- Tesla will behave like a Chinese tech stock for the next decade, according to Morgan Stanley.
- Up to half of the Elon Musk-run EV maker's profitability comes from China sales, the bank said.
- Tesla and Chinese tech stocks have both fallen sharply this year as recession fears intensify
Tesla rakes in so much of its profits from Chinese sales that it will behave like a tech stock listed on Hong Kong's Hang Seng or the Shanghai Composite index until at least 2030, according to Morgan Stanley.
The electric carmaker is likely to find itself closely tethered to the price movements of China's tech stocks because up to half of its profits come from that country, its analysts said in a Monday research note.
“We estimate Tesla generates as much as one-half of its profitability from the Chinese market, arguably making the stock a derivative of a Chinese tech stock,” the team led by equity analyst Adam Jonas said.
Tesla's reliance on sales to China makes it vulnerable to a rise in geopolitical tensions between Beijing and Washington, Morgan Stanley said.
Recently, Musk was praised by Chinese government officials for suggesting that Taiwan — a flashpoint in tensions with the US — should become a special administrative zone like Hong Kong.
Tesla will likely be reliant on its sales in China until at least 2030, the Morgan Stanley team said. That leaves it exposed, if the hostilities between the US and China intensify.
“The broader arc of Sino-US economic relations and the evolving geopolitical situation will continue to add volatility to Tesla shares,” the bank said.
“Our forecasts through 2030 become gradually less China-dependent, but this takes time.”
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