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Morgan Stanley analyst Adam Jonas questions whether investors appreciate the opportunity and the risks of China’s reliance on electric vehicle battery supplies.

According to Morgan Stanley, China accounts for more than 30% of Tesla’s revenue (NASDAQ: TSLA) and up to 50% or more of its profitability. Chinese chemicals and battery analyst Jack Lu says China supplies 50% of global battery shipments and 50-75% of global battery materials, including cathode, anode, separator and battery. electrolyte, making China a key player in advancing the cause of global road electrification. .

As globalization evolves, Jonas believes that “the race for global dominance of electric vehicle batteries goes hand in hand with geopolitics and national security.”

Pelosi landed in Taipei, the capital of Taiwan, on Tuesday. Pelosi’s trip makes her the highest-ranking US politician to visit the island in 25 years, and Chinese officials have called it “provocative”.

Contemporary Amperex Technology Co. Ltd. (CATL), the world’s largest maker of batteries for electric vehicles, is headquartered in Fujian, across the Taiwan Strait from the island. CATL considered sites in the United States for a plant. The multi-billion dollar North American plant would supply Tesla Inc. and Ford Motor Co.

CATL was in the advanced stages of site selection and was preparing to announce its selection in the coming weeks. However, according to Bloomberg, Nancy Pelosi’s trip to Taipei raised tensions to the point that CATL decided to push back the plant’s announcement until September or October. The report quotes people familiar with the process as saying CATL’s concern is that an announcement could stir up tensions at a sensitive time.

Neither CATL nor Tesla has released a public comment on the story.

While companies like CATL weigh their options based on geopolitical circumstances, investors may also need to consider those circumstances. Jonas thinks Tesla’s renewable energy infrastructure is currently undervalued and overlooked for what it is. Jonas believes that “events of the past 6 weeks and catalysts for the next 6 months will significantly alter the narrative of what Tesla does, the markets they serve, the growth profile and the global/strategic implications of the ecosystem on which they rest”.

By Michael Elkin

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