Tesla: China sales of Model S and Model X vehicles stopped due to tariffs
We’re maintaining our fair value estimate for Tesla stock.
Mentioned: Tesla Inc (TSLA)
Key Morningstar metrics for Tesla
- Fair Value Estimate: $250
- Morningstar Rating: ★★★
- Morningstar Economic Moat Rating: Narrow
- Morningstar Uncertainty Rating: Very High
In China, Tesla TSLA stopped selling the two vehicles made in the US due to the China tariff on US imports. Tesla shares were down 4% at the time of writing on the news and broader tariff-related selloff.
Why it matters: China is Tesla’s second-largest market behind the US. Tariffs on Tesla’s vehicles made in the US and exported to China will make Tesla’s vehicles prohibitively expensive to sell. If the tariffs remain in place, Tesla could see permanently lower sales of Model S and Model X vehicles.
- Lower deliveries also reduce Tesla’s total addressable market for its ancillary products and services, including autonomous vehicle software, charging, and insurance in select US states.
The bottom line: We maintain our $250 fair value estimate for narrow-moat Tesla. We view Tesla shares as fairly valued, with the stock trading slightly below our fair value estimate but in 3-star territory. We recommend investors wait for a larger margin of safety before considering an entry point.
- Tariffs on US exports to China make it prohibitively expensive for Tesla to export vehicles to China. However, we only see a small impact. We estimate less than 1% of total deliveries in 2024 came from Model S and Model X vehicles exported outside of the US to all countries, including China.
Big picture: We see little impact to Tesla from China’s tariffs on US imports. We also see less impact to Tesla’s automotive business from US tariffs versus other automakers as Tesla produces and assembles a larger portion of its vehicles in the US.
- We see a potential impact to Tesla’s energy generation and storage business from US tariffs. Tesla assembles its battery packs in the US, but the battery cells are generally imported from China and would be subject to tariffs.
- Tariffs will likely cause Tesla to raise prices to offset the higher costs. This could result in lower sales volumes as it could make other energy generation sources more cost-competitive versus Tesla’s battery storage products.
