Tesla (TSLA) may not have much of a future in the world’s largest electric vehicle market, if one analyst’s predictions pan out. Morgan Stanley’s (MS) Adam Jonas says that CEO Elon Musk’s high-tech automotive company will likely see sales in China plummet to zero by 2030.
“We have China sales peaking [in the] middle of the decade and then going down...and then eventually nothing after 2030,” Jonas told Yahoo Finance’s “On the Move” this week.
China has become an important market for Tesla, since Musk worked with the country’s government to build out the firm’s Shanghai Gigafactory. The country has the fastest growing EV market in the world, but saw sales dip last year as Beijing began to phase out government subsidies for alternative energy vehicles with the expectation of ending them in 2020.
Tesla, which doubled its sales in China in the first half of 2020, controls 21% of that country’s EV market, Nikkei Asia reported in August, citing Chinese research firm Ways. That was up from 6% the year prior. But it also comes as Chinese EV sales tumbled by roughly half, according to the report.
In March, the country extended those subsidies, and in April decided that the subsidies would run until 2022 in an effort to prop up sales of EVs and reach a self-imposed goal of alternative energy vehicles accounting for a fifth of all vehicles sales by 2025.
So why then does Jonas believe Tesla’s sales in China will fall off a cliff by 2030? It all has to do with the company’s hopes for autonomous vehicle systems and the impact of the ongoing trade war between the U.S. and China.
With data privacy and security between U.S. and Chinese tech companies top of mind, Jonas said, it’s unlikely the U.S. would allow a network of Chinese-made autonomous vehicles to drive around any major U.S. city in the future. Naturally, the flip side would also be true.
“Can you imagine a Chinese internet of cars autonomous network operating in the streets of Boston in 10 years? Of course not. Wake up. It's not happening,” he said.
“And so this idea that the Chinese aren't allowed to use AI network machine learning data privacy networks from the state, but it's okay for us to do [it] there, is just a fallacy in our opinion,” Jonas added.
While Jonas noted that Tesla might be able to own a stake in an EV Chinese entity, he said that there are still too many unknowns when it comes to how much Chinese and U.S. companies will be allowed to interface with each others’ countries in the future.
Tesla’s stock has been on a tear in 2020, with retail investors largely seen as a major catalyst for its rise from $93.81 at the start of the year to $448.16 as of the close of markets on Oct. 1.
Recently, the company hosted its annual Battery Day event, where Musk announced plans for a new vehicle with a starting price of $25,000 that will be available in three years, something he’s promised in the past. That would be a significant price drop from the current Model 3, which starts at $37,990 before incentives. The company also discussed plans to mine its own lithium.
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