Why This Tesla Analyst Sees Giga Texas Serving A 'Hearts And Lungs Of Future EV Production'

Tesla Inc. TSLA held the grand opening of its Giga Texas late Thursday, with the invite-only fest named Cyber Rodeo attended by about 15,000 people.

The Tesla Analyst: Wedbush analyst Daniel Ives maintained an Outperform rating and a $1,400 price target for Tesla shares.

The Tesla Thesis: Tesla's fifth Giga, situated in Travis County, Texas, will change the EV production game for the company in the U.S., analyst Ives said in a note. Austin will take over from Fremont as the main hub for Tesla's operations over the coming years, he added.

Tesla CEO Elon Musk put the number of people employed at the factory at about 10,000 and confirmed that Cybertruck production at the plant will begin in 2023, the analyst noted.

Cybertruck, along with the Semi, Model 3 and Model Y, will be "front and center" over the next 12 to 18 months, he added.

The Texas Giga, which came up with an estimated cost of $1 billion, is situated near the Austin airport in Texas, the analyst noted. The company targets to have an annual Model Y production capacity of about 500,000 units at the plant, he added.

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As Tesla faces the problem of demand outstripping supply, the Giga openings in Austin and Berlin will help tackle the bottlenecks of production for Tesla globally, the analyst said. The company, Ives noted, will likely have a production capacity of about 2 million units annually by the end of 2022. This is a 100% increase from the 1-million run-rate seen currently, he added.

China's "zero Covid" policy is causing shutdowns in Shanghai for Tesla and remains a worrying trend if it continues, the analyst said. With Austin and Berlin now live and ramping, the company will likely continue to "flex its distribution muscles in the EV landscape" even as other automakers struggle, he added.

"In a nutshell, last night was an important achievement for Tesla with Austin the 'hearts and lungs of future US EV production' along with Fremont the key one-two punch that casts a shadow over other EV players in this arms race," Ives said.

TSLA Price Action: Tesla shares were down 2.20% at $1,034.18 Friday at publication.

Related Link: Why Tesla Analysts Are Shrugging Off Q1 Deliveries Miss, Remain Bullish On The EV Stock

Photo: Courtesy Tesla Inc