Chinese regulators' recent cybersecurity probe into ride-hailing company Didi could have implications for electric vehicle maker Tesla , Morgan Stanley said. As regulators in China crack down on data protection, the bank said the growing scrutiny could affect how foreign companies operating there store data needed for autonomous driving. "The regulations around autonomous driving in China should get stricter over time and may present some increasing challenges to foreign automakers in the years ahead," Morgan Stanley's Adam Jonas said in a note released Tuesday. Tesla's shares declined by about 1.8% on Wednesday. China is a key market for the electric vehicle maker. Chinese sales made up about 29% of Tesla's revenue in the first quarter of 2021, according to the company's latest quarterly report . That's after Tesla's sales in China doubled in 2020 to comprise about a fifth of the company's total revenue that year. However, Tesla's brand reputation has faced challenges in the country. Most recently in June, China's vehicle safety authority announced a voluntary recall via software update of about 285,000 Tesla vehicles due to reported issues with driver-assistance systems. Despite growing pressure in China, Morgan Stanley maintains a bullish view on Tesla. The firm reiterated its overweight rating on the stock and a price target of $900, implying upside of more than 36% from the stock's Tuesday close. Jonas said he is optimistic on Tesla's "ability to expand its production and commercial footprint outside of China." The analyst also said the company's business in the country could be a separate "Tesla China" legal entity in the long term.
Tesla's Model Y compact crossover vehicles at a showroom in Shanghai, China, on January 18, 2021.
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