Goldman Sachs analyst Mark Delaney has maintained a Neutral rating on Tesla Inc, with a price forecast of $235. Delaney’s comments centered around Tesla’s ability to leverage its Full Self Driving (FSD) software in China, a crucial market for the company’s future growth.
The Importance of China
China is the world’s largest car market and has become the biggest market for Tesla’s new vehicle sales over the last year. The country’s high BEV penetration rates and large market size have contributed to Tesla’s success. However, changes in market share have also played a role, with Tesla’s trailing twelve-month share in the U.S. BEV market falling to about 45% and its share in Europe falling to the low double-digit range. In contrast, Tesla’s BEV share in China has remained stable in the high single-digit range.
FSD in China
Tesla has been working to launch supervised FSD in China, with minimal local-specific data required. The company has leveraged its more generalized software, which has been refined domestically. While FSD in China has performed relatively well, some reviews have cited a lack of understanding of local traffic rules and sporadic use of wrong lanes. This could be due to the more limited data available for the Chinese market.
Competition and Regulation
Tesla’s FSD offering is one of several ADAS options available to consumers in China, with many local competitors offering this as a standard feature. The level of technology and cost improvement that Tesla can achieve with FSD will be key to its longer-term economics related to autonomy. Additionally, China is looking to regulate the testing, deployment, and marketing of smart driving features, which could impact Tesla’s plans.
Robotaxi Services
Tesla hopes to offer robotaxi services widely over time, starting in Texas in June 2025. The company’s cost of goods sold per vehicle globally was about $35.5K in the first quarter of 2025, and its Hardware 4 equipped vehicles have all the hardware needed for L4. However, if Tesla eventually starts a robotaxi operation in China, it will face a different competitive landscape with several autonomous vehicles having attractive costs.
Projections and Price Action
Delaney projected fiscal 2025 revenue of $93.17 billion and EPS of $1.20. TSLA stock closed lower by 1.75% to $275.35 on Tuesday.
Key Takeaways
- Tesla’s fate is tied to China’s adoption of Full Self-Driving technology
- China is the world’s largest car market and a crucial market for Tesla’s growth
- Tesla’s FSD offering faces competition from local competitors in China
- Regulation of smart driving features in China could impact Tesla’s plans
- Tesla hopes to offer robotaxi services widely over time, starting in Texas in June 2025.