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Tesla becomes critically dependent on Chinese market sales

Elon Musk
Elon Musk

Tesla Motors is so dependent on the Chinese market, it should be treated as a Chinese tech company, Morgan Stanley analysts said, as reported by Business Insider on Oct. 25.

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“We estimate Tesla generates as much as one-half of its profitability from the Chinese market, arguably making the stock a derivative of a Chinese tech stock,” the team led by equity analyst Adam Jonas said.

Accosting to the assessment, Tesla shares could start trading like any other tech stock traded on Chinese exchanges – Hang Seng and Shanghai Composite. This dependency could last until at least 2030.

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This comes as draconian COVID restrictions and deepening real estate crisis raise concerns about Beijing’s ability to meet its official 2022 goal of 5.5% economic growth: annualized Chinese GDP growth was only at 3.9% in Q3.

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The apparent economic slowdown was reflected in Hang Seng Tech index declining by almost 50% in 2022. Morgan Stanley suggested Tesla stock could soon begin to mirror this dynamic, following a 9% reduction in Model 3 and Model Y prices in China.

“Price cuts announced by Tesla China may affect already-weak market sentiment,” the report said.

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The deepening dependence of Tesla Motors on the Chinese market comes in the midst of rising Washington-Beijing tensions and escalating trade wars.

Tesla shares declined by 43% in 2022 – far outpacing the 21% fall of S&P500 index.

Read the original article on The New Voice of Ukraine