Tesla Charges Into China

Stock hits record high on expansion news.
7:11 | 08/29/14

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Transcript for Tesla Charges Into China
I'm by the cannot -- Washington as the financial markets head into their final hour on Wall Street on this Friday August 29. This is story stock story today Tesla the electric motor company announcing a new deal in China. And now Tesla stock is at a record high. To explain no more now I'm joined by Rick Newman from Yahoo! finance Rick thanks for joining us. So what exactly is Tesla doing in China us. -- -- announce they're gonna team up with a Telecom operator there 22. Create a network of 400 charging stations and a few of those are going to be super charging stations. Where you can charge your car -- perhaps half a half hour or so -- -- full charge. And what this is doing it's just -- Tesla. -- already selling cars in China -- giving -- as -- little bit more traction there there are other electric carmakers in China. But this -- against has low and nudge ahead if you well and it just I just improves the outlook for Tesla sales in China. He's mention that there are the other electric carmakers in China is that -- really big draw it they're big market for something like that there. -- -- China course is. One of the fastest growing economies in the world. The great news about China if you're trying to sell stuff there is there they're middle class is just booming I mean these are people with disposable income. They've got money to spend. More and more people -- the giant Chinese middle class every year whereas in places such as United States and and Europe. You know and the middle class is stagnant and -- you know the Tesla is trying to sell to limited number of very wealthy people so. This the growth in China alone in the size of it make it a terrific market one other factor in China. They're big pollution problems there. They're burning a lot of -- -- mean of course in big cities like Shanghai. In Beijing I mean people walk around with masks sometimes you can barely even see a mile or so because of the pollution. So there's a big push by the government two to find ways to cut through the pollution one of those is electric vehicles so what may happen in China. Is that the government really gets behind electric vehicles a lot more so than here in the United States for instance. And that the you know it has already done that to some extent it could do that more and that would benefit everybody selling electric cars in China so terrible isn't a good position -- there. And -- -- partner in all this is actually a Telecom company that partnership makes cents. Yeah it makes sense because the Telecom company has a lot of retail outlets so what the Telecom company is providing is the land -- basically. I mean it's not that difficult to come up with a charging stations and in this is just electricity. As long as you can connect to the grid and -- Telecom company. Does have the locations to do that I think I'm sure Tesla -- look for a partner. That was located in the right places in other words a long road networks where. You know you might need to charge every couple hundred of miles instead of you know one here and then there wouldn't be another one until another thousand miles away or something like that assumption they look for partner. With the right locations I think they've probably found -- in -- going to be able to build this pretty good charging network there. Sir can you give us a sense of just how excited investors are about this -- and break down the two -- chart for us. Sharon I mean invent a chip -- has a lot of just die hard loyalists. Has -- fan boys you might say who just love this document this stock has been going into the stratosphere for about a year and a half. And there he'll see a nice -- from yesterday to today that's about a 2% jump. It was actually higher today it peaked at about 272 it's now down around. I think around 269. So to 72 as the highest the stock has ever been if it closes. Around 26097. -- that will be the highest close for Tesla stock. It's interesting to note -- is not even really profitable. So investors are bidding up this stock based on huge expectations for the future -- -- they're really betting that Tesla is going to be a game changing company the way it CEO Elon Musk claims it will be. I mean they're basically buying his story line even -- title is still a really tiny auto maker with the tiny percentage of market share. And as you -- their tests are not yet turning a profit how is it doing here in the US in general our sales increasing those charging stations -- -- expanding. Tells -- sales are doing well but you gotta keep in mind. I mean -- it has something like 110 of 1% market share here in the United States. The challenge for Tesla is that they have to. For they have to expand their market beyond. Wealthy people in urban cities who couldn't afford the seventy up to even a hundred -- -- out 1101000 dollars for what's basically a second car. You can't rely that much on a -- like to take to go for a long road trip yes some might be charging station. If you're gone from one place in California to another but if you're -- -- United States are just -- United States you're not gonna find charging stations so. -- -- to expand into the middle market. They know this they have plans to introduce less expensive vehicles. A lot depends on getting those charging stations up and convincing people that an electric vehicle for it it for all its trade offs. Is going to be better than at gas powered vehicle and gas powered cars are getting better and more efficient all the time we've also got other types of technologies. The might displace both of those things so this is that this is this is early in the game a lot of people are bay are gambling on Tesla because it's sort of the best bet right now. But other things could definitely come along and bump -- off the side. Tesla CEO Elon Musk says the test the sales in China will actually surpass the sales in the US in 2015 not far out. I from your perspective do you think that's like Cleary think that is perhaps the drum -- speech for -- -- I don't I think that's not quite possible you know that's because sales for as much attention as this company -- sales are still very low. And you know China is -- kind of market where. You know the growth in the luxury segment is booming. And we've got enough billionaires and millionaires in the United States -- you know self. -- thousand thousands of Tesla cars but the growth in that segment is really in China so sure. You know there's a huge entrepreneurial class in China would -- IPOs of companies that make people instant. Millionaires just like we have in Silicon Valley and other places here United States a gesture. China can easily sustain that level sales again what Iraq -- -- in the if it's gonna succeed at the I think valuations that investors are putting on the stock it needs to become more than a niche car company. And -- in order to do that it needs to have more models and it's in those are those are on the way but it's gonna take time and what the real question for -- is whether. It will succeed in getting into the mass market and expanding beyond the niche that it's in right now. A lot of drivers very eager to -- those lower price Tesla -- come out want to have when they do it right. Rick Newman from -- auto finance thanks so much for joining us to think so yeah. And even watching story stock stay with abcnews.com for your latest headlines I'm -- Connie in Washington.

This transcript has been automatically generated and may not be 100% accurate.

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