Should Investors Be Wary of Tesla Amid China Military Ban? Analyst Weighs In

The Chinese government recently showed Jack Ma who’s boss. Does it now have another outspoken billionaire in its sights?

It appears the Chinese government has restricted the use of Tesla (TSLA) vehicles by some state and military personnel, with national security being cited as the reason for the limitations.

So, what has Elon Musk done now? Well, according to a security review, the Chinese reportedly found out Tesla’s sensors could record images of their surrounding locations. Following the revelations, Musk then reassured the government backed China Development Forum in Beijing, that data collected by its vehicles in China or other countries would never be handed over to the US government. Tesla would shut down everywhere, Musk went on to add, if the company’s cars were ever used to spy on a country.

“We believe this statement (while assumed) was important for Tesla and Musk to make directly to the Chinese and the government in Beijing given the strategic importance of its EV ambitions within China,” said Wedbush analyst Daniel Ives. “With a brewing Cold Tech War between the US and China, Tesla (as well as Apple, semis), remain caught in the crossfire and ultimately Musk needed to draw a clear line in the sand to assuage Beijing around this sensitive issue and make sure this stays a contained issue within China with no more negative ripple effects for Tesla.”

Ives has often referred to China as the “linchpin to the bull case thesis around Tesla,” and it is hard to understate the county’s importance to the leading EV maker. China is the world’s largest EV market, one in which Tesla has built its Gigafactory, giving it a “strategic advantage” over both domestic and foreign rivals. It has also helped put it on the road to “potentially hit a 300k run rate of demand in China by the second half of this year.” Ives thinks the fact Tesla has also been gaining domestic market share, means China’s move is hardly surprising, although it also “clearly indicates ‘big brother is watching’ the situation closely.” So will Ives, who regards the news, as a “contained situation for now.”

All in all, there’s no change to Ives’ rating which remains a Neutral (i.e. Hold). That said, the 5-star analyst’s price target is a bullish one, and at $950, suggests upside of 42% in the coming months. (To watch Ives’ track record, click here)

Most on the Street, however, beg to differ. The forecast is for shares to modestly slip by 5%, given the average price target currently stands at $636.76. Rating wise, other analysts are more in-line with Ives; Tesla has a Hold consensus rating, based on 13 Holds, 9 Buys and 7 Sells. (See Tesla stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.