Well, it looks like the valuation police have come a-knocking. In a grim turn of events, Tesla finds itself at the mercy of the markets right now, down more than 30% year-to-date (YTD).
Global pandemonium or not though, it has no intentions of slowing down; in fact, it’s reportedly gearing up to build out a second factory in China.
So why is Tesla after another plant in China?
Of the 6.5 million global electric vehicle sales in 2021, roughly half (3.2 million) were in China, 2.3 million were in Europe, and 535,000 were in the United States. China has become the stomping ground for EV adoption.
Tesla can currently produce 1.1 million vehicles per year there — but it wants to double its production capabilities in the region — and these facilities will provide the resources to do so. To shed light on how meaningful China is to Tesla, Chinese sales amounted to $13.8 billion (25%) of total revenue in 2021.
Although not yet confirmed, there’s no doubt that Tesla will want to get this factory up and running as quickly as possible. There’s no dispute over who the U.S. leader is — Tesla has more than 50% market share there — but in other regions, it’s not doing quite as well, and the home players have the advantage; Volkswagen in Europe, and BYD in China. The ongoing delays due to regulatory hurdles over at Giga Berlin haven’t helped either, slowing Tesla’s advances in Europe.
Tesla might have technological advantages, but it hasn’t come close to meeting the production capacity of other large-scale manufacturers yet. If I was Musk, I’d get that plant up and running as soon as possible, because some consumers might not wait around for Tesla while cheaper options are ready to go.
And according to reports, Tesla could break ground on Giga Shanghai 2 as early as next month. Investors will want to watch this space.
Financial Writer at MyWallSt
David's favorite stock is Google. He's a daily user of its YouTube platform, where you can learn or find something brand new at the touch of a button. He believes the company will continue to grow for many years to come.