- Tesla’sChina factory could open sooner than expected, Morgan Stanley told clients Wednesday.
- The company has said if that happens, it could make 500,000 total vehicles this year.
- However, China’s auto market has been on the skids for nearly a year now, and reported its worst-ever monthly drop in sales in June.
- Visit Business Insider’s homepage for more stories.
Tesla could open its Chinese factory sooner than expected, Morgan Stanley analysts told clients on Wednesday.
“Our China team just returned from a visit of local Chinese suppliers with some fresh feedback on Tesla’s progress with its currently under-construction Gigafactory 3 in Shanghai,” the team said in a research note. “If they’re right, Tesla may be able to ramp China production faster than we have currently anticipated in our model.”
Tesla is currently targeting the early part of the fourth quarter, it said in its first quarter letter to shareholders. If that happens, the company said, “this year, we may be able to produce as many as 500,000 vehicles globally in 2019.”
Morgan Stanley, who remains an “equal weight” rating on the stock, said it’s not updating its expectations yet, but has noted the bullishness in its risk assumptions.
“Our China team’s view of Tesla’s ability to ramp domestic production and to take commercial share in the domestic Chinese market is more bullish than the forecast implied within our earnings model,” analyst Adam Jonas said in the note.
“We have allowed for a greater level of execution risk in our assumptions, given the complexity of bringing an all new plant with all new workers and many new suppliers on line within the Chinese market,” he continued.
Still, there are plenty of worries about China’s appetite for cars in general in the face of a slowing economy and automotive sales.
In June, China reported its worst-ever monthly vehicles sales drop, Reuters reported. The decline highlighted concerns about the country’s economic slowdown as the world’s largest car market saw demand fall for the eleventh consecutive month.
Still, there’s hope for Tesla to unlock pent up demand for Chinese buyers who may be waiting for cheaper model produced domestically, as opposed to the ones currently shipped from Tesla’s American factory in California.
“We expect Tesla will be the leading luxury EV player in China,” Morgan Stanley’s China team said.