Tesla Motors (TSLA)

Since Tesla (TSLA) released earnings last Wednesday, shares have taken a 12.07% hit. After reaching the $180 benchmark, the stock is now predicted by the self-learning algorithm to increase in value again, making this a good opportunity to get into TSLA.

The electric car manufacturer delivered decent earnings, however actual delivery numbers were below expectations of 6,457, yet still higher than guidance of 6,400. The company’s production numbers were also higher than guidance at 7,535, with revenues and earnings surpassing analyst expectations as well. Refuting the frequent bear argument that demand in North America is slowing, demand has actually grown 10%. Sales in China didn’t start until last month, so they were not included in the Q1 2014 results. Major variables affecting Tesla’s long-term value are contingent upon progress in China, Tesla’s response to state bans and the implementation of its Gigafactory.

Tesla In China

Tesla and the Model S have been prevalent in the Chinese media since its delivery of its first Model S in the country on April 22nd. Coverage has been favorable, except for some customer complaints for vehicle delivery not being timely. The city of Shanghai announced incentives for the car almost as soon as the car was made available. Shanghai is waiving the cost of license plates, a price tag that costs as much some cars do. Shanghai consumers can bypass the $15,000 license plate fee by purchasing a Model S, but they need to act now, as the exemption is only available for 3,000 vehicles per automaker Shanghai is one of four cities in China now imposing quotas limiting car purchases in order to curtail traffic and pollution.

While China is the worlds largest auto market, Tesla’s management does recognize the challenges of creating a charging infrastructure in cities where there are only one fifth as many millionaire families as in the states. Tesla expects to invest “hundreds of millions of dollars” building charging infrastructure in China. Tesla is competing with Daimler AG’s (DAIGn.DE) Mercedes Benz and BMW (BMWG.DE) for a share of China’s emerging green vehicle market, something the Chinese government wants to develop quickly. The company intends to cooperate with China’s two major power network operators, State Grid Corporation of China and China Southern Power Grid, in order to build an infrastructure that is sufficient for Tesla drivers. Tesla also will work with China United Network Communications Group Co., Ltd., which will provide communications solutions such as navigation, remote monitoring and other services.

While electric cars are making headway in Europe, with 52,729 electric vehicles sold on the continent in 2013, China, on the other hand, has catching up to do. In 2012, Chinese consumers purchased only 11,375 electric vehicles out of 19.3 million sold. However, having environmentally-friendly vehicles is important for the far-east nation and growth will catch up. As a part of its efforts to put 5 million alternative energy-powered vehicles on the country’s roads by 2020, Beijing is providing purchase subsidies for electric car buyers. CEO Elon Musk stated that a large part of support from the Chinese government to enable the company to more competitively price its cars would dictate whether the country could become Tesla’s biggest market share.

The Model S is available for 734,000 Yuan ($118,000) in China, which is much lower than expectations, but still 50% more expensive than in United States…

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