Source: Teslarati

China is one of the world’s biggest and fastest-growing economies, making it an attractive growth opportunity for the world’s biggest consumer brands. With a rising middle class, increasing discretionary income and an increasingly tech-savvy population, it’s no wonder American companies like Apple have taken off in the region.

Tesla Motors (NASDAQ: TSLA) began delivering its first units of the Model S in late Q1/early Q2 of 2014 to China. Tesla CEO Elon Musk personally delivered the first units to Chinese consumers at a widely publicized event in Beijing.

China has the potential to become one of Tesla’s biggest markets down the road, if not the biggest. Sales of luxury U.S. automotive brands have been growing rapidly in China and consumers have shown an affinity towards purchasing high-profile brands. For example, in 2013 China was GM’s biggest market. The company sold 3.2M units, up 11%+ from 2012.

The Tesla brand has been off to a red-hot start in China. The company’s Weibo page (the Chinese version of Twitter) has amassed well over 50,000 followers despite very limited marketing/sales in the region. This data seems to insinuate Chinese consumers are showing a particularly strong affinity towards the Silicon Valley automaker.

Prior to delivering even just one vehicle in the country, Tesla announced that it had enough pre-orders to double the entire amount of electric vehicles (EVs) in Hong Kong.

Yet another major catalyst for Tesla in the region is simply its ‘green’ proposition. China is notorious for having some of the world’s worst pollution, and the government has begun to make solving this pressing issue a priority.

Tesla has already begun to see the benefits of this new government stance. For instance, in Shanghai, license plate auctions can cost up to $15,000, making it exorbitantly expensive to purchase a new vehicle. The logic behind this fee is to stem the emerging pollution and traffic problem in the city.

Luckily, Tesla has recently been made exempt from this $15,000 fee, most likely because of its ‘zero-emission’ mantra. This could be a major catalyst to boost sales in the region as it gives Tesla a significant pricing edge over its competition without sacrificing any margins. Longer term this could be a good indicator of how accommodative government policies in China will boost Tesla’s adoption in the region going forward.

Tesla has also been making ambitious plans to rollout its Supercharger network in China. Traditionally the Supercharger has been a key selling point for the company, and significantly widens consumer interest in buying a Tesla.

The initial Superchargers in Greater China went live in late April, and Tesla has shown no signs of slowing down the expansion of its rapid charging infrastructure. In early June, the company opened its first Beijing Supercharger, in the same region of the city where Musk delivered the first Chinese Model S’.

As more Chinese customers receive their cars, and the Supercharger network expands in the region, awareness surrounding the Tesla brand will spread exponentially.

Going forward investors can look for several indicators for updates on Tesla’s progress in China. As always, quarterly letters and conference calls are a great resource, as well as any other press releases or blog posts.

Another one to keep an eye on is Tesla’s Weibo followers. Which would be a leading indicator of the brand’s presence in the region.

It’s probably still too early to extrapolate exactly how big of a market China could be for Tesla. That being said, initial signs have been overwhelmingly bullish and are likely to translate into commercial success for China in the region.

Without any official guidance from Tesla on sales or profits in the region, looking at leading indicators such as social media and updates in the Chinese press is probably the best way to stay informed. Official sales numbers for China are likely to come with Q2 results, when the company will have to include its first sales from the region in its financial reports.

 Galileo Russell has no positions in any company mentioned in this article.

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