Goldman Sachs gives Tesla a "Neutral" rating as FSD faces fierce competition in China

According to the Zhitong Finance APP, Goldman Sachs has given Tesla (TSLA.US) a "Neutral" rating with a target price of $235. The firm believes that Tesla's ability to utilize its Full Self-Driving (FSD) software in the Chinese market is crucial for its future performance.

Goldman Sachs pointed out that China has become Tesla's largest automotive market globally. Over the past year, Tesla's new car sales in China have accounted for a significant share. This phenomenon is partly due to China's large automotive market size and high penetration rate of Battery Electric Vehicles (BEVs), which has exceeded 30%. Moreover, Tesla's market share in China remains relatively stable, maintaining a high single-digit percentage, whereas its BEV market share in the U.S. has dropped to about 45% as of the first quarter, and in Europe, it has fallen to low double digits.

In the Chinese market, Tesla's FSD faces numerous competitors, with many local rivals offering Advanced Driver Assistance Systems (ADAS) as standard on mainstream models. For example, Nio's NAD service and XPeng's XNGP pose competitive pressure on Tesla's FSD in terms of functionality and cost. Goldman Sachs believes that the level of Tesla's FSD technology and the extent of cost improvements relative to its competitors will have a critical impact on Tesla's long-term economics in the autonomous driving sector.

Analysis from the GS Data Works team and survey data from Morning Consult indicate that Tesla's consumer research scores in China are higher than those in North America and Europe. In terms of "Net Purchase Consideration" and "Net Sentiment" (the number of respondents who have seen or heard positive information about the brand in the past two weeks minus the number who have seen or heard negative information), China shows a more favorable performance.

However, with Tesla CEO Elon Musk re-engaging in company affairs in May 2025 and plans for new model launches, Goldman Sachs will be monitoring whether Tesla's consumer research scores in North America and Europe improve.

Goldman Sachs stated that the $235 target price is based on a 100 times price-to-earnings ratio estimate for the company's earnings per share from the fourth quarter of 2025 to the fourth quarter of 2028. In a pessimistic scenario, assuming a slowdown in sales growth and a lower-than-expected improvement in profit margins, the stock price could drop to about $150; in an optimistic scenario, if the non-GAAP earnings per share in 2027 apply a 100 times price-to-earnings ratio, the stock price could reach about $345