A new tax law could boost demand for the Tesla Motors Inc (NASDAQ:TSLA), at least according to research from Rod Lache, an analyst from Deutsche Bank. The State Council of the People’s Republic of China has decided to waive a tax on electric vehicles and “New Energy Vehicles.” The attributable drop in price could boost demand from the country.
According to the report the change in tax could reduce the price of a Tesla Motors Inc (NASDAQ:TSLA) Model S by up to 10%. Such a substantial drop in cost could put the car in a price range more easily affordable by thousands of people and significantly increase the desire to purchase one of the vehicles in the East Asian giant.
China tax change could boost demand
According to Mr. Lache the change in tax policy is a “significant additional stimulus” to demand in China. The analyst says that demand is already “exceedingly strong” ion the country, and lists the company’s prospects on that side of the world among the significant positive factors pushing its stock price.
Lache said that he expects a major update on the Deutsche Bank opinion of the company to come in the next few months, though it is already clear that the analyst is bullish about the company’s future. Lache currently has a Hold rating on the company’s stock and has placed a twelve-month price target of $220 on the company’s stock.
On today’s market shares in the electric vehicle maker were trading at just below that level after falling more than 1% in today’s trading. The company appears to have suffered from a generally negative day on the markets as macro factors, including renewed worries about Europe’s strength, have depressed the stock market in New York.
Tesla looks to China for growth
Tesla Motors Inc (NASDAQ:TSLA) has had its share of problems in China but, to be fair, the company has had a legion of issues to deal with in the United States at the same time. The company’s trade mark has come under fire in the country as has its constrained supply. Despite those problems Tesla will need multiple markets to grow in, and China may be an ideal place for the company to germinate.
With its high number of high net worth people, its material display of status and its lack of a popular history with the automobile, China may be an easier place for a company like Tesla Motors Inc (NASDAQ:TSLA) to take hold. The company doesn’t have to face ideas about luxury cars being made by Germans or good cars being made by Americans.
Tesla Motors Inc (NASDAQ:TSLA), despite its trademark problems, may have an easier time establishing brand identity in China, and the drop in tax on its cars cannot help but add to the attractiveness of its luxury battery-powered sedan. Elon Musk’s company will need a wide base of demand in order to establish that brand for the release of its mass market vehicle, and the Model X, an all-electric SUV due next year.