China has started to restrict the use of Tesla Inc (NASDAQ:TSLA) electric vehicles by state and military personnel citing national security concerns, according to reports out of China on Friday.
A review by the Chinese government reportedly found that Tesla's sensors could record an image of their surrounding locations raising fears over the use of vehicles in sensitive military sites.
Analysts at broker Wedbush said that given that Tesla's market share within China is increasing and EV demand is skyrocketing within this key region this move is not a complete surprise.
“Tesla's massive giga footprint remains a major strategic advantage versus other EV players (domestic and foreign) as we believe Tesla has potential to be on a 300,000 run rate of demand in China by the second half of this year," analysts at the US broker said.
“We will be watching this situation closely as China remains the linchpin to the bull case thesis around Tesla for the coming years with this latest news a 'contained situation' in our opinion for now.”
Wedbush has a US$950 share price target and neutral rating.