Wedbush analyst Daniel Ives believes that Tesla (NASDAQ: TSLA) is likely to report robust delivery for the fourth quarter and easily top both the Street and internal expectations.

The market is preparing for deliveries of 180k for the fourth quarter, but Ives believes that the underlying strength in China and s a late push in Europe and the US may result in deliveries close to 200k.

“This would enable Tesla to achieve its 500k delivery number for the year, which was not even on the map for the Street going back to the late spring/early summer timeframe. While there are some logistics speed bumps throughout Europe that could derail a number of deliveries in the next few days, the theme of the Tesla story and overall global EV demand continues to be around white hot demand coming out of China,” Ives wrote in today’s research note sent to clients.

The analyst argues that we are seeing a surge in demand for electric vehicles as we head into 2021. The EV market is about 3% of total car sales now but it is likely to move towards 10% by 2025.

“We believe this demand dynamic will disproportionately benefit the clear EV category leader Tesla over the next few years especially in the key China region which we believe could represent ~40% of its EV deliveries by 2022 given the current brisk pace of sales. China remains a greenfield EV market opportunity as we believe overall EV sales can potentially double in the region over the next few years given the pent-up demand for EV vehicles across all price points.

“We believe China (coming off what looks like a robust November/December) could see eye popping demand into 2021 and 2022 across the board with Tesla's flagship Giga 3 footprint a major competitive advantage, as domestic players such as BYD, Nio, Xpeng, and Li also are also firing on all cylinders. If China stays on its current path for Tesla, Musk & Co. could hit one million delivery units globally by 2022 (currently we are modeling 2023 timeframe),” Ives added.

The fundamental aspect is also playing in Tesla’s favour as Europe and the UK move towards reducing carbon emissions.

“China remains the "hearts and lungs" of the Tesla demand growth story playing out over the next year along with underlying Europe EV strength seen in the field. In Europe there remains a major focus on reducing carbon footprints coupled by EU regulatory catalysts that should further drive a renewed consumer focus on EV vehicles especially in France, Germany, Italy, and the UK with Tesla's Berlin factory build out a major step in the right direction that will increase margins and simplify logistics/deliveries throughout Europe looking ahead.

Additionally, the incoming Biden administration will focus on "markedly increasing" consumer EV tax credits/incentives, helping Tesla, but GM, Fisker, and others, as well.

Overall, Ives reiterated a “Neutral” rating on TSLA and his price target of $715.00 per share.