Tesla Hints at Further Expansion in Asia – What Might Come Next?

After its stock rose by an impressive amount over the past two years, Tesla remains one of the most popular publicly-listed companies in the world. Both retail and institutional traders are involved, mainly because the trend has shifted towards electric vehicles and Tesla has the widest expertise in the field.

As part of its plans to increase new car deliveries, the company opened more factories, including one in Texas and another in Germany. However, the media has been focusing lately on the expansion operations that are pending in Asia.

image via Pixabay

$188 million to upgrade the Shanghai factory

Based on a report from Global Times, Tesla will invest another $188 million in upgrading manufacturing facilities at the Shanghai Gigafactory. New funds will be deployed for optimizing production lines, a move that is expected to start in December and to be completed by April 2022.

The Shanghai plant is where the company produces the popular Model 3 and Y, as well as derivative car models, and with the latest inflow of capital, an increase in employees and an overall capacity optimization should be obtained.

In September alone, Tesla sold a record 56,000 cars in China, up 27% MoM, which shows that there is still domestic demand for EVs, despite the world facing an economic backlash due to the COVID-19 pandemic.

Positive expectations have also been one of the reasons why the TSLA stock has been such a big outperformer. Favorable conditions for online stock trading favored the car manufacturer, which is now the biggest name in its industry by market capitalization.

Rumors of another Tesla factory in Asia

For those who don’t already know, Tesla has an ambitious plan to soon be able to deliver 1 million electric vehicles per year. To achieve that, production capacity will need to be further enhanced, and Asia is one of the areas where there is high room for growth. However, the main spotlight has been on the Austin and Berlin factories.

More specifically, when Elon Musk was asked about expanding factories in Asia outside China on Twitter, his answer was: “Yeah, but first we need to finish Giga Berlin and a second US Giga to serve the eastern half of North America”.

Competition on the rise?

An accelerated expansion might also be supported by the growing competition faced by Tesla. Domestically, General Motors and Ford Motor Co. are the most prominent names, but surprises might come from Chinese manufacturers as well.

Li Auto Inc. and Nio already launched EVs that are growing in popularity. Combined with the fact that Tesla recently hiked prices on some of its vehicles, consumers might start to take a look at other alternatives.

The high valuation of the TSLA stock will need to be backed by solid fundamental data, which will further incentivize traders and investors to buy, in order to sustain itself. If that isn’t the case, it will be increasingly difficult for the stock to post the same outperformance.

Featured image credit: Photo by Neo Tan on Unsplash