Has the Tesla Bubble Popped?

Momentum stocks have been absolutely hammered in 2016. Many overvalued companies are being brought down to more conservative valuations and Tesla (TSLA) is no exception to this trend. Shares of the EV market are down almost 40% YTD and it looks like the bubble has finally burst. That being said, investors with an appetite for risk can consider scooping up Tesla on the pullback as the stock can move higher due to the momentum in China.

World’s largest Electric Car Market

China is Tesla’s newest chief market where third quarter Model S orders surged considerably from second quarter mainly due to the opening of two new retail locations.
Tesla faced many problems in China, but now it seems that the company’s China strategy is headed in the right direction.

At present, Tesla has a very small market share in China of about 5 percent, but as the government in China rolls out programs that support electric vehicles usage in order to overcome pollution problems, sales of Tesla’s cars should continue increasing massively. Despite the fact that market is conquered by the local players, Tesla still has the potential to make headway into the Chinese market.

One of the gigantic challenges that Tesla faced in its expansion in China was the lack of enough charging stations and that its technology is not compatible with Chinese-government originated charging network. To overcome this problem, Tesla is working on adjusting its vehicles to make it compatible with the government’s criteria and also seems to be mounting its super charger network in the market at a quick rate.

This growing trend indicates the robust result for the upcoming quarter driven by the expansion in China. Government policies supporting electric vehicles in the region are finally working to the benefit of Tesla and this may help the company make headway into the market. Although local companies act as a barrier for Tesla in the region, it can be said that if it gets it strategy right, China could be a massive growth driver for the Tesla Motors.


Tesla’s future growth relies strongly on China. As of now, the signs look positive for the company in the market. However, I think investors should wait and keep a close eye on Tesla’s progress in China before deciding to buy the stock. Tesla may have fallen considerably this year, but is still overvalued and is only a stock for risk-loving investors.
Published on Feb 10, 2016
By Akshansh Gandhi

Copyrighted 2020. Content published with author's permission.

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