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Activity In Shanghai Paints Bullish Picture For Tesla

Jun. 12, 2020 10:03 PM ETTesla, Inc. (TSLA) Stock326 Comments
Nick Cox profile picture
Nick Cox


  • Strong May numbers from China show demand rising despite COVID-19.
  • Shanghai production to be engine of production growth, with USA possibly adversely affected throughout the year.
  • Asian sales will still be supply constrained throughout year as Fremont struggles to meet fast growing demand worldwide.
  • Ability to ramp up wider range of product out of Shanghai is key to meeting 2020 sales targets.
  • Individual country data from Asia showing growth this year but really substantial volume looks more likely in 2021.

Tesla (NASDAQ:TSLA) has seen surging sales in Asia so far this year, despite the COVID-19 pandemic. The latest figures for China prove the point. After 5 months of the year, it is now possible to draw some conclusions for the year as a whole. These indicate Asia will be vital for the company to meet its sales unit targets for the year, but COVID-19 uncertainties persist. Asia figures will be even more central to the company's prospects in 2021. They should then see rapid growth as economies recover from the pandemic and as Shanghai production increases to meet demand.

My recent article detailed the strong start to the year in Asia. Since that article, much further progress has been made and new data reported. Much of the media attention has been focused on some startling successes for the Model 3 in individual European markets. The Model 3 is the best-selling plug-in EV in the USA and in Europe. Tesla is though likely to remain supply-constrained in Europe until the Berlin factory opens next year.

Tesla sold a stunning 367,000 cars worldwide in 2019, more than in the previous 2 years combined. Its target of 500,000 cars for 2020 pre-supposes a post-pandemic recovery and the company being able to ramp up supply to meet the demand. Asia will be key to both the supply and demand side of the equation. The continent's importance will increase still further in coming years as production increases rapidly in Shanghai.


The Model 3 continues to be the model that dominates the world of plug-in sales as the figures below illustrate:

Source: The Driven

Despite some claiming otherwise, the Model 3 continues to be the best-selling EV of any type in Europe:

Source: Inside EVs

Across the Tesla product range, its products continue to dominate plug-in

This article was written by

Nick Cox profile picture
Nick Cox is a long-time entrepreneur and investor,currently living in Singapore.He has lived and worked in the Asia-Pacifci region for many years.He is a graduate in modern history and economics from University College,London University. His investment strategy is centred around finding long-term growth companies in the region based on inspiring Management and businesses at the cutting edge of new growth areas. Asia is the leading driver of worldwide economic growth today and for the medium term.

Analyst’s Disclosure: I am/we are long TSLA BYDDF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (326)

Excellent article !

1. It´s most probable that the asian sales will be higher than expected as a % of units for tsla global in 2020 due to the covid issues,
(US and EU production and deliveries will be less than expected for CY2020 because they were shut down 3 months, and another 3 months of lower sales and global logistics issues is very likely).
2. but sales volumes/unit increase also because the new shanghai production will/can supply nearby asian markets with cheaper model 3s, so sales volumes can rise quickly.

Both 1. and 2. as You explained, very well.
So the total FY Tsla production and sales of 450.000 units/plus forecast is probably going to happen, with more of the mix being sold in the asian markets than foreseen.
As You said.

And the ASP is likely to be high due to new asian markets buying relatively high % of performance/awd versions, at first, with premium add-ons, at first.
As You said.

But the key thing is really batteries.
Everything else is just a life-support system for the batteries.

Tsla in 2019 made about 35 GWh in motive batteries, about 70-80% of all global advanced motive batteries by capacity.
By YE 2020 Tsla is likely to be producing at a rate of 70 GWh+, run-rate, in the last months.

These *current-production* batteries by YE 2020 are almost certain to use a better chemistry/packaging/production that will make them 20% cheaper + 20% longer-lasting by kWh/capacity and lifetime/longevity.
Vs actual incurred costs in levelised FY 2018 production/capacity/costs around 20Gwh.

It is somewhat expected/known that the newest Tslas are already using a new better battery, to some extent, today, 6/2020.
The new battery at 20% better gravimetric density and cost means the battery costs 20% less to make (marginal) and masses 20% less.

This means 3% better net margins for car sales, and better easier packaging and cooling, if volumetric density stays the same.
(20% cheaper battery @ 65kW that costs 14k$ avg ==> 3000$ net savings inc. pack, cooling, etc).

