1 Key Reason Why Tesla Motors Traded Near an All-Time High Today

Shares of Tesla Motors (NASDAQ: TSLA  ) opened the week on a high note, as the stock zoomed to $196 in early trading on Monday. Today, the stock moved above $199 per share in the final hour of trading, edging closer to its 52-week high of $202.20, before dropping back to $196. Shares of the electric-vehicle maker even crossed the $200 mark in early trading on Tuesday.

Let's look at what's pushing Tesla higher this week, and whether investors should be worried about a pullback.

Setting new records
Tesla has come a long way since 2011 when it was the most shorted stock on the Nasdaq. Last year, shares of Tesla quadrupled in value. The company carried that momentum into the new year, with the stock gaining more than 30% so far in 2014. Tesla has China to thank for this week's move, after the Asian country's finance ministry declared higher than anticipated subsidies for electric cars purchased in the nation.

Over the weekend, China said it would trim EV subsidies by just 5% this year and 10% in 2015, according to CNN. That is much less of a reduction than previously expected. Moreover, China offered electric-car buyers a subsidy of between 35,000 yuan and 60,000 yuan per vehicle last year, which translates into roughly $5,780-$9,900, CNN reported.

This news is particularly important because China is a key growth market for Tesla. The EV maker officially began deliveries of its Tesla Model S car in the nation this quarter, and it plans to expand operations in the Chinese market in the quarters ahead. 

Source: Tesla Motors.

Unlike other luxury automakers selling cars in China, Tesla said it would not mark up the price of its vehicles for sale in the Asian market.

Tesla plans to sell its 85-kilowatt-battery Model S in China for roughly 734,000 yuan. That converts to about U.S. $121,370, which includes what Tesla will pay in Chinese taxes, duties, and transportation costs. Tesla CEO Elon Musk said the company will eventually build a factory in China to help meet production demands.

Zipping ahead
Between Tesla's honest pricing strategy and better than expected subsidies in the world's largest auto market, the company's opportunity in China appears brighter than ever. Looking ahead, Musk says Tesla could end up selling more cars in China than it does in the United States. If he's correct, this could just be the beginning of a massive rally in Tesla's stock. Nevertheless, investors will gain more insight into what the future holds when Tesla reports earnings on Monday, Feb. 17.

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Read/Post Comments (7) | Recommend This Article (3)

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  • Report this Comment On February 11, 2014, at 5:15 PM, countrarian wrote:

    A lot of mention of the China subsidies; but little about the fact that Tesla (as an import) does not qualify for them. What is being reported as a positive may wind up actually being a negative since it will give Tesla's competitors a head start in the economy market.

  • Report this Comment On February 11, 2014, at 6:25 PM, TMFSocialME wrote:


    Thanks for pointing that out about the incentives. Tesla is hopeful that once deliveries are underway there the Chinese government will extend those incentives to the Model S as well. Nevertheless, it will be interesting to see how Tesla's sales in China go without the incentives.



  • Report this Comment On February 11, 2014, at 6:55 PM, EdwardInFlorida wrote:

    @countrarian. You make a good point about the Chinese subsidies but keep in mind that it's not "set in stone". China's government may very well extend those subsidies to Tesla if anything to incentivize Musk to build a factory there. Second of all, the rapidly expanding upper, and high class in modern China is very discerning and are more apt to buy goods that represent high quality and prestige. To them it's not about buying the "cheapest". So I guess what I'm trying to say is that with or without subsidies, Tesla is bound to do really well over there (and everywhere), especially when the Gen III model is introduced in less than three years from now.

  • Report this Comment On February 11, 2014, at 9:35 PM, oTeslaManiax wrote:

    China has a huge air pollution problem. Their people are more aware of this issue than Americans. They will buy BEV if the BEV technology is equal or better than their ICE options. Look at the Californians in 2013. Tesla provides them that option and is attractively priced. They will buy even without incentives.

  • Report this Comment On February 11, 2014, at 10:19 PM, drax7 wrote:

    Tamara, you get tesla, I support your views .

  • Report this Comment On February 12, 2014, at 6:30 AM, Pietrocco wrote:


    As Contrarian said, it might be actually a negative for Tesla.

    But even if it eventually turned out to be a positive, your statement "this could just be the beginning of a massive rally in Tesla's stock" is... well, let`s call it "optimistic" although many other adjectives come to my mind.

    Tesla`s stock has already QUINTUPLED in one year!

    THAT was the "massive rally" (stratospheric, actually).

    You seem not to realize that the company is already worth 24 billion $ and is massively overvalued, not a candidate for a "massive rally" ahead.

    I used to expect articles of another calibre from TMF.

  • Report this Comment On February 12, 2014, at 12:13 PM, MiserblOF wrote:

    Sad to hear about their building a factory in China. I guess even the most forward thinking capitalists still have a thirst for slave labor, sad to say.

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Tamara Rutter

I've been an analytical writer for The Motley Fool since 2011. I cover the sectors of Consumer Goods, Technology, and Industrials. Connect with me on Twitter using the handle, @TamaraRutter -- I'd love to hear from you!

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