Source: Barron's
FSD is expected to land in China, which will benefit Tesla's technological upgrades and demand growth.
$Tesla (TSLA.US)$CEO Elon Musk's efforts to visit China on April 28 are paying off. According to foreign media reports, the Beijing government decided to introduce more FSD (fully autonomous driving) features into Tesla's Chinese cars. Tesla did not respond to Barron's request for comment.
A week earlier, some users asked when Musk FSD would enter China on the X platform. Musk replied, “It may be possible soon.” Another Tesla user app shows that Tesla China's official FSD service purchase page has changed from “coming soon” to “coming soon.”
Currently, Tesla provides the Chinese market with a range of driver assistance functions, such as adaptive cruise control, but does not include all the features of the FSD highest-level system.
“This is a 'big moment' for Tesla.” Wedbush (Wedbush) analyst Dan Ives (Dan Ives) wrote in the report.
On April 29, EST, Tesla's stock price peaked to 198.87 US dollars, and finally closed up 15.31% to 194.05 US dollars; the S&P 500 index and the NASDAQ index rose 0.32% and 0.35% respectively on the same day.
Over the past five days, Tesla's stock price has risen by 36.61%. This is the best five days since August 2020. At that time, Tesla rose 37.3% during the closing time of the US stock market on August 18. However, in the years before the outbreak of the epidemic, Tesla's rise in this trend dates back to 2013.
FSD is expected to land in China, which means three major benefits for Tesla:
First, Tesla is able to comply with Chinese government regulations relating to driver assistance technology. Foreign media reported that Tesla will use navigation and maps provided by Baidu (BIDU). Also, according to a person familiar with the matter, the Chinese edition of “Barron's”, Tesla and Baidu Maps collaborated for “exclusive” and in-depth customization. On April 29th EST, Baidu's stock price rose 5.62%.
On the day Musk arrived in China, the China Association of Automobile Manufacturers and the National Computer Network Emergency Technical Handling Coordination Center issued the “Notice Concerning the Inspection Status of 4 Safety Requirements for Automobile Data Processing (First Batch)”. The models produced by Tesla (Shanghai) Co., Ltd. met the compliance requirements, making it the only foreign-funded car company that complied with the compliance requirements.
Second, Tesla's confidence in its autonomous driving technology is growing. Musk believes that achieving autonomous driving would be a huge windfall for the company; analysts also based Tesla's long-term valuation on FSD and autonomous driving. Achieving this goal, however, is not an easy task — the driverless challenge began 20 years ago.
Ives said that one of the key parts that FSD currently lacks is FSD data for the Chinese market. Autonomous driving is a watershed moment for both Musk and the Chinese market.
In the long run, upgrading the FSD function may increase Tesla's demand in the Chinese market. Since this year, the slowdown in automobile growth has become a core challenge facing Tesla — in the first quarter, the company's car deliveries fell 8.5% year over year to 387,000 units. In the Chinese market, Tesla's delivery volume in the first quarter was 132,400, down 3.6% year on year.
Since the beginning of the year, Tesla's stock price has fallen by about 22%, while the Nasdaq index has risen by about 6% — this is on top of a 14% rebound in stock prices after Musk announced last week that it would accelerate production of low-cost models (Model 2). With the introduction of more FSD features, Tesla is expected to gain more consumers in the fiercely competitive Chinese market, which in turn will receive strong valuation support.
“FSD is Tesla's potential route to new markets.” Baird analyst Ben Kallo (Ben Kallo) wrote that in the near future, the FSD addition rate will increase (the FSD addition rate of the current model is about 10%) and improve the company's long-term car supply. The additional rate refers to the number of people who bought Tesla cars and also bought FSDs.
Ives and Carlo both rated Tesla stock as a “buy,” with target prices of $275 and $280, respectively.
However, there are also analysts who disagree. Philips Securities analyst Jonathan Woo (Jonathan Woo) downgraded Tesla's stock rating from “holding” to “selling.” The target price was lowered from $175 to $145 per share, citing slowing growth and pressure on profit margins.
Katie Stockton (Katie Stockton), founder of Fairlead Strategies, which focuses on technical analysis, believes that Tesla's increase on April 29 was higher than the 50-day moving average, and the next resistance level is close to $200. Stockton mainly predicts company stock movements based on stock charts rather than fundamentals to understand what will happen in the short term.
Among analysts covered by FactSet, about 43% currently rate Tesla stock as “buy,” up from 41% a day ago; the share of S&P 500 constituent stocks receiving a “buy” rating is about 55%.
edit/lambor