China is a vital cog in Tesla Inc's (NASDAQ:TSLA) wheels, and Wedbush analyst issued a valuation Thursday for what Chinese EV market is worth for the company.

The Tesla Analyst: Daniel Ives maintained a Neutral rating on Tesla shares with a $1,250 price target — and a bull-case target of $2,000. 

Tesla's China Thesis: Tesla has seen a robust snapback if demand for its Model 3 vehicles in China in June, Ives said, citing industry reports from China. (See his track record here.)

This resurgence is a linchpin of the Tesla bull thesis going forward, the analyst said.

Tesla sold about 15,000 Model 3 vehicles in China in June on top of the 11,000 units sold in May, suggesting demand in the key market is beginning to ramp after the weakness triggered by macroeconomic softness and the coronavirus pandemic, he said. 

Ives estimates the China growth to be worth at least $400 per share in a bull case scenario to Tesla, as EV penetration is set to ramp significantly over the next 12 to 18 months, along with major battery innovations coming out of Giga 3.

"In a nutshell the success in China out of the gates is a major achievement for Tesla and if this trajectory continues will be a "game changer" for its EV penetration story over the next decade."  

Tesla's Million-Mile Battery: Wedbush is of the view that technology innovation around Gigafactories and Fremont remain the key ingredients in Tesla's success on the battery front.

The company is close to announcing the million-mile battery at its upcoming Battery Day in September, Ives said. 

The battery technology will be very advanced, potentially last for decades, withstand all types of weather and terrain and be another "major milestone for the Tesla ecosystem and adds to the bull case valuation," Ives said. 

TSLA Price Action: The stock was trading 0.88% higher at $1,377.93 at the time of publication Thursday.

Related Links:

Tesla Surpasses Toyota To Take The Crown As World's Most Valued Automaker

Tesla Vs. Nio Vs. Xpeng: A Look At The Chinese Electric Vehicle Market

Photo courtesy of Tesla.