Tesla China’s Model Y Standard Range rollout brings upside to suppliers: JP Morgan

By Joey Klender

Posted on July 9, 2021

Tesla’s recent rollout of the Model Y Standard Range variant in China is bringing on critiques of positivity from some investment firms, including JP Morgan, who believes the introduction of the new crossover configuration will lead to upside for not only the automaker but its suppliers as well.

On July 8th, Tesla China officially launched the Made in China Model Y Standard Range Rear Wheel-Drive variant. With a competitive price of ¥276,000, Tesla can expect drastic amounts of demand for the company’s (likely) most popular vehicle. The Model Y has seemed to overtake the Model 3 in terms of popularity in some regions, especially because of its pricing, cargo space, performance specifications. The Model Y SR’s anticipated range ratings, which currently sit at 326 miles (525 kilometers), only add additional hype for the highly-anticipated configuration of the crossover.

Tesla Model Y Standard Range lives on in China — and it’s priced to kill

Tesla already offered the Long Range Dual Motor and Performance variants of the Model Y in China, which were both competitively priced and among the country’s most purchased vehicles. The Model Y officially overtook the Model 3 in terms of sales in May 2021, eclipsing its sibling vehicle by over 3,500 units, according to Chinese Passenger Car Association (CPCA) figures.

Because of the introduction of this new and demand-heavy variant, JP Morgan analysts Rebecca Wen, Nick Lai, Anqui Hu, and Jiajie Shen wrote a note to investors, indicating the vehicle could lead to “upside to battery and parts supply chain.” The introduction of the new variant already has JP Morgan expecting a drastic increase in production volume.

The analysts wrote:

“With this competitive offering, we believe Tesla Shanghai’s production volume (domestic sales and exports) will continue to ramp from the current ~33k units/month toward potentially 40k-60k units/month by year-end.”

Tesla’s production volumes in Shanghai have been increasing steadily as the company expanded the plant. After Model Y production began, the company started exporting some units to Europe, where demand for Tesla’s vehicles continues to grow. The note also highlights the Model Y’s competitive nature in China, as it is only eclipsed by the HongGuang Mini EV, a vehicle that is highly affordable due to its lack of standard features and also is apart of a different vehicle segment.

As demand continues to increase, JP Morgan said in the note that Tesla’s suppliers are also sitting in a good position, as they will benefit from the new Model Y launch. “While we see a high chance of a technical pullback following the rally, we believe the supply chain may trade3 at higher levels by end-2021 as underlying fundamentals continue to beat our estimates, including top-line volume (potential pent-up demand in 2H21) and margins (given the scale and stabilizing material prices.) Tesla supply chain players that may meaningfully benefit from the new Model Y launch include Tuopu (OW) and CATL (OW) and materials suppliers such as Putailai (OW).”

JPMorgan on Tesla 👇🏻

“With this competitive offering (model Y LFP), we believe Tesla Shanghai’s production volume (domestic sales and exports) will continue to ramp from the current ~33k units/month toward potentially 40k-60k units/month by year-end.”$TSLA pic.twitter.com/5DOFTNs5Jd

— David Tayar (@davidtayar5) July 9, 2021