Little mention was made of Tesla Motors' (NASDAQ:TSLA) important but struggling market of China when the company reported first-quarter results earlier this year. Will investors get a better idea of how well Tesla is doing in the world's largest auto market when the electric-car maker reports second-quarter earnings on Wednesday? For a better understanding of any potential new comments from Tesla management in its second-quarter letter to shareholders or during the conference call following the release, here's what Tesla has said about the China market.
What investors know
"While we still have work to do in China, we saw encouraging signs of a return to growth in orders there as well," Tesla said in its first-quarter letter to shareholders. This was the only mention of China during the report.
This update followed an overhyped initial entry into the country during the first half of the year, when scalper orders for Model S made demand for the car appear to be higher then it was. Drama intensified when Tesla's public-relations missteps in China inadvertently made charging Model S in the country seem to be more difficult than it really was at the time. The cumulative result was that China became the only market where Tesla actually had excess inventory.
Ever since Tesla CEO Elon Musk noted the company's excess inventory in China, the underlying storyline the company has offered regarding China has been simply that Tesla is slowly gaining traction in the market.
To make long-distance travel in China feasible and to help spur demand, the company has been rapidly growing its charging network in the region. There are now over 60 Supercharger locations in China and eight in Hong Kong. This is in addition to hundreds of Tesla's Destination Charger locations.
When Tesla reports its second-quarter results, investors will be looking for the company to comment on whether the market is continuing to grow. Perhaps more important, investors will want to know if management is growing confident in the market's near-term potential for China to start representing a meaningful portion of sales.
Does Tesla need China yet?
Interestingly, when Tesla shared its guidance for 55,000 vehicle deliveries in 2015 (up 74% from the year-ago quarter), management said sales growth in China wouldn't be necessary for achieving this ambitious target.
"Even if our sales in China were zero this year, I'm still confident we could do the 55,000 cars," Musk said during the company's fourth-quarter earnings call last year.
When Tesla reports second-quarter results, will Musk maintain his confidence about achieving its aggressive sales target in 2015, even if China sales haven't started to ramp up meaningfully?
Tesla will release its second-quarter results after market close on Wednesday, Aug. 5. The letter to shareholders will be available on Tesla's investor-relations page. And investors can tune in to the company's live second-quarter conference call at 5:30 p.m. ET.