automotive industry – Fountainheadinvesting

Tesla (TSLA) $193 up 14%

Good news for Tesla – Musk’s China visit seems to have paid off. The markets and the street love it and it’s great for those of you who had the patience to hold on to it.

One of the key reasons for the approval seems to be the collaboration with Baidu, plus China was very keen for a win. Nonetheless, this is good for the market. Two heavyweights Apple and Tesla are seeing support.

Read on from Barron’s today.

https://www.barrons.com/articles/tesla-stock-price-news-china-elon-musk-8476fa2e?mod=BRNS_ENG_NAS_EML_BULLETIN_AUTO_NAH

Tesla Stock Soars on FSD Approval in China.

3 Reasons the News Is a Big Deal.

According to Barrons “The win does a few things for Tesla. For starters, better driver-assistance products can mean more demand for Tesla vehicles in China. Second, it demonstrates the company can navigate complicated government regulations related to driver-assistance technology. And third, it shows that Tesla has increasing confidence in the quality of its self-driving car technology.”

“We expect this announcement to lead to a near-term uptick in FSD attach rates—which we currently model at about 10%—and improve the offering longer-term,” wrote Baird analyst Ben Kallo in a Monday report. Attach rates refer to how many people buying Tesla vehicles also buy FSD. “We also view this announcement as a potential pathway for Tesla to follow for entering new markets.”

“While the long-term valuation story at Tesla hinges on FSD and autonomous, a key missing piece in that puzzle is Tesla making FSD available in China which is now a done deal,” added Ives. “This is a key moment for Musk as well as Beijing at a time that Tesla has faced massive domestic EV competition in China along with softer demand.”

To help win Chinese approval for FSD, Musk needed to assuage regulators’ concerns about data security risks. To that end, he agreed to use navigation and mapping functions provided by Chinese firm Baidu BIDU 5.77%, the Journal said.

Baidu’s American depositary receipts, or ADRs, were up 4.1% in early trading at $104.65 apiece.

The situation is even worse than expected with only 57K vehicle production for 2024 – no growth, production cuts, workforce cuts, hardly breaking even at gross levels.

Here is the company’s outlook, which inspired no confidence.

“For 2024, we expect our total deliveries to be derived from our existing order bank as well as new orders generated during the year. Our full year targets rely on an improvement in order rate driven by our planned go-to-market strategies. The conversion of our existing order bank to sales can be impacted by several factors including delivery timing, location of order, monthly payments, and customer readiness. Our order bank has notably reduced over time as deliveries more than doubled in 2023 versus 2022, and we have incurred cancellations due to macro and customer factors.”

Conference call, filled with underwhelming guidance and management’s approach to addressing the current challenges, the business model was questioned – do they even need a new plant? The sheer magnitude of the projected shortfall and the apparent lack of more decisive action is also baffling.

There is a lot of risk in the current market environment, particularly given the required $5 billion investment in conjunction with the new Georgia plant to facilitate the production of Rivian’s mass-market R2 vehicles.