Tesla Motors, Inc. Talks China: It Still Could Be One of Our Biggest Markets

By Markets Fool.com

One of the key areas of business for Tesla Motors investors to watch during the past year or so has been the company's launch into China. Before the electric-car maker entered the important market, Tesla believed the countrywould be a key catalyst for sales. But about a year later, the company reported that China was its only market with excess inventory--sales in the region were worse than expected.

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This has left investors wondering whether or not Tesla's potential in China is as great as management first thought it would be.

Fortunately, management has continued to provide some commentary on this key market -- even recently.

Tesla store and service center in Shanghai, launched in April 2015. Image source: Tesla Motors.

Encouraging signs
Ever since Tesla surprised investors in January when it said sales in China were "a lot weaker than expected" in Q4, investors have been looking for evidence that the road bump really was temporary, as CEO Elon Musk insisted it was.

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Several positive updates on the China market in recent months suggest the sales disappointment, indeed, may be a temporary blip.

During a press conference in March, when Tesla announced the company's latest major software update for the operating system in its vehicles, Musk said the company was seeing some "steady improvements in China."

In May, reiterating this storyline, Musk said during the company's first-quarter letter to shareholders that Tesla was seeing "encouraging signs of a return to growth in orders" in China.

China still could be one of Tesla's best markets
But does Tesla still believe in the China market the way it used to? More specifically, does management still believe China could become one of its biggest markets?

Apparently so. Buried in Tesla's first-quarter 10-Q, the company said, "Despite initial challenges in China ... we believe the country could be one of our largest markets within a few years."

Tesla's Model S is currently its only vehicle for sale. Image source: Tesla Motors.

Of course, these are just words. And Tesla has let investors down once already when it comes to its expectations for the China market. Still, it's likely there's more meat behind this recent projection. Not only does the forecast follow some tough lessons about the difficulty of ramping up sales of its electric vehicles in the market, but Tesla is also putting its money where its mouth is.

"Additionally, as part of our growth strategy, we will continue to expand our sales, maintenance, repair and Supercharger services internationally, particularly in China," Tesla noted in its first-quarter 10-Q.

Just over a year after Tesla's first deliveries in China, the company has already opened 60 Supercharger locations, five stores, and 10 service centers in the country.

Going forward, given the potential for China to become such a key market for Tesla, investors should keep a close eye on any commentary provided by management related to the company's progress in the country.

The article Tesla Motors, Inc. Talks China: It Still Could Be One of Our Biggest Markets originally appeared on Fool.com.

Daniel Sparks owns shares of Tesla Motors. The Motley Fool recommends and owns shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.