Tesla has announced plans to resume full-capacity production of EVs at its Shanghai Gigafactory as early as today. If it succeeds in getting production back up to full speed, it could be churning out nearly 950,000 vehicles per year in China, putting it back on track toward its goal of producing 1.5 million EVs per year. But probably not this year.
As Daiwa warns today in a note covered by The Fly, Tesla has already lost about 100,000 units of potential production in Shanghai as it sat on the curb and waited for Chinese COVID-containment regulations to lapse. Adding to Tesla's troubles, Daiwa believes production ramp-ups at Gigafactories in Texas and in Germany have been slower than planned, reducing total 2022 potential production by another 80,000 vehicles.
Result: In a year when Tesla aimed to produce 1.5 million EVs, it might succeed in building only 1.2 million.
And that's OK. On the one hand, Daiwa cites this expected production miss as the reason it's cutting its price target on Tesla by more than 30%, to $800 a share. Yes, this lower value on shares could complicate Elon Musk's plan to finance his acquisition of Twitter (as analysts at Bernstein commented today). And yes, rival Volkswagen could very well try to take advantage of Tesla's weakness at this point to accelerate its own EV plans and overtake it in sales by 2025.
But it's pretty irrelevant whether Tesla achieves 1.5 million EVs produced this year. In the grand scheme of things, that's a short-term and rather arbitrary milestone. What's important is whether the company succeeds in producing at the rate of 1.5 million cars per year after the lockdown ends. And not only does Daiwa think it will, but that analyst estimates the company will keep growing its production, probably hitting 1.8 million cars in 2023.
That's the goal you should focus on: What happens after the lockdown goes away, and Tesla's growth is able to rev higher unhindered. As long as it keeps doing that, this growth story remains intact.