Image: @JayinShanghai/Twitter

Wedbush reaffirmed Tesla's Overweight rating and raised its share price target to $225 from $200 following a recent survey of Chinese customers. Based on the results, the firm's analysts believe that Tesla's story of re-accelerating electric vehicle sales in China is only just beginning to gain momentum and should be a tailwind in Q1 2023.

In a note to clients, analysts wrote that the demand decline in China in Q4 2022 due to the lockdown and macroeconomic uncertainty was a limiting factor for Tesla. However, this trend has now begun to change, and in the domestic market, the company is registering a significant increase in demand, especially compared to local competitors.

“While China demand was a headwind for Tesla in 4Q with the lockdown and macro uncertainty, we are now seeing a noticeable turnaround for Chinese EV buyers favoring Tesla vs. domestic players (BYD, Nio, Xpeng). The price cuts have swayed 3 of every 4 EV buyers in China based on our survey work in China and Tesla's unmatched ability to scale its production operations in China are meaningful to margin stability which are front and center for the Street.”

Additionally, Wedbush commented on the recent changes regarding SUVs and crossovers in the Inflation Reduction Act of 2022 (IRA), which went into effect on Friday. In particular, the classification of electric SUVs up to $80,000 has been reclassified, allowing all Model Y versions to receive a $7,500 EV credit. In this regard, Tesla also made changes to the cost of cars in the US, making the entry-level Model 3 RWD cheaper by $500. Tesla Model Y got a little more expensive, with the Long Range AWD version now $1,500 more and the Performance version up $1,000. With the $55,000 cap no longer in place and demand resilient, Wedbush analysts believe investors could see a slight price hike in the coming months that would give Tesla more flexibility with the tax credit already in place.

© 2023, Eva Fox | Tesmanian. All rights reserved.

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Eva Fox holds zero shares of Tesla, Inc., and currently (at the time of this article's publishing) holds zero options or securities in Tesla Inc. and/or its affiliates.