Tesla (NASDAQ:TSLA) investors have had little to shout about lately. Sales have slumped across multiple regions – especially in Europe – and Elon Musk’s ties to the Trump administration have only added to his divisive image. The result? A rough ride for Tesla’s stock, which has tumbled 27% year-to-date.
So, any hint of good news is a welcome change. According to Bloomberg, Tesla is gearing up to introduce driver-assistance features akin to Full Self-Driving (FSD) in China via an over-the-air update in the coming days.
But before investors get too excited, Guggenheim analyst Ronald Jewsikow is throwing some cold water on the optimism.
“We wrote about this topic last April, where we highlighted skepticism around the ability to price for FSD in China and potential challenges with developing a robust regional build given high compute and data export controls,” Jewsikow said. “The more things change, the more they stay the same.”
And competition in China isn’t making things any easier. Recent moves by BYD and Li Auto show that NOA (navigation on autopilot) features are quickly becoming standard, while the ability to charge for advanced driver assistance system (ADAS) features is fading – nearing 0 RMB.
That’s not to say launching FSD in China won’t be beneficial for Tesla’s business. Jewsikow thinks it could help boost sales as consumers seek out these features and also contribute to future-proofing the product. “That said,” Jewsikow goes on to add, “we believe TSLA is competing with one hand tied behind its back in China with respect to FSD.”
That’s because the strong data training advantages Tesla enjoys in the U.S. are not applicable to China. Musk has noted that FSD training in China relies in part on open-source online images and videos rather than proprietary vehicle data. While this approach has been sufficient to train the system so far, Tesla remains at a disadvantage compared to local Chinese rivals, who are not subject to the same restrictions on vehicle data usage.
Still, there could be some benefits here. “While we are skeptical of TSLA’s ability to price for FSD on an ongoing basis, there are more than 2mn TSLA vehicles in China and even with very low FSD attach rate historically, the deferred revenue recognition potential could be an item to monitor in 1Q,” the analyst summed up.
That, however, is not enough to alter Jewsikow’s bearish stance. The analyst rates Tesla shares as a Sell, with a $175 price target – suggesting a hefty 40% downside from current levels. (To watch Jewsikow’s track record, click here)
Meanwhile, Wall Street’s average price target stands at $351.38, suggesting a potential 20% upside over the next year. As for the consensus rating, a mix of 13 Buys, 12 Holds, and 10 Sells results in a Hold. (See TSLA stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.