A Tesla Model Y is seen in a production hall of the Tesla Gigafactory during the open day. In Grünheide, east of Berlin, the first vehicles are to roll off the production line from the end of 2021.
Patrick Pleul | picture alliance | Getty Images
A “major overhang” on Tesla’s stock has been removed after German authorities said the carmaker could start production at a new factory in Berlin, according to Wedbush analyst Dan Ives.
The conditional license for the vehicle and battery plants in Brandenburg was expected following months of delays. Tesla had intended to start production of vehicles by early summer of 2021, but the Covid pandemic, supply chain complications and clashes with environmentalists slowed its progress.
Ives, a well-known Tesla bull who expects the stock to rise, said in a note to investors Sunday that the Berlin “Gigafactory” is of the utmost importance to Tesla and its stock price. Tesla’s market cap soared to over $1 trillion for the first time last October, but has been falling gradually ever since and it now stands at less than $850 billion.
“The red tape and headaches seen around the delays/disputes opening up this flagship European factory has been frustrating for investors to watch unfold as many on the Street were doubting if Giga Berlin ever actually would open,” Ives wrote.
“We cannot stress the production importance of Giga Berlin to the overall success of Tesla’s footprint in Europe and globally, as the current Rubik’s Cube logistics of producing cars in China at Giga Shanghai and delivering to customers throughout Europe was not a sustainable trend,” he added.
Tesla sees the Berlin factory eventually producing up to 500,000 vehicles annually.
Ives said that the company’s Model Y is likely to be “front and center” at the factory over the next 12 to 18 months.
There are currently five to six month delays for Model Ys and certain Model 3s in different parts of the world, Ives said, noting how Tesla’s factories in Austin — and now Berlin — should help to alleviate these issues and solve production bottlenecks.
Wedbush believes that Tesla will increase its annual run rate from 1 million units in 2021 to 2 million in 2022.
Ives has a price target of $1,400 on Tesla’s stock, which is almost 70% higher than Friday’s closing price of $838.
— Additional reporting by Michael Wayland and Lora Kolodny.