market.
Tesla’s China Gigafactory
Towards the end of 2019, Tesla began delivering the China-made Model 3s in the country. Notably, the company set up the China Gigafactory in record time. It managed to get several concessions from the Chinese government that was so far unheard of in the country. It received faster permits and funding from Chinese authorities. Furthermore, Tesla became the first automaker to set up individual operations in China. All other automakers that wanted to do business in the country had to do so by way of joint ventures with domestic Chinese companies.
China also made Tesla cars eligible for the government subsidy which is otherwise reserved for domestic companies. The country also made NIO cars eligible for EV subsidies even as its cars start at a much higher price point as compared to the limit set by the country. However, China created a special category for EV companies that provide battery replacement services to make NIO eligible for the EV subsidy.
Tesla versus NIO
NIO also launched a sedan earlier this month to complement its portfolio. The sedan would compete with some of the Tesla models also. The rivalry has been intensifying in the Chinese EV market as cash-rich companies are launching new models and cutting prices on existing models to grab market share.
Tesla priced its China-made Model Y at a base price of 339,900 yuan, which is about $52,072. The price point is very competitive looking at models from domestic Chinese electric vehicle makers. Li Auto’s Li ONE SUV starts at around 328,000 yuan while NIO’s EC6 crossover starts at 368,000 yuan.
NIO’s new sedan would have a range in excess of 600 miles which would be higher than what Tesla offers. The competition would only intensify over the next couple of years. In order to justify their valuations, EV companies would need to continue to report high growth rates.
The valuations of all EV stocks soared over the last year. Tesla short-sellers lost almost $40 billion in 2020 amid the meteoric rise in the company’s stock. Jim Chanos who is among the most prominent Tesla bears squared off some of his bets against the company last year calling the position “painful.” However, Michael Burry, whose bet against the CDO (collateralized debt obligations) brought him fame during the 2008-2009 financial crisis said later last year that he is short on Tesla stock. Overall, 2020 was a nasty year for those betting against EV stocks.
Only Tesla stock short-sellers lost $40 billion last year which is a record in itself. On the contrary, some of those betting on the success of the company became millionaires and Tesla’s CEO Elon Musk became the world’s richest automaker ahead of Amazon’s Jeff Bezos.
Experts are divided on Tesla stock
Experts are very divided on Tesla stock. Billionaire investor Chamath Palihapitiya is among those who are bullish on the company and expects Tesla stock to triple from even these levels. He advises against selling the stock even after the tremendous rally. “I don’t understand why people are so focused on selling things that work,” said Palihapitiya. He added, “When things are working, you’re paid to stay with people that know what they’re doing. And this is a guy who has consistently been one of the most important entrepreneurs in the world. And so why bet against him?”
Dean of valuation is bearish on Tesla
On the other hand, the “dean of valuation” Ashwath Damodaran is very bearish on Tesla and valued it at a fraction of its current stock price. Gene Munster, the co-founder of Loup Ventures, is however bullish on the Elon Musk-run company and expects its market capitalization to cross above $2 trillion over the next three years. So far, Apple is the only company that crossed the $2 trillion in market capitalization.
How to buy Tesla stock?
You can invest in green energy stocks like Tesla through any of the reputed online stockbrokers. Alternatively, if you wish to trade derivatives, we also have reviewed a list of derivative brokers you can consider.
An alternative approach to investing in the green energy ecosystem could be to invest in ETFs that invest in clean energy companies. ARKK Innovation ETF, which is run by known Tesla bull Cathie Wood could be a good ETF to get diversified exposure to Tesla and some of the other tech companies.
By investing in an ETF, one gets returns that are linked to the underlying index after accounting for the fees and other transaction costs. There is also a guide on how to trade in ETFs