Tesla: China Could Be Our Biggest Market

Tesla is already planning its aggressive expansion in China. Here are the latest details on the company's plans to surface.

Jan 25, 2014 at 12:01PM

Tesla (NASDAQ:TSLA) won't begin deliveries in China until about the end of March. But as the company's first China delivery approaches, more details on its plans in the world's largest auto market are surfacing -- and the plans are looking aggressive.

Model S China

Model S. Source: Tesla

Potential sales in China
While Tesla had originally said it planned to begin deliveries in either the first or second quarter of 2014, recent comments from Tesla CEO Elon Musk to Bloomberg suggest that the end of March may be locked in as the date for the first deliveries in the country.

But how will Tesla do in the country? Up until this point all we knew was that Tesla has already seen a "tremendous" response in the country. When Tesla vice president of corporate and business development Diarmuid O'Connel described the demand in China at the auto show in Detroit in early January, however, he didn't give any figures.

But Tesla vice president of China operations Veronica Wu, who worked in Apple's China unit from 2006 until joining Tesla in December, finally shared some sales estimates. Tesla is aiming for its China unit to contribute about a third of Tesla's total sales growth in 2014, Wu told Reuters in a recent interview. Based on her prediction that Tesla could approximately double sales in 2014, a third of estimated 2014 sales growth would equal about 7,400 vehicles -- more than the 6,900 Tesla sold globally in its fourth quarter.

Musk even told Bloomberg in a phone interview this week that its China sales have the potential to hit an annualized rate that exceeds U.S. volume by the end of next year. But that's "a big maybe," he warned. And whether the annualized sales in China exceed those in the U.S. also depends on how robust sales are in the U.S., of course.

Long-term plans
In Musk's interview with Bloomberg he stressed how crucial the Chinese market is to the company.

"I think it's really important. I think it could be as big as the U.S. market -- maybe bigger," he told Bloomberg. On the other hand, Musk showed some caution in his bullish outlook: "I don't want to get over excited about it."

Beyond Tesla's plans to expand to the country with deliveries, Tesla-branded retail stores and service centers, and a no-fee Supercharger network, Tesla is also considering China as a potential location for a production factory.

"Long-term there's no question we'll have a factory in China," He told Bloomberg. Going further, he admitted, "There is an argument for having that be our first major factory outside the U.S."

Given Tesla's very bullish valuation, any hints of aggressive expansion plans are good news for investors.

It's clear that Tesla believes much of its short-term growth could come from China, so investors should keep an eye on the company's plans and progress in the region. A great chance to really get an idea of what Tesla expects in the market will probably be when it announces full-year results and 2014 guidance at the beginning of February.

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Fool contributor Daniel Sparks owns shares of Tesla Motors. The Motley Fool recommends Tesla Motors. The Motley Fool owns shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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