Tesla Motors, Inc.'s Overlooked Opportunity

By Fool.com

In the near term, all eyes will be on Tesla's production ramp-up of its Model X SUV and the development of its lower-cost Model 3, which is slated for a 2017 launch. But for buy-and-hold investors concerned with more than the near-term outlook, there is one key catalyst gaining steam: Tesla's China business.

Tesla Store. Image source: Tesla Motors.

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An unimpressive start When Tesla first entered the China market in 2014, it was overoptimistic about its prospects there. After management underestimated the volume of reservations made by scalpers, as well as some public relations missteps related to how the company described the charging experience to potential customers, the key auto market ended up being the first region where the electric-car maker had excess inventory.

Tesla CEO Elon Musk admitted in January 2015 that sales in China had been "a lot weaker than expected." The company's poor start in China was a far cry from the prediction -- made by its former vice president of China operations, Veronica Wu -- that the market would account for a third of the company's sales growth .

Since this slower-than-expected start, Tesla's China market has received little attention in the media. But, meanwhile, Tesla has been quietly making formidable investments, growing sales, and increasing orders in the country.

Tesla's China ramp Here's a timeline of updates on Tesla's China market since the topic fell out of the limelight:

Q4 2014 shareholder letter, Feb. 11, 2015:

Q1 2015 shareholder letter, May 6, 2015:

Q2 2015 shareholder letter, Aug. 5, 2015:

Q3 2015 shareholder letter, Nov. 3, 2015:

Tesla charging network in China. Dark gray icons indicate Destination Chargers. Red icons indicate Superchargers. Image source: Tesla Motors.

Not only have sales and orders been growing in China, but Tesla management remains confident about the market's potential over the long haul. The company said in its most recent 10-Q filing that despite the "initial challenges in China... we believe that China could be one of our largest markets within a few years."

Given how significant Tesla's ramp-up is in the crucial market, investors should keep a close eye on its expansion in China going forward.

The article Tesla Motors, Inc.'s Overlooked Opportunity originally appeared on Fool.com.

Daniel Sparks owns shares of Tesla Motors. The Motley Fool owns shares of and recommends 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.

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