On January 7th, at Tesla’s Shanghai Super factory, the high-profile “China Made model 3 first social car owners delivery ceremony” was held. Tesla’s share slain shares hit new highs. If the june 2019 low of $177 is calculated, Tesla’s share price is up 155 percent in the past six months, up from $451.54 per share as of January 7, 2020.
Tesla, however, remains a loss-making company, with a cumulative loss of $967 million in the first three quarters of 2019. Tesla’s net worth per share is $33.51, according to Eastern Wealth Choice, which also means tesla’s net price is 13.47 times higher.
So what makes investors so bullish on Tesla? Will Tesla be a catfish that stirs the car market?
Electric car catfish from the United States
In the third quarter of 2019, Tesla’s quarterly net profit turned positive, with a net profit of $143 million for the quarter. This is Tesla’s fourth quarterly net profit turnaround since 2011, but from past data, every quarterly net profit turnaround is like a flash in the pan.
Since the 1980s, there has been a huge gap between U.S. auto sales and car production, and the U.S. auto industry has been largely depressed since the 2008 financial crisis. For a long time, the U.S. auto market is a “foreign” brand-filled world, this is the background of Tesla’s birth.
Tesla is very young compared to the car brands we know as BMW and Audi, and it is the “post-00” in the automotive industry: it was born in 2003 and in 2004 it welcomed a CEO, Elon Musk, who “builds rockets while making electric cars”.
Led by the rocket CEO, Tesla will sell 245,000 cars in 2018, making it the world’s best-selling plug-in passenger car maker, accounting for 12 percent of sales in the plug-in segment.
Tesla introduced models such as the Model S and Model X in 2012 and 2015, and with sales, tesla’s revenue swelled.
The Tesla Model 3 was officially delivered to customers in 2017, quickly becoming the number one car in the U.S. luxury car market.
Tesla’s share price rose on January 3rd when it released its fourth-quarter 2019 production and sales figures. In the fourth quarter of 2019, the Tesla Model 3 delivered 92,550 vehicles and the Model S and Model X delivered 19,450 vehicles, bringing the total to 112,000. In total, it delivered about 367,500 vehicles in 2019, up 50% year-on-year.
Today, Tesla, as a “post-00” in terms of total sales (whether gasoline or electric), can compete with established carmakers in the U.S. market. Tesla is like a catfish, stirring up the U.S. auto market.
Tesla currently has six plants.
While Tesla’s sales are booming, the u.S. market’s contribution to it has been modest. Tesla delivered 192,300 vehicles in the U.S. market in 2019 and 1916, 000 in 2018, according to Carsalesbase data, meaning the U.S. market contributed only a modest increase to Tesla’s 2019 years.
So Tesla’s focus on China and Europe is a logical and compelling strategy.
So far, Tesla has six plants. Tesla has revealed that it has a weekly production capacity of 3,000 vehicles, or about 156,400 units, at its superplant 3 in Shanghai, China, by the end of 2019. The total production capacity will reach 500,000 vehicles when it is completed, the Beijing News reported.
In addition, Tesla’s super plant in Glenhead, Germany, will begin construction this year and is expected to have a capacity of 500,000 vehicles when completed. It also means that when all of its plants in Shanghai and Germany are completed, Tesla will add an additional 1m vehicles, plus its current capacity of 367,500 vehicles, which is conservatively estimated to be 1.3675 m, 3.7 times the current capacity.
Perhaps that explains why investors are so bullish on Tesla, whose planned capacity has given investors high expectations. If Tesla continues to win customer approval, there is a good chance that its quarterly sales will grow 2.7-fold from the current $6.3 billion (third-quarter 2019 data).
Tesla’s speed is remarkable, perhaps linked to Musk’s rocket-building work, and the speed of Tesla’s Shanghai superplant is comparable to that of a rocket.
In July 2018, Tesla signed an agreement with the Shanghai municipal government to announce the location of Tesla’s China plant, Tesla’s first superfactory outside the United States.
In October 2018, just three months after signing an agreement with the Shanghai government, Tesla acquired the plant. In January 2019, the Shanghai Super plant broke ground, and by December 2019 Tesla’s Shanghai Super plant had begun mass production of the Model 3, reaching a weekly production capacity of 3,000 vehicles.
In a statement, Tesla said its intention to build a super plant in Shanghai was aimed at the Chinese market, saying: “We are building a Shanghai super plant to significantly increase the affordability of Chinese customers to the Model 3 by lowering transportation and manufacturing costs and eliminating tariffs on cars imported from the United States.” “
Can it change the domestic competitive landscape?
On January 3, 2020, the Tesla Model 3 domestic version of the domestic version reduced its selling price to 3238 million yuan (previously 355.8 million yuan), and further enjoyed 247,000 yuan of electric vehicle car purchase subsidies after the purchase price of 299,000 yuan.
Citic Securities predicted: “Tesla’s product pricing system is the standard BBA (Mercedes-Benz, BMW, Audi), we refer to Tesla’s sales performance in North America and Europe, we expect model 3 sales in China to reach more than 300,000 units.” “
It is worth noting that last year’s sharp decline in new energy subsidies led to a sharp decline in the domestic new energy vehicle market. New energy vehicle sales in November 2019 were 95,000, down 41.3 percent from a year earlier, according to Oriental Wealth Choice.
And in this context, Tesla this catfish with a rapid “plant-building and price reduction” strategy to enter the market, consumers will not pay?
Zhang Yi, CEO of Ai Media Consulting, told the Daily Economic News: “Tesla’s Shanghai plant officially delivered customers, should be said to be a very iconic event.” Tesla brand is very attractive to users, especially for some elite users, their consumption weather vane on the low-end market is very instructive, this price down, I believe that gold-collar and white-collar customers will be activated, which will also drive other customers in the market on electric vehicles consumption habits. “
Notably, there are also research institutes abroad that have surveyed Tesla’s consumer satisfaction. The results showed that Tesla Model 3 owners rated the company 4.71 out of 5 when faced with the option of “I’ll never buy a petrol car again.”
Tesla ranks first in major electric vehicle ranges and far outpacing other brands of electric cars, according to data from Ai Media Consulting.
In addition, Zhang Yi believes that Tesla can change the domestic electric vehicle market competition structure is not yet known, for the industry as a whole, the importance of charging piles than the importance of range.
“China’s electric cars have struggled over the past year, but the rapid construction of charging piles is an opportunity for the development of electric vehicles, not only in the past year, but also in the layout of charging piles by PetroChina and Sinopec, but also by the State Grid and Southern Power Grid, which are also laying out charging piles,” Zhang said. Charging piles (markets) are beginning to mature, which is the same as gas stations driving gasoline car growth. “
Morgan Stanley also had forecasts for Tesla’s Shanghai super plant, saying: “Tesla will not be able to capture a large share of china’s electric car market, but lower production costs will help it make a profit.” “