Research on Tech Companies

Evelyn Zhang

Over decade experiences in  Morgan Stanley, Bank of America Merrill Lynch, Agricultural Bank of China, Lenovo. 
Expertise include research and investment into tech companies of all stages. 
Asset management, private equity, strategic investment, investment banking,  equity research, corporate finance; particular focus on emerging technology.

Consumption/ Electric Cars/ US-China/ Climate/ Hong Kong

Thematic (Sector/Industry)

China Automobiles / Thematic (Sector/Industry)

<p><a href="https://www.smartkarma.com/entities/tesla-motors-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors (TSLA US)</a>  has been making headlines in China lately, but not for reasons it would like to. The revenue pressure Tesla faces in the China market is causing the car maker a number of challenges in the short term, mainly component quality control and maintaining its premium brand positioning, however its strategy of focusing on software may allow Tesla to shift its profit center away from hardware, to its software platform. However, this strategic shift depends heavily on policy environment.</p><ul>
<li>Under Tesla’s agreement with the Shanghai government, to build the Gigafactory, Tesla is obligated to meet an annual tax revenue target of <strong>RMB 2.23bn ($360 mn)</strong> by end of 2023. To achieve this goal, Tesla needs to build and sell roughly 500k to 1mn vehicles in China, or 25%-30% of China EV market share.</li>
<li>Tesla has since adopted “price for volume” strategy to boost sales in China. Tesla has cut price 7 times in China and there is still 10-20% room for further cuts. New Model 2 will cost $25,000 only thanks to over 90% utilization rate of Chinese components manufactures.</li>
<li>Tesla does not have strict qualifications of non-core component suppliers and product quality, and gives suppliers high degree of autonomy. The gross margin of supply chain may suffer from the price cuts, but it may benefit future China EV manufactures.</li>
</ul>

Tesla Motors (TSLA US)  has been making headlines in China lately, but not for reasons it would like to. The revenue pressure Tesla faces in the China market is causing the car maker a number of challenges in the short term, mainly component quality control and maintaining its premium brand positioning, however its strategy of focusing on software may allow Tesla to shift its profit center away from hardware, to its software platform. However, this strategic shift depends heavily on policy environment.
Under Tesla’s agreement with the Shanghai government, to build the Gigafactory, Tesla is obligated to meet an annual tax revenue target of RMB 2.23bn ($360 mn) by end of 2023. To achieve this goal, Tesla needs to build and sell roughly 500k to 1mn vehicles in China, or 25%-30% of China EV market share.
Tesla has since adopted “price for volume” strategy to boost sales in China. Tesla has cut price 7 times in China and there is still 10-20% room for further cuts. New Model 2 will cost $25,000 only thanks to over 90% utilization rate of Chinese components manufactures.
Tesla does not have strict qualifications of non-core component suppliers and product quality, and gives suppliers high degree of autonomy. The gross margin of supply chain may suffer from the price cuts, but it may benefit future China EV manufactures.


Fast & Furious - Tesla’s China Bet