We previously highlighted Memtech as a supplier of US$30 to US$40 worth of components per car to Tesla, for all of Tesla’s models. Later today, Tesla will unveil its mass market lineup, Model 3, which retails at US$35,000 – around half the price of the Model S sedan. We note that the company moved online preorders an hour earlier amid signs of heavy demand.

Tesla’s delivery target stands at around 80K – 90K for 2016, which would bring their cumulative figure to 187K – 197K cars. Its aggressive 2020 target of 500K cars annually depends on the success of Model 3 as a mainstream luxury sedan.

The company expects to start Model 3 production in late 2017, though its history of delays casts doubt on the projection. We continue to monitor Tesla as a potentially significant revenue source for Memtech for FY18 and onwards. Maintain HOLD rating with S$0.725 fair value estimate.

Source: OCBC Research - 2 Apr 2016