Tesla Motors Inc (TSLA) Might End up Investing More on Infrastructure in China Despite of High Model S Demand

Patrick Archambault, Goldman Sachs analyst, mentioned in one of his recent reports of over 4,000 Tesla Motors Inc (NASDAQ:TSLA)’s Model S reservations in China. Considering the fact that Tesla sells Model S for fifty percent higher price in China at $121,000, this has to be excellent NEWS for the company. However, Erin Gibbs, S&P Capital IQ Equity Research equity chief investment officer, thinks differently.

According to Gibbs, the high number of reservations for Model S in China might trigger a panic button in company’s management, as it will prompt the company to install as many as 400 charging stations within China to support its car sales. The company is likely to take up to six months in delivering the vehicles.

Gibbs added,

“This delay is really managing expectations that you don’t have too many cars with nowhere to charge them. There may be all this pent up demand but until we have infrastructure to support it, I’m a little hesitant about any of these valuations.”

One of the biggest challenges in front of Tesla Motors Inc (NASDAQ:TSLA) is to ensure a large charging network to support convenient long drives for its customers. In September 2014, China Unicom signed an agreement with electric vehicle manufacturer under which, Tesla would have the permission to install charging stations throughout the country. Initially, Tesla would install 400 charging station in 120 different cities targeting China Unicom locations. China Unicom would be responsible for the maintenance as well as availability of electricity for these charging stations.

In addition to it Tesla Motors Inc (NASDAQ:TSLA) and China Unicom would team up to install 20 supercharging stations with quicker charging facility than the rest of its establishments. For one thing that experts know for sure, network expansion is going to cost dearly to this automotive company.

This article has been written by Prakash Pandey.

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