Tesla's advantage may be becoming less reliant on China than peers
China may be less of a crucial factor for Tesla (NASDAQ:TSLA) than it has in the past as the company's electric vehicle business goes global. That could be good news for shareholders who have become accustomed to TSLA's share price swinging with geopolitical, supply chain, or COVID developments out of China.
It is not that Tesla (TSLA) is struggling to grow in China. The Tesla Model Y has the second highest year-to-date BEV market share in China this year behind only the Wuling HongGuang Mini. Overall, the Tesla (TSLA) brand ranks third behind BYD and SGMW for year-to-date market share. However, Tesla China is now facing its biggest ever competition in China from growing domestic Chinese EV companies and Tesla is noted to be starting to offer more promotions in the region.
Morgan Stanley analyst Adam Jonas and team believe Tesla (TSLA) is passing through its peak China dependency stage over the next 12 months. "Capacity growth in the U.S. and Europe will be paired with far higher levels of vertical integration, turbo-charged by tax incentives and production subsidies where Tesla appears uniquely advantaged," they advised.
The Morgan Stanley view is that the remainder of the decade will see a rapid industrialization of Tesla's (TSLA) NAFTA and European Union supply chains to achieve compliance with programs such as the Inflation Reduction Act and potential European Union equivalent, which will drive a natural dilution of the role of China in Tesla's (TSLA) demand footprint and supply ecosystem. Those supply chain advancements could set the company apart from U.S. EV startups with close ties to China.