IF in fact the Tsla production margins have increased 3-5% net for the car,
-- and this seems likely,
where 3k$ savings in 45k$ marginal costs (cost of premium Model 3) is 6% cheaper,
Tsla is then set to dominate the global battery BEV market for a long time.
-- and this seems likely.

Better batteries cheaper, and more of them, is everything.
Tsla made about 70% of global production in 2019, 30-35 GWh,
maybe 50- 60GWh in 2020,
maybe 120 GWh in 2021.
Nick Cox profile picture
Thanks yours.
Yes,you are of course right,batteries are the key and Tesla leads the field here.The Battery Investor Day should give us further information on recent advances made in the technology.I think the decision to go ahead now with the Semi indicates meaningful battery breakthroughs as the Semi would use up huge numbers of cells, on which Tesla were supply-constrained last year.

Unconfirmed reports that the Model 3 in Shanghai is being sold at a 40% gross profit seem likely to be true.There are all sorts of cost savings manufacturing in Shanghai as opposed to shipping cars made with expensive U.S. labour half way around the world.
solucky profile picture
@Nick Cox

" Yes,you are of course right,batteries are the key and Tesla leads the field here. "

Not bad but also not leading....

Capacity lost after one year up to 5% ...Tesla is good but others are better


Can't imagine someone outside of China wanting a Chinese made premium car. In addition, Seeking Alpha published an article stating that Tesla can not repatriate the profits made in the Chinese plant. If that is indeed true, Tesla would be better off just giving the plant to the Chinese. We shall see if that is true. It is a major issue.
Shaduc profile picture
volvo, Buick SUV
Tesla has to pay off the chinese bank loans before it can repatriot cash.

If US companies can't bring back profits why would apple be there?

The mentioned seeking alpha article is just Montana Skeptic trying to build a mountain out of nothing.
Shaduc profile picture
"it can repatriot cash"

stimulating inflation
lol this joke about "supply-constrained market" is becoming compulsive
Nick Cox profile picture
Quite so,even the airlines and cruise liners are making the same poor excuse...
yanming_sv profile picture
"85 per cent of plug in buyers choosing cars from Tesla’s competitors".

How to read this number and sentence ??? !!!

Bulls: Yes ! TESLA is building GF-4, GF-4, and going to build GF-London, GF-Austin, ......

Shorts: More competitors coming and build more different models of EV, ......

Then, what cars consumers going to choose to buy ??? !!!

This analysis will determine what stock to buy and hold.
yanming_sv profile picture
For those comparing GM Toyota VW Ford with TESLA.

Don't overlook one key thing:
The dying ICE and the rising BEV.
yanming_sv profile picture
Never trust Morgon Stanry and Goldman Sochocs Up-Down-Grades.

These two firms have their own agenda to make profit for them selves.
In this Pandemic Troubled times TSLA is your "Safe Harbour". Today June 15 @ $ 985 - $998 , if you want to get secure & stagnant stock go F (fail ) or GM (Gooberment Mootors, those are going Nowhere Fast! 😂
I'm waiting to sell at $ 5000......bought my shared back $ 985.
Nice buy....You must be from Sherwood forest :)
mschratter profile picture
yanming_sv profile picture
Then, you may have to wait longer.
At least One year !
CentralScrutinizer profile picture
Thanks to the Bears loaded up on 1200 strike calls at the open....up 50% ...
I see. Now your Robinhood account balance is $150.
You all must agree that Tesla is just a stock price entity rather than a successful ptofitable EV manufacturer.
Nick Cox profile picture
Well,as regards profitable it's been profitable for the past three quarters, as regards successful it makes the world's best-selling EV amongst many other successes.
Tesla hasn't posted a single Annual profit number in last 8 years & with prices of some high selling models taken down, it looks still a distant dream.😊
BYD sold 11,325 plug in vehicles in China in month of May, higher than Tesla's 11,095.
Tesla's March China sales revised down to 10,160 from earlier said 12,709.
But looking at overall Auto sales in China in May, EVs, Plug ins sales continued to show drop for 11th straight month while total auto sales in China surged by 14.5% in May on YoY basis.
This clearly shows that Coronavirus pandemic has minimal impact on Consumers preffering EVs over conventional cars in China & that is a bad sign for Tesla.
kan2905 profile picture
Are you talking to yourself trying to convince yourself ?
Nick Cox profile picture
Figures very somewhat but I believe that figure of 11,095 refers only to Tesla Model 3.In addition Tesla sold about 550 Model S and X in May.
Excellent journalism in the LA Times about how Tesla has contributed to an explosion of Covid-19 Cases.

