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In a previous article, we had made a case for shorting TSLA stock via inverse short ETPs. However, it’s not all doom and gloom for the mercurial automobile manufacturer. The company has a new production facility coming up in the vicinity of the industrial heart of Europe: Germany.
Giga Berlin
Tesla Gigafactory Berlin-Brandenburg is currently under construction in Grünheide, 35 kilometres south-east of central Berlin on the Berlin–Wrocław railway. Announced by Tesla CEO Elon Musk in November 2019, the factory is planned to produce batteries, battery packs and powertrains for Tesla vehicles. The plant will also assemble the Tesla Model Y with an initial planned capacity of 100,000 vehicles, which will be ramped up to eventually to 500,000 vehicles per year.
According to a January 2020 publication by the local environmental agency, the factory is expected to begin operations in July 2021.
Tesla Sales in Europe
A total of 1.42 million battery-electric vehicles (BEV) and plug-in hybrid vehicles (PHEV) were sold in 2020, representing a 147% year-on-year increase. This sharp rise is attributed to increasing availability of BEVs and PHEVs as well as a regulatory push on manufacturers to increase sales of low-emission cars in order to avoid EU emissions fines. Both BEV and PHEV categories combined accounted for 12% of all cars sold across 23 European markets, including the European Union member states, the UK, Norway and Switzerland. Tesla currently imports its vehicles into Europe for sales and distribution. In 2019, Tesla sales rose dramatically relative to 2018 but it closed 2020 with marginally fewer cars sold relative to 2019.
[ninja_tables id=”23019″]Despite the sales being lower in number, it can be seen that Tesla’s share of the total car market in 2020 (not just in the EV category) is actually higher than in 2019. This is due to the fact that the global pandemic had an adverse effect on all vehicle sales that only began to ease off in the closing months of 2020. This can be evidenced by extremely strong vehicle sales in January 2020 followed by a very sharp fall in subsequent months.
[ninja_tables id=”23023″]This list of top destinations hasn’t changed significantly in 2020 either but the company faces stiff competition from two powerhouse manufacturers in the region: Renault and Volkswagen. Together, these two brands commanded nearly 45% of all EV sales in Europe in 2020 (relative to Tesla’s 20%).
In terms of top countries for Tesla vehicles, Norway, Netherlands and Germany had remained a steady fixture in the Top 3 of 10 across both 2018 and 2019.
[ninja_tables id=”23029″]This list of top destinations hasn’t changed significantly in 2020 either but the company faces stiff competition from two powerhouse manufacturers in the region: Renault and Volkswagen. Together, these two brands commanded nearly 45% of all EV sales in Europe in 2020 (relative to Tesla’s 20%).
[ninja_tables id=”23036″]The Renault Zoe overtook the Tesla Model 3 to become the top-selling BEV in Europe in 2020, with Volkswagen also looking to rapidly close the gap with its ID series as well as the Audi E-tron series. Volkswagen’s e-car plant in Zwickau went online in August 2020 and aims manufacture up to 330,000 vehicles per year covering six e-models from three Group brands by mid-2021. So, in terms of competition, Tesla is not going to have a cakewalk over its rivals in Europe.
However, if the strong interest seen in Tesla in January 2020 relative to the same month in 2019 is any indicator of public interest in its offering, then its brand equity is in relatively good shape. It is no great leap to state that establishing a production line in Europe will only help bolster sales further.
A Hypothesis for Tesla’s Stock Performance
The competitive landscape, on a macro level, bears some similarities with the case when Tesla entered the Chinese market: local brands are strong on the ground while Tesla has a certain “public charm” associated with its brand.
Satisfying sales demand by importing from the company’s Giga Shanghai might not be a strong alternative: it had already been reported that the Chinese-made vehicles are much heavier than the US-built models owing to their use of lithium ferrophosphate (LFP) batteries (a heavier weight would lower the vehicle’s effective range). So, any ramp-up in meeting sales demand would likely hinge upon Giga Berlin’s in-house battery/battery pack production capacity. In this regard, Tesla’s Berlin conundrum is similar to its Shanghai conundrum: importing vehicles from the US into China attracts massive import duties, thereby increasing the burden on Giga Shanghai to attain a high degree of self-sufficiency. By centering both battery and powertrain manufacturing in Giga Berlin, the company’s Europe operations is pre-emptively enabled to attain a high degree of self-sufficiency.
Interestingly, the month-on-month performance in Tesla’s stock price over January and February of 2020 has a fairly strong correlation with May and June of 2019 – about 5-6 months before Giga Shanghai went into full production mode.
