Thomson Reuters
- Tesla's roll out of full-self driving technology in China could earn it over $2 billion by 2030, Bank of America said.
- But rising competition in the country could prompt Tesla to offer the software for free.
- In any case, FSD should push up demand for Tesla vehicles, supporting the stock.
Tesla's success in getting China to approve its full self-driving technology could rev up the firm's earnings this decade, Bank of America said.
The electric vehicle maker could pocket in excess of $2 billion by 2030, assuming that its software is increasingly adopted by Tesla drivers in China, the bank wrote on Monday.
News of CEO Elon Musk's surprise trip to China this weekend has propelled Tesla's troubled stock as much as 16.6% since early Monday, as reports followed that Beijing would green light the self-driving technology.
Also announced was a partnership reached with Chinese firm Baidu, which will contribute navigation functions to Tesla's software.
Once the technology rolls out, Tesla could charge Chinese FSD users around $99 a month, based on its US pricing.
In the case that just a quarter of the 1.6 million Tesla drivers subscribe, this would amount to just half a billion in annual revenue, Bank of America said.
"But with a gross margin likely to exceed 70% the earnings benefit could be ~$350mm," the note said. "This number could increase meaningfully over time and, based on IHS projections for TSLA's China auto sales, could be $2.3bn in annual earnings by 2030 under the same assumptions."
Also possible is that FSD generates zero earnings if Tesla feels pressured to deploy the technology at no cost to the consumer. Rising competition in the country could spur Tesla to do this. That doesn't mean the company won't benefit, as allowing more vehicles to use FSD would accelerate the software's neural network training, the bank said.
At any rate, FSD is certain to spur Chinese demand for Tesla models, potentially reversing declining interest the company has seen in the market.
"Competition is increasing from domestic manufacturers and FSD will help TSLA catch up to, and potentially exceed, other EV offerings on the market. Combined with recent price cuts in China (by 14,000 yuan, or ~$1,930), this could spur volume growth," Bank of America said, though it noted that Chinese EV sales have slowed in the first quarter.
Aside from the China FSD deal, Tesla's stock will also benefit from the August Robotaxi event, a fresh product in 2025, and the possible licensing of FSD.
Bank of America maintains a $220 price target on Tesla, representing almost 20% upside from current levels.
Source : Business Insider
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