"Alameda County has the highest number of COVID-19 cases in Northern California; since Musk defied the county order May 11, cumulative cases have more than doubled, up 104% from 2,064 to 4,207 by Sunday."

@DarcyJendrik I as much anti Tesla and more specifically anti Elon as anyone on here, but are we sure some of these spikes aren't due to all the protests?
CentralScrutinizer profile picture
Is this a joke?
Nick Cox profile picture
I don't believe even our man in Trump Towers has accused Musk of murder before....
Tesla deliberately exposing its workers to coronavirus and causing Fremont to be the epicenter of the surge of Covid-19 cases in Alameda County is completely in character for the company.

Inside Tesla’s factory, a medical clinic designed to ignore injured workers |

Nick Cox profile picture
I thought I'd heard every possible conspiracy theory about arch-criminal Musk,the Moriarty of the 21st century, but that's a new one! Manslaughter or murder....
I didn't say anything about manslaughter or murder. I just mentioned the well-documented and uncontested facts that:

1) Tesla refused to follow county Covid-19 guidelines for closing its factory in a timely manner or for delaying reopening as per guidelines

2) Alameda County, where the Tesla factory operated against the orders of public health officials, had the highest % of Covid cases in California

3) The investigative journalists at reveal.org really did catch Tesla denying medical treatment to injured workers in an unethical attempt to improve its safety statistics.
Shaduc profile picture
@DarcyJendrik U are incorrect.

There are 5 S Calif. counties that have helluva lot more cases
RD Barris profile picture
Only a Tesla bull could write these two sentences right after each other and fail to see the contradiction:

"The April decline was caused by buyers awaiting the price cut for May. The Tesla bears who said the April figures showed a decline in demand for Tesla were quite wrong."
@RD Barris My thoughts exactly. They were just holding off until they could get a better price. It's not exploding demand, it's just backlog.
Exactly....The price drop was announced so people just waited until they could buy at the reduced price.
yanming_sv profile picture
RD Barris,

The brain uses language as media for thinking.

This is the root reason for Shorts losing money.
v.c profile picture
Toyota avg world wide marketshare is 10%, they are making money. Their market cap is 183B. Assuming TESLA marketshare will reach 10% they should have similar marketcap 173B.

I don't have any issue with posting Tesla sales growth but their marketcap doesn't make sense. TSLA debt is 138B and Toytoa less than 100B.

More over all the sales projects are under the assumption there won't be breakthrough in battery technology by any big players. Every good news for TESLA is priced in. TSLA thinks their share price is overpriced.
Baslim profile picture
Teslas liabilities is $26B of which only about $13B is debt. Did you mean $13.8B.

There is a transition from human driven ICE cars to AI driven BEV vehicles that will completely change the industry so comparing OEM market caps all must consider how that transition happens.

Tesla owns both the OEM and dealerships so if Tesla and Toyota both get to 10% of the market Tesla could be twice as valuable as Toyota if dealerships stay at 50% of the profit. If you expect Tesla to grow 50% for the next six years Toyota to not grow and Tesla makes twice as much per dollar of revenue as it has its own dealer network. If you have a 12% return on investment then the two companies should be worth the same today.

Hence Tesla is undervalued if it can grow 40-60% for many years and very overvalued if it can not.
mschratter profile picture
Nick Cox profile picture
Short term you may be right that the stock price is due some downside but long term it is Buy & Hold as far as I am concerned, but time will tell.
Toyota has made a lot of mis-steps in their EV ideas,especially on the hydrogen fuel cell project which seems to be going nowhere fast.They may well end up getting BYD Auto to make BEV's for them and brand them "Toyota" but I am not sure that is a great business model.
Tesla is stretching their meager China sales of 3,500 per month and the Tesla fan boys are still dreaming that other countries are super interested in buying a Chinese Tesla. (Which I do not believe is true.) The second wave of the virus is hitting China now and the plant is not safe from being shut down again. In addition, the profits may not be able to be repatriated back to the US even if they were doing well. (Reported in a Seeking Alpha article. Needs to be confirmed.) It appears that the China gamble is not paying off.
Baslim profile picture
Since when is 6,000 cars per month average this year and 10,000 last month, $3500 cars per month. Especially with a big back log of sales.
NiceWhileItLasted profile picture
@Lewis Bagwell

<< the profits may not be able to be repatriated back to the US even if they were doing well. (Reported in a Seeking Alpha article. Needs to be confirmed.) >>

You have alleged this particular lie to be factual dozens of times. Now all of a sudden it needs to be confirmed? What gives?
And BTW, it's "fanboi" not "fanboi."
The repatriation issue was published in a Seeking Alpha article.
mschratter profile picture
"Paints Bullish Picture For Tesla"

This company has never produced an annual profit but just managed to squeak out a quarterly profit of $16 million.

