Elon Musk’s surprise visit to Beijing resulted in some good news for Tesla (NASDAQ:TSLA) investors. The Chinese auto association’s green light for the EV giant’s FSD (full self-driving) system marks a significant milestone, clearing the path for its deployment in the company’s vehicles on Chinese roads.
To gain Chinese FSD approval, Musk needed to address regulators’ fears around data security risks and so the company will work together with local tech giant Baidu for mapping and navigation functions.
Wedbush notable analyst Daniel Ives makes no bones as to the importance of this development. “Musk winning FSD approval in the key China market is a watershed moment for the Tesla story in our view,” the analyst said.
It also comes at a key moment for Tesla, given the company has been dealing with softening demand while competition in the Chinese EV market has been growing ever fiercer.
Musk has maintained a strong belief that attaining autonomous driving capabilities will result in significant financial gains for the company, a notion shared by Ives, who says that the “long term valuation story at Tesla hinges on FSD and autonomous,” but that Tesla making FSD available in China has been a “key missing piece in that puzzle.”
As required by the Beijing regulators, since 2021, all data collected by Tesla’s Chinese fleet has been stored in Shanghai. Should the company secure approval to transfer data collected in China overseas (previously, China hindered Tesla from sending data to the US for algorithm training purposes), it could be crucial in accelerating the training of its algorithms for autonomous technology on a global scale.
Ives also thinks Musk’s trip will go toward further solidifying Tesla’s presence in the Chinese EV market during a key period while the news shows how “close the FSD vision in China is to becoming a reality for Tesla.”
“While demand challenges exist in China for Tesla, the Street is looking through this painful transition period for the long term growth story to emerge for Musk & Co. with FSD a key ingredient in that recipe for success,” Ives summed up.
All told, Ives maintained an Outperform (i.e., Buy) rating on Tesla shares, backed by a $275 price target. The implication for investors? Upside of 50% from current levels. (To watch Ives’ track record, click here)
That’s the Wedbush view, but it differs from Wall Street’s general tone on Tesla at present. The stock claims a Hold consensus rating, based on 16 Holds, 7 Buys, and 9 Sell recommendations. Moreover, at $171.99, the average price target implies the shares have downside of 6% from current levels. (See Tesla stock forecast)
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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.
