Tesla's China Profit Potential Doubted by Morgan Stanley
(Bloomberg) -- Investors should temper expectations that Tesla Inc. will earn profits in China, Morgan Stanley analyst Adam Jonas wrote, adding that he's cautious about the role the country will play in the carmaker's long-term strategy and fundamental value.
Jonas cited Chinese authorities' decision to suspend customs clearance for Model 3 sedans, an issue that's been the subject of ongoing local media reports this week. Flawed labels have held up the cars at ports and highlighted “the risks inherent in U.S. auto/tech firms conducting business in the PRC,” Jonas wrote, noting the sensitivity of data privacy, cybersecurity, robotics and artificial intelligence.
A total of 4,678 Model 3s that have arrived at Chinese ports may have issues, including misprinted or missing local-language labels, China Central Television said Wednesday. The flaws first surfaced earlier this week when Caixin reported that ports had suspended customs clearance of Model 3s due to problems with about 1,600 cars.
Tesla is fixing the labels under the supervision of customs officials, who will resume clearances after they pass review, CCTV said. The company said in a statement Tuesday that sales of the Model 3 in China aren't impacted and that it continues to deliver sedans that have already been processed.
China Concerns
Morgan Stanley's Jonas listed a host of concerns, including Tesla's reliance on China having “constructive trade relations” with the U.S. American regulations on exports to the country also should be considered, including the Treasury Department's Committee on Foreign Investment in the U.S., known as Cfius, and the “unquantifiable risks of technology transfer,” the analyst said.
Electric- and autonomous-vehicle technology may be regarded as having “dual-purpose,” Jonas wrote, which could limit the role of U.S. companies within China's transportation industry, and vice versa. He added that Morgan Stanley's China team is aware of dozens of domestic Chinese electric-vehicle startups.
Further ahead, Jonas sees the auto industry “morphing into a public transport utility operated as a public good.” That might naturally limit the role of foreign entities, as national and economic concerns come into play.
Morgan Stanley rates Tesla shares the equivalent of a hold with a $283 price target. The stock was little changed as of 10:20 a.m. Wednesday and has slumped since Chief Executive Officer Elon Musk announced plans to close most of the company's stores and shift to all-online ordering.
More: Musk is said to blindside Tesla staff with store wind down
--With assistance from Anthony Palazzo.
To contact the reporter on this story: Felice Maranz in New York at fmaranz@bloomberg.net
To contact the editors responsible for this story: Craig Trudell at ctrudell1@bloomberg.net, ;Catherine Larkin at clarkin4@bloomberg.net, Chester Dawson
©2019 Bloomberg L.P.
-
Talking Points This Week: Tech Nerves, FII Buying, And A Faraway Banking Shock
The global markets are not shining this Diwali. The exception in the large markets is, India.
-
Midterm Rally Lasted A Day. The Hard Reality Of A Divided US May Last Two Years | Opinion
Between a contested AI boom, a debt ceiling that arrives in 2027 and a president with every incentive to act alone, the next two years may prove more volatile than the first day's rally suggests.
-
Blue Wave Will Derail the AI Trade but Won't Dismantle the AI Era | Unhedged Position
The Democrats' sweep of the US Congress will see politics collide with economic forces both over the long and short term.
-
It's Time To Take The GST Council's Bet On Trust Global
Payment records can prove India's services exports, and clear, proportionate rules can bring foreign digital sellers into the tax net.
-
Opinion | India at 38: From Innovation Overperformer to Innovation Powerhouse
India now has 453 VC-backed deep science startups, 18 of them late-stage, after 117 percent growth since 2020. Laurus Labs, at USD 9.3 billion, is the most valuable deep science company in any middle-income economy outside China.
-
Navigating Energy Crossroads: S Jaishankar's Call For Diversified Supply Chains At G20 Ministerial Meeting
As geopolitical fault lines continue to test maritime trade routes and commodity flows, Jaishankar's message remains pertinent: true economic resilience requires open markets, protected transit lines, and a genuine commitment to multilateral cooperation rather than coercion.
-
Indians Are Travelling, But Not Every Journey Is A Holiday | The Week In Whys
Pilgrims, patients and working women are the real travellers, and the system hasn't quite caught up with them.
-
Getting To Work Costs Women More | The Reason Why
It is not just about women paying more than men. It is about women paying much more in cities than in villages.
-
AI Bias In Investing Cannot Be Eliminated, But It Can Be Governed
Framing is a particularly important example as identical financial information presented in terms of gains rather than losses can lead an LLM to reach a different assessment.