But please don't look at the fact that the company is valued at $175,000,000,000 and now has surpassed Toyota as the most valuable car company in the world. Please try to remember that Tesla has this incredible future ahead of it where every third or fourth car on the road will be one of theirs. And please try to forget the fact that every other car company on Earth, from VW, Ford, Toyota, to GM and Mercedez, you know, all those pesky insignificantly small companies that actually produce the annual 70 million cars we buy and drive, please try to forget the fact that within a year they will have truly entered the EV game.

Ford: a 116-year-old company, owns all or part of Landrover, Jaguar, Lincoln, Mazda, Volvo, Aston Martin, etc. Ford typically makes annual net profits in the billions.

Toyota: an 82-year-old company, was the largest car company in the world until Tesla recently surpassed it. LOL!  Owns all or part of Lexus, Scion, Daihatsu, and Hino Motors, with a stake in Fuji Industries (Subaru's parent company) and Isuzu. Toyota typically makes annual net profits in the tens of billions.

Volkswagen: an 83-year-old company that owns twelve brands from seven European countries: Audi, SEAT, ŠKODA, Bentley, Bugatti, Lamborghini, Porsche, Ducati, Volkswagen Commercial Vehicles, Scania, and MAN. VW usually makes annual profits in the tens of billions.

GM: a 111-year-old company, currently owns auto brands Buick, Cadillac, Chevrolet, GMC, Holden, and Wuling.  GM usually makes annual net profits in the billions.

Mercedes: a 94-year-old company that owns Maybach, Smart, and several heavy truck companies including Freightliner and Western Star. Mercedez usually makes annual profits in the billions.

"But you don't understand, it's a technology company and not a car company. You don't understand their business model."

I love it when children, that believe in magic, are allowed to invest. For it’s the backbone of every bubble worth shorting.

I am building up a sizable short position again...
Baslim profile picture
Except for VW every other car company is not taking the EV change over seriously. None of them have integrated electronics in their cars despite Tesla showing them it was necessary 8 years ago. No other OEM is claiming to do battery R&D and ramp up their BEV capacity at 75% per year. Show me an auto maker who has a plan to convert completely from ICE vehicles to BEV vehicles over the next 10 years or less and I would consider investing because if one can do it then they will survive with Tesla and are much cheaper.
For example GM expect 500K BEVs in 2025.

This is without level 5 autonomy that moves up the conversion of 90% BEVs to about 3 years after governmental approval.
NiceWhileItLasted profile picture

<< This is without level 5 autonomy that moves up the conversion of 90% BEVs to about 3 years after governmental approval. >>

Autonomy at any level has absolutely nothing to do with whether the car is powered by a battery or by gasoline. Nothing at all.
mschratter profile picture

I am not sure what you are talking about? All of the big car manufacturers are spending tremendous amounts of money on EV R&D.

General Motors to spend $20 billion through 2025 on new electric, autonomous vehicles:
(that's over just the next 4.5 years)


Ford plans $11 billion investment, 40 electrified vehicles by 2022
(that's only in the next 1.5 years)


VW Challenges Rivals With $66 Billion for Electric Car Era
(and that's only over the next 3.5 year)


Mercedes $23B

Global automakers will spend $225 billion on EV development between now and 2023, according to AlixPartners.
CentralScrutinizer profile picture
another great presentation of the FACTS by @Nick Cox
Nick Cox profile picture
Thanks yours.
One tries to be factual amongst all the animosity that Tesla arouses here.
FlagFootballSaint profile picture
Gross margin 39%
I assume OEMs shit their pants when they read that:

Bay Area Kid profile picture
Tesla calculates gross margin differently than the other automakers. Need to compare operating margins for a true comparison
It better be if they want to make the nut they owe CCCP for the factory they are borrowing.
Baslim profile picture
@Bay Area Kid assuming a pro rata share of R&D. It is still a 25% margin which if true should really scare other automakers as that R&D includes the ability to sell near 100% FSD on these same cars in the future.
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