Morgan Stanley: Outside of Tesla, automakers must face the 'elephant in the room' for new electric vehicles

Tesla [NASDAQ: TSLA] stock rocketed upwards yesterday. Why? More input from one of Wall Street's most insightful analysts covering Tesla. According to CNBC, "Shares of Tesla jumped Tuesday after Morgan Stanley's Adam Jonas, a widely-followed analyst on Wall Street, raised his 12-month price forecast... [upping] their price target on Tesla to $379 from $317." It's reported that, "Jonas said Tesla's existing infrastructure 'footprint' will be a 'key differentiator' over the coming years." 


Above: Model S vehicles line up for a charge at Tesla's proprietary Supercharger stations (Image: Ars Technica)

Jonas elaborates: "Infrastructure (or lack thereof) is the 'elephant in the room' of the EV revolution. Compared to other OEMs (Original Equipment Manufacturer), Tesla has made the biggest proprietary investment in superchargers and destination chargers globally. In most communities, we believe this infrastructure is larger than it needs to be in preparation for the expansion of the serviceable and charge-thirsty fleet. Other OEMs will closely watch how consumers react to this infrastructure."


Above: In addition to its Superchargers, Tesla has aggressively built out its Destination Chargers at hotels, restaurants, and shopping destinations (Image: Bloomberg)

While other automakers rely on third-party charging networks (and battery makers), Jonas notes (via Electrek) that, "Tesla has made the biggest proprietary investment in superchargers and destination chargers globally... Tesla targets 10k superchargers globally by the end of 2017 (6,246 as of Aug 17), and we estimate that there will be 15k destination chargers by the end of the year. Throw in... the world’s largest battery factory (Gigafactory 1 in Reno), and we estimate that Tesla has allocated nearly $8bn to the infrastructure of manufacturing, servicing and charging its vehicle fleet."


Above: Model 3 parked in front of Tesla's massive battery plant in Nevada, its Gigafactory 1 (Image: Motor Trend)

In contrast, legacy automakers will have to play catch-up to Tesla. Jonas cites recent talks with another automaker (via Barron's): "We recently met with the management team of an OEM that operates a substantial fleet of electric/automated vehicles, and the team indicated that the single biggest impediment to on-road testing of its vehicles is the inability to get sufficient electric power to charge its vehicle fleet."


Above: Back in 2015, Morgan Stanley's Adam Jonas had published his thoughts on Tesla in a prescient (albeit quirky) video (Source: Morgan Stanley)

Jonas sees electric vehicle infrastructure as mission-critical in the coming years. He notes, "We expect that the topic of infrastructure at the corporate level (including at OEMs, suppliers, tech firms, electric utilities and mining companies) as well as at the local and national government level will take on increased importance and scrutiny over the next few years, particularly given this may be the single most important physical bottleneck preventing widespread EV adoption."


Above: Morgan Stanley estimates that $2.7 trillion must be spent on global infrastructure build-out for EVs to reach their forecast of 526 million units by 2040 (Source: Bloomberg)

With so many automakers recently announcing a move to electric vehicles, it's clear that a paradigm shift is underway. Jonas told CNBC earlier this week, "We don't think it is a coincidence that all the car companies are... [transforming] at a time when Elon Musk has launched the Model 3." He concludes, "I would describe the current environment for autos as a magical, magical time."