On Wednesday, Tesla Motors, Inc. (TSLA - Analyst Report) announced on a Chinese website that it has started the reservation of Model S in China. Earlier this month, the company had revealed its plans to open a showroom in Beijing.
Tesla’s closest international competitor in China – the world’s largest automobile market, is General Motors Company’s (GM - Analyst Report) plug-in hybrid Chevrolet Volt. Electronic cars are not very popular in China.
However, the previous electric cars targeted the masses, while Tesla’s car targets the wealthy consumers in China, who seek the latest products and technology available in the market. Moreover, the car is expected to be popular among the environmentally conscious consumers.
Model S is already popular in Hong Kong with more than 300 reservations, despite the fact that Tesla has not even fixed the price of the car in the region. In fact, the figure surpasses the demand for Model S in the company’s established markets like U.S., Australia and Japan.
The popularity of Model S in Hong Kong increases optimism about the acceptance of the car in mainland China as well. However, shortage of charging stations in the country could discourage people from buying the car.
Moreover, the high tariffs on imported cars in China could raise the price significantly. Model S is currently manufactured in California and Netherlands.
Tesla can overcome this problem by opening a manufacturing facility in the country. The automaker has plans of opening a plant in Asia. Tesla is also planning to make the rear seats of Model S more comfortable as the wealthy Chinese section prefers chauffer-driven cars.
Tesla expects Model S sales to cross 40,000 by 2014, assuming the demand in Asia and Europe meet expectations. The car was launched in the U.S. in 2013 and is also available in Europe.
Tesla currently carries a Zacks Rank #3 (Hold). Other major automobile stocks worth considering are Nissan Motor Co. Ltd. (NSANY) and Volkswagen AG (VLKAY). Both these stocks carry a Zacks Rank #1 (Strong Buy).