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Elon Musk visiting China is a sign Tesla is 'playing nice' with Beijing and its stock will outperform this year, Wedbush says

Tesla Elon Musk at China factory
Tesla Inc CEO Elon Musk poses with Tesla China-made Model 3 vehicle owners onstage during a delivery event at its Shanghai factory in China January 7, 2020.REUTERS/Aly Song
  • Elon Musk's trip to China shows Tesla is "playing nice" with Beijing amid US-China tensions, Wedbush said.

  • Musk's private jet landed in Beijing on Tuesday, marking his first trip to China in 3 years, Reuters reported.

  • Wedbush says these developments around Musk's China relationship could mean more upside for Tesla stock.

Elon Musk visiting China is a sign that Tesla is aiming to get in the good graces with Beijing — and it could be another event that propels its stock to outperform this year, Wedbush said.

Analysts pointed to Musk's trip to China amid rising US-China tensions, with the Tesla CEO's private jet landing in Beijing on Tuesday, Reuters originally reported.

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Musk's arrival marks his first visit to China in about 3 years, where he is expected meet with Chinese officials – possibly with Chinese premier Li Qiang, which sources told Reuters Musk has been trying to meet since March.

Musk is also expected to visit to Tesla's Shanghai factory, which will be essential, Wedbush added, as the plant is a major producer of vehicle units and is one of the company's "key advantages" as it faces competition from rivals like Nio and BYD.

"While the geopolitical tensions between the US and China are increasing, Tesla … finds itself in a tight wire act to balance its success and production within China which remains a vital market in both the supply and demand front," Wedbush said in a note on Tuesday. "Playing nice in the sandbox in Beijing is something the Street is laser focused on to make sure there are no disruptions to Tesla's expansions and tentacles within China."

Analysts predicted that Tesla stock would outperform this year, rising 11% from current levels to notch $215 a share by the end of 2023.

That comes amid Tesla's fight to stay competitive in the EV market under the current macro conditions. Already, the company has slashed prices on its models six times over the past year, and has also floated building another battery factory in Shanghai, which could potentially boost production while lowering costs.

It makes business in China an important factor for Tesla's success -- something it and other tech firms could be concerned about as tensions between the US and China potentially reach a breaking point. Chinese officials have expressed fury over US politicians' show of support for Taiwan and Congress's heated grilling of TikTok's CEO. Lawmakers are reportedly considering limit US investment in Chinese firms, with China suggesting that it could retaliate if its firms continue to face harsh treatment by the US.

Read the original article on Business Insider