Morgan Stanley visited China to do some channel checks on suppliers for the Tesla Gigafactory 3 in Shanghai in order to determine when they could start production.

They expect that Model 3 production at Gigafactory 3 as soon as November.

In a note to clients today, analyst Adam Jonas revised the firm’s expectations for when Tesla can bring Gigafactory 3 online after Morgan Stanley’s Chinese auto team visited local suppliers.

Here are the key feedback points from their Chinese supplier visit:

  • The construction of SH tracks perfectly on schedule as to last week and aims to be ready by end of Sept.
  • SKD/CKD (Semi Knocked Down/Completely Knocked Down) production will kick start from November, but is expected to have rather limited impact on the 330k units of M3 forecast (globally) to suppliers this year.
  • TSLA is in talks with local battery maker Tianjin Lishen and also LG Chem for collaboration for fully localized models from 2H20.

The analyst wrote about their updated view of Tesla’s critical project:

“Our China team’s view of Tesla´s ability to ramp domestic production and to take commercial share in the domestic Chinese market is more bullish than the forecast implied within our earnings model. We have allowed for a greater level of execution risk in our assumptions, given the complexity of bringing an all new plant with all new workers and many new suppliers on line within the Chinese market.”

China is now the most important automotive market in the world and it is also true for electric vehicles.

Morgan Stanley’s team expects “Tesla will be the leading luxury EV player in China.”

They expect that Tesla will be able to produce 35,000 to 40,000 vehicles at Gigafactory in 2020 and ramp-up to 60,000 units for 2021.

Tesla CEO Elon Musk said that Tesla wants to produce 3,000 Model 3 vehicles per week at Gigafactory 3 in Shanghai by the end of the year.

Morgan Stanley believes that they won’t achieve that until 2022:

“We expect China to account for less than 200k units of deliveries to Tesla annually by 2022.”

While they came out of their visit being more optimistic about Tesla’s Gigafactory 3 prospects, they don’t like Tesla’s long-term prospects in the country:

“While we anticipate significant pent-up demand for Tesla´s locally produced vehicles in the PRC, longer-term we expect the Chinese EV market to remain highly competitive and see Tesla´s China volume peaking at 254k units sold in 2024, before falling to the 160k to 170k range by 2030.”

Adam Jonas is ranked #693 out of 5,246 Analysts on TipRanks with a success rate of 51% and an average return of 8.7%. He has been maintaining an equal-weight rating on Tesla’s stock over the last year:

Electrek’s Take

It’s generally safe to bet that Elon’s production guidance is too optimistic. It sounds like Morgan Stanley also has more information than us through Chinese suppliers so I tend to believe them for the short-term.

However, I disagree about the long-term prospects.

China is such a large market and it’s going all-electric fast. Tesla is going to release less expensive vehicles in the market — resulting in greater volumes.

Between Model 3 and Model Y, I could see Tesla selling 400,000 vehicles per year in China alone by 2022.

What do you think? Let us know in the comment section below.


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