So, if:
we can build the hypothetical stock performance trajectory thus:
Note: This is only a hypothesis on how the stock MIGHT perform. This is not meant to be a prediction of future performance.
One factor in Tesla’s advantage is its strong cash reserves available (especially when compared to 2019). Therefore, it can be assumed that the company will have no problems in aggressively pushing for sales once production begins in Giga Berlin.
Tesla holds a unique place in investor minds; “long” ETPs based on the stock traditionally exhibit very high weekly volumes in the figures reported by the London Stock Exchange. The high interest underlines the strong beliefs in the company’s ability to deliver value.
Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.
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Notice
If you are not classified as an institutional investor, you will be categorised as a private/retail investor. At this time, we cannot send communications directly to private/retail investors. You are welcome to view the contents of this website.
If you are an ‘Institutional investor’, you affirm either that you are a Per Se Professional Client, or that you wish to be treated as an Eligible Counterparty Client, both as defined under the Markets in Financial Instruments Directive, or an equivalent in a jurisdiction outside the European Economic Area.
Risk Warnings
The value of an investment in ETPs may go down as well as up and past performance is not a reliable indicator of future performance. Trading in ETPs may not be suitable for all types of investor as they carry a high degree of risk. You may lose all of your initial investment. Only speculate with money you can afford to lose. Changes in exchange rates may also cause your investment to go up or down in value. Tax laws may be subject to change. Please ensure that you fully understand the risks involved. If in any doubt, please seek independent financial advice. Investors should refer to the section entitled “Risk Factors” in the relevant prospectus for further details of these and other risks associated with an investment in the securities offered by the Issuer.
This website is provided for your general information only and does not constitute investment advice or an offer to sell or the solicitation of an offer to buy any investment.
Nothing on this website is advice on the merits of any product or investment, nothing constitutes investment, legal, tax or any other advice nor is it to be relied on in making an investment decision. Prospective investors should obtain independent investment advice and inform themselves as to applicable legal requirements, exchange control regulations and taxes in their jurisdiction.
This website complies with the regulatory requirements of the United Kingdom. There may be laws in your country of nationality or residence or in the country from which you access this website which restrict the extent to which the website may be made available to you.
United States Visitors
The information provided on this site is not directed to any United States person or any person in the United States, any state thereof, or any of its territories or possessions.
Persons accessing this website in the European Economic Area
Access to this site is restricted to Non-U.S. Persons outside the United States within the meaning of Regulation S under the U.S. Securities Act of 1933, as amended (the “Securities Act”). Each person accessing this site, by so doing, acknowledges that: (1) it is not a U.S. person (within the meaning of Regulation S under the Securities Act) and is located outside the U.S. (within the meaning of Regulation S under the Securities Act); and (2) any securities described herein (A) have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction and (B) may not be offered, sold, pledged or otherwise transferred except to persons outside the U.S. in accordance with Regulation S under the Securities Act pursuant to the terms of such securities. None of the funds on this website are registered under the United States Investment Advisers Act of 1940, as amended (the “Advisers Act”).
Exclusion of Liability
Certain documents made available on the website have been prepared and issued by persons other than Leverage Shares Management Company. This includes any Prospectus document. Leverage Shares Management Company is not responsible in any way for the content of any such document. Except in those cases, the information on the website has been given in good faith and every effort has been made to ensure its accuracy. Nevertheless, Leverage Shares Management Company shall not be responsible for loss occasioned as a result of reliance placed on any part of the website and it makes no guarantee as to the accuracy of any information or content on the website. The description of any ETP Security referred to in this website is a general one. The terms and conditions applicable to investors will be set out in the Prospectus, available on the website and should be read prior to making any investment.
Leverage Investment
Leverage Shares exchange-traded products (ETPs) provide leveraged exposure and are only suitable for experienced investors with knowledge of the risks and potential benefits of leveraged investment strategies.
Cookies
Leverage Shares Management Company may collect data about your computer, including, where available, your IP address, operating system and browser type, for system administration and other similar purposes (click here for more information). These are statistical data about users’ browsing actions and patterns, and they do not identify any individual user of the website. This is achieved by the use of cookies. A cookie is a small file of letters and numbers that is put on your computer if you agree to accept it. By clicking ‘I agree’ below, you are consenting to the use of cookies as described here. These cookies allow you to be distinguished from other users of the website, which helps Leverage Shares Company provide you with a better experience when you browse the website and also allows the website to be improved from time to time. Please note that you can adjust your browser settings to delete or block cookies, but you may not be able to access parts of our website without them.
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