Tesla Motors Inc. (Nasdaq: TSLA) announced this week that customers in China can start purchasing Model S sedans through Alibaba Group Holding Ltd.'s online-payment platform Alipay.
Tesla and Chief Executive Officer Elon Musk hand-delivered the country's first Model S sedans at a public event last week in Beijing. The Chinese government has announced that it wants 500,000 electric vehicles on the road by 2015 and 5 million by 2020. Tesla hopes to sell 35,000 Model S sedans globally this year.
Tesla is hoping the partnership with Alibaba will lead to increased sales in China, but right now, online payment isn't the biggest problem holding back electric-vehicle sales in the country.
China has a dearth of electric-vehicle charging stations, which is seen as a major hindrance to Tesla sales. The company is determined to fix the problem and is working to create a large "network" of charging stations similar to what the company has constructed in the United States.
"My instructions to the team are to spend money as fast as they can spend it without wasting it," Musk told reporters in Beijing last week. "In dollar terms I think over time we'll probably end up investing hundreds of millions of dollars in charging infrastructure in China."
The vehicles are also subject to huge import taxes and customs duties. The company plans to circumnavigate those costs by producing vehicles in the country within three to four years.
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For now, the Alibaba partnership should make purchasing a Tesla vehicle online easier for Chinese consumers. It also lends a familiar name to Tesla's brand, as Alibaba is China's largest e-commerce company.
For Alibaba, the partnership is just another name added to the company's network as it prepares for what may be the largest U.S. IPO since Facebook Inc.'s (Nasdaq: FB) $16 billion initial public offering in 2012.
China is expected to become a major revenue generator for Tesla, and its success in the country should have a major impact on the TSLA stock...
Tesla (Nasdaq: TSLA) Stock's Long-Term Value
TSLA shares have sold off a bit lately, down 17% since the beginning of March. That was after posting a 667% in the 14 months prior. While shares are down, Money Morning's Chief Investment Strategist Keith Fitz-Gerald sees huge long-term potential for TSLA.
"I think Elon Musk is one of the most dynamic CEOs on the planet, and I believe he has the potential to make Tesla a $1,000 stock within the decade," Fitz-Gerald said.
"Tesla will start producing cars in China within the next few years and that's going to become a real boost to the bottom line because it will help the company avoid a 25% import tariff that many competitors have to deal with at the moment," Fitz-Gerald said. "I'm also excited about what Musk is doing with battery production, charging stations, and, of course, his willingness to take on the established auto sales model."
Shares of TSLA currently trade just above $207 per share and are up 3% this week.
Do you invest in TSLA? What do you think of the company's future in China? Let us know on Twitter @moneymorning using #Tesla
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