China: Tesla's Saving Grace
It’s no secret that Elon Musk could be in serious trouble.
No, I’m not talking about the fact that his company won’t be profitable anytime soon.
You should be well aware of that fact by now, especially given the few Tesla critics who have dared question the future of the $53 billion electric auto giant.
One Gigafactory in Nevada won’t be enough to dig him out of trouble.
A second Gigafactory in Buffalo that will take on his solar roof promises won’t, either.
At this pace, Bitcoin will hit $25K by the time he follows through on that one.
Adding a third, fourth, fifth, and sixth Gigafactory… okay, maybe he’s getting a little closer.
Thing is, we already know where these will be built.
So let’s not sugarcoat one very sobering thought: Musk’s future success hinges on China.
You may have not fully read through Tesla’s latest SEC filing.
Maybe you skimmed the headlines like the rest of the market, started to ask a few questions about whether or not Tesla will still be burning mountains of cash next year (spoiler alert: it will), then became distracted by the one-man show revealing how the company will turn the trucking industry on its heels.
If you weren’t distracted, then the upcoming Roadster model probably did the trick.
However, if you did happen to dig through Tesla’s report, something should’ve immediately jumped out at you.
It certainly did for me...
Tesla’s sales from China tripled in 2016 to more than $1 billion.
In fact, it accounted for over 15% of the company’s total revenue.
If you listened closely to Tesla’s conference call, Musk made it clear that the path forward will be paved on China’s roads.
In fact, he’s planning on boosting his manufacturing capacity there.
But is that really surprising?
China is the largest market for electric cars, with 336,000 new EVs registered in 2016.
But it wouldn’t be a real Musk announcement without a few promises thrown in the mix.
This time he’s said production in China would begin in 2020.
There’s just one slight problem with all of this... one that presents an enormous obstacle for the magical Musk to overcome.
And you can beat him to it...
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Buy It… Before Musk Makes His Final Move
Most investors have absolutely no idea about the kind of disruption the EV could potentially have going forward.
Not a day goes by that we don’t see some rosy headline calling for the end of the traditional auto market.
But he won’t break the auto market...
He’ll break the lithium market first.
He even said it himself, too.
Last year, he boasted that for Tesla to reach its production target for the Gigafactory-1, it would absorb the entire world’s current production of lithium.
That might not be such a crisis if Tesla were the only game in town, or if the “Big 3” didn’t utterly control the world’s lithium supply.
Unfortunately for those of you crossing your fingers that Elon Musk will follow through on his promises and turn Tesla profitable, he’s not the only one with an eye on cornering the EV market.
Ever wonder why companies like Tesla are failing to secure the kind of long-term contracts that will be vital to their success?
EV magnates like Warren Buffett (via BYD) and Elon Musk are about to be taken to the cleaners.
But you might be surprised by who’s really going to come out on top of the lithium revolution.
Here’s a hint: It won’t be the Big 3.
It’ll be a group of small lithium stocks that nobody saw coming...
Until next time,
A true insider in the energy markets, Keith is one of few financial reporters to have visited the Alberta oil sands. His research has helped thousands of investors capitalize from the rapidly changing face of energy. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital as well as Investment Director of Angel Publishing's Energy Investor. For years, Keith has been providing in-depth coverage of the Bakken, the Haynesville Shale, and the Marcellus natural gas formations — all ahead of the mainstream media. For more on Keith, go to his editor's page.
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