Posted on September 06, 2017 by Matt Pressman
Historically, Wall Street analysts have had many different views on the valuation of Tesla [NASDAQ: TSLA]. Morgan Stanley automotive analyst Adam Jonas has also vacillated between "bull and bear" when considering Tesla as an investment for the bank's clients. That said, it appears that Morgan Stanley is turning positive once again in its outlook for both electric vehicles and Tesla.
Above: Tesla vehicles lined up together (Instagram: moscowteslaclub.ru)
According to Barrons, "Morgan Stanley predicts that over a billion electric cars will be on the road by 2050 — and Tesla's success is one reason why... [according to] a massive report on the future of electric vehicles called On the Charge." The first part of the report discusses battery electric vehicles [BEVs] — it's titled "Why BEVs are really coming this time" and part of Morgan Stanley's rationale appears to be the rise of Tesla.
Expanding on this, Electrek reports, "Morgan Stanley’s research group released a new blue paper about electric vehicles last week... [and] using data from IHS, Morgan Stanley projected global EV sales by model and concluded that Tesla’s Model 3 and Model Y alone could represent roughly half of the market by 2020."
Above: Tesla's Model 3 and Model Y could represent half the global electric vehicle market within 3 years (Source: Electrek via Morgan Stanley / IHS)
In the report, Morgan Stanley writes, "Tesla shows that the consumer preference for internal combustion engines can be swayed" — especially in contrast to Big Auto's electric vehicles that haven't sold well versus other, similar internal combustion engine options.
Above: Tesla's Model S (Instagram: electrified_motors)
The report notes, "Even successful electric vehicles such as the Nissan Leaf have made little headway in gaining global car market share, and many [electric] vehicles have failