How is Tesla doing in China?

It's no secret that Tesla and its Model S electric car are popular stateside. But as the company expands, the opportunities are seemingly endless.

By TheStreet.com Staff Mar 6, 2014 12:16PM

The front of a Tesla Motors vehicle © Joe Raedle/Getty ImagesBy Chris CiacciaTheStreet


It's no secret that Tesla Motors (TSLA) and its Model S electric car, are popular stateside. The company delivered 6,892 Model S vehicles on its way to generating $761 million in revenue during the fourth quarter. Yet, as the company expands into Europe, and specifically China, the opportunities for Tesla are seemingly endless. The Street on MSN Money


Tesla's first Model S was delivered in China just several days ago, on Feb. 25. An article in Want China Times notes that not only is demand for the car in China surging, but also for the company's stock.


The article states that the company has received "sizeable pre-orders," with the latest orders set to ship in September. In Tesla's fourth-quarter letter to shareholders, CEO Elon Musk noted that a sizable number of cars were in transit to Europe and China. Musk expects enormous demand in China, although meeting this demand could be tough. "I think, based on current trends it seems unlikely that we'll be able to satisfy demand in China this year," Musk said on the earnings call. "So there will be unmet -- likely to be, I think, unmet demand in China."


The Palo Alto, Calif.-based firm earned 33 cents a share on $761 million in revenue during the fourth quarter. Tesla delivered 6,892 Model S units, and had a 25.2 percent non-GAAP gross margin for the quarter. Analysts surveyed by Thomson Reuters were expecting Tesla to earn 21 cents a share on a non-GAAP basis, generating $677.36 million in revenue.


With Tesla's U.S. market cap over $30 billion, approaching those of Ford (F) and General Motors (GM), shares on China's A-share market have "become one of the favorites on the exchange as well," the article noted.


Tesla chart


Reporting on the ground appears to validate comments by Musk, a known showman. Bill Bishop, who co-founded Marketwatch and now lives in China, tweeted that he was in the Tesla store in Beijing, noting that the place was "very busy."


In January, Tesla announced that the price of the premium 85 kWh Model S is 734,000 CNY ($121,370), the same price as the $81,070 starting price in the U.S., excluding taxes and fees.


On the earnings call, Musk said that since Tesla announced pricing in China, "it seems unlikely that we'll be able to get everyone a car this year."


The strong demand for Tesla in Asia goes back to July, when Kenneth Lui, a Tesla sales manager based in Hong Kong, told Bloomberg the company had received "hundreds of orders" for the Model S sedan already despite not having a retail price for the car in the Chinese city at the time.


There will be some setbacks as the company continues to expand into China, with a small Supercharrger network (for now), and limited infrastructure, but the company will get there. During the earnings conference call, Deutsche Bank analyst Rod Galves questioned Musk and CFO Deepak Ahuja about the prospects of charging in China, with Musk noting the company is "working pretty hard on that, and we believe we've got some good solutions."


With the Chinese government continuing to provide incentives and subsidies for electric cars, Tesla's future in China is exceedingly bright. One Model S (and soon to come, Model X) at a time.


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1Comment
Mar 6, 2014 1:19PM
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Funny how Luxury Care SALES are literally through the ROOF setting monthly new Record Highs yet we have Record Global Poverty. However unlike other Luxury Brands, Tesla can potentially be a Game Changer to reduce Global Poverty if it reaches it's full Potential.
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