Morgan Stanley: Tesla is going to need big China sales next year in order to make it – CNBC

What happened: Tesla’s recently announced $2.7 billion capital raise is a “bridge” solution, and the company needs to begin manufacturing and selling lower-cost vehicles in China, according to Morgan Stanley analyst Adam Jonas. However, he said that the electric vehicle (EV) maker’s increased dependency on China and robotaxis undermines its investment story. Morgan Stanley said it doesn’t expect significant deliveries of Tesla’s Model 3 until the first quarter of 2020.

Why it’s important: Jonas’ less-than-optimistic outlook comes after Tesla reported disappointing first quarter results and has attempted to boost slow deliveries in China. The company’s image took a hit last month following an incident in which one of its vehicles self-ignited while parked in Shanghai’s Xuhui District. Chinese luxury ride-hailing platform Shenma Zhuanche has also taken to social media to voice its grievances over the EV maker’s after-sales service and quality issues, saying that 20% of its 280 Teslas have had electromechanical faults. The US company is expected to begin production at its Shanghai plant later this year to provide lower-priced vehicles to the Chinese market.

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Chris Udemans

Christopher Udemans is a Shanghai-based data and graphics reporter. He covers Chinese artificial intelligence, mobility, and cybersecurity. You can contact him at chrisudemans [at] technode [dot] com.