Asia Tea Time - Cup 51 ☕

This week I talk Tesla setting up shop in India, ignoring the market’s data points and the buyout of a homegrown Singapore brand.

Macro in Asia

Tesla reportedly looking at India sites for EV production plant

Tesla will send a team this month to India to begin scouting locations for a potential production centre.

According to the report in the FT, the electric vehicle plant will cost an estimated US$2-3 billion.

Why it’s happening

• Tesla’s growth is starting to slow in its main markets of the US and China as more companies realise that making EVs in the world’s two largest economies can actually be pretty profitable.

• Like other manufacturers, the EV pioneers wants to expand its current Gigafactories – in California, Texas, Berlin, and Shanghai where its cars are made – to deal with expected increased demand.

Why it matters

• Tesla’s a massive company. Last year it raked in nearly US$100 billion in revenue so where it decides to set up shop and manufacture is a big deal. 

• India is holding a general election this year in which current Prime Minister Narendra Modi is expected to win another term. A public commitment to India from Tesla would be a big win.

What’s next?

• Watch for any announcement this year and of what size. While any India plant has been slated to produce up to 500,000 vehicles per year, Tesla’s Shanghai Gigafactory managed to produce just shy of 1 million vehicles in 2023.

Tim’s Take 

It’s about the India story right now for investors and companies alike. Tesla has apparently told Indian officials that it’s considering producing smaller-sized, cheaper cars at any India plant.

However, that could be exactly that – a consideration – as news leaked recently that Tesla won’t be focusing on producing a cheaper so-called “Model 2” that is priced under US$30,000.

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Regardless, a Tesla plant in India would be a huge win for the Modi government. In fact, this news of a potential India production site has come hot on the heels of a tariff cut by the India government last month.

That relates to tariffs being cut on higher-priced imported EVs for companies that committed to producing them in India within three years. Enter Tesla. 

According to reports, Musk had been pushing for that tariff cut as a condition for producing cars in the country.

Now that it’s happened, any Tesla production in the country could see cars being sold domestically in India – the world’s third largest market for new auto sales – as well as for export to Southeast Asia, the Middle East, Africa, and parts of Europe. 

Expanding beyond just four global Gigafactories for production and adding a second Asia site would be good business. It would also add to another plant in Mexico that is due to come online for Tesla in 2026. 

While it’d be useful diversification for Tesla, perhaps the bigger win would be for the Modi government in India as it looks to attract big brand names to manufacture in the country. In that sense, they don’t come much bigger than Tesla.

Tim’s money tip of the week

Investing is hard enough as it is. But when we have thousands of news stories and pundits in our faces telling us different things, it can be overwhelming.

That’s why, generally, long-term investing is best done in a vacuum. Unfortunately, we don’t live in one so the next best thing is to try to drone out the “noise” that markets produce.

A lot of these live in data points – like inflation numbers, payroll reports, consumer confidence – that a lot of market pundits rely on to make educated guesses about where the stock market is going to go next.

The truth is that no one knows for certain (otherwise we’d all be millionaires). But either way, if you’re investing with a time horizon that is longer than a few months then you’re playing a different game to traders anyway.

Many out there will be trading on news and that adds to markets functioning in a healthy manner. Yet it has no real impact on your long-term returns as an investor.

That’s because staying invested in the market always proves out to be a winning formula. You can take a look at the data.

From 1926 to 2019, BlackRock found that if you had stayed invested in the US stock market for just one month, the odds of you making money were 62%. 

However, if you stretched that out to five years, the odds went up to 89% and if you went even further and stayed invested for 15 years, you had a 99.8% chance of making money.

The takeaway? Stay invested and try to filter out the data points and noise as best as possible.

Story of the week

Singapore-based traditional Chinese medicine firm Eu Yan Sang is set to be bought by Japan’s Mitsui and Rohto Pharmaceutical in a deal that values the firm at S$800 million.

With 170 retail outlets and 30 clinics in Singapore, Malaysia, and Hong Kong, most of us will be familiar with the company’s ingredients for traditional Chinese soups – many of which are used to treat ailments or for recovery purposes like post-natal “confinement” periods.

Eu Yan Sang is over 140 years old and its enduring appeal is evidence that traditional Chinese medicine and herbs can still attract bidders in today’s fast-moving world of Big Pharma.