Tesla Stock (NASDAQ:TSLA) has dropped by about 2% in early Tuesday trading. This follows information from China that the company’s sales in October took a hit by up to 70%. According to a Chinese official that shared this information with Reuters, Tesla only sold 211 cars in the Chinese market all through the month of October. Tesla has come out to deny these claims, though it did admit last month that it was facing challenges in the Chinese market. This is all due to the ongoing trade war between the U.S and China. According to the company, China was levying duty of up to 40% on its cars.
Short term challenges abound
In the short-term, Tesla could continue to experience challenges in the Chinese market. That’s because President Trump has threatened that there could be more tariffs on Chinese goods all the way into 2019. If China retaliates, then it could negatively impact on American businesses operating in China.
Long-term prospects looking good
While a tough market environment due to the trade war with China may impact on this company in the short-term, the long-term prospects of Tesla (TSLA) are looking good. Several factors favor this company in the long-run.
First, regulations are moving more in favor of electric cars. Due to the increased threat of climate change, regulators all across the world are tightening the rope on environmentally polluting cars. This is quite visible in the increased fines and penalties against major Car makers for breaking emissions regulations. As these regulations get stricter, for environmental reasons, electric car makers such as Tesla will continue to gain market share.
On top of that, society is becoming more aware of the impacts of climate change, and is moving more towards environmentally friendly options. Prove to this shift in sentiment is the decision by GM to lay off 14,000 workers, close plants, and discontinue some of its models. The company’s decision is in line with its strategy of moving towards electric cars. Actually, the company’s new mission is: Zero crashes, Zero emissions, Zero congestion. This change in strategy is in line with market changes, and an increased demand for smart electric cars, relative to the other cars models. Given that Tesla Inc (NASDAQ:TSLA) has an edge in this market, in terms of brand recognition, it stands a good chance to grow faster than the rest of the car industry.
Tesla is also making heavy investments that will see it gain dominance in the market. For instance, the company has invested heavily in a Gigafactory in Nevada. This Gigafactory is expected to beat its 2020 projections of battery production volumes this year this year, further cementing its leadership position in the market.
With all these factors at play, there is no doubt that Tesla Stock (TSLA) stands in a good position to grow in the long-run. As market conditions improve in its favor, the long-term value of Tesla Inc (NASDAQ:TSLA) in the market will rise too. It has good long-term prospects in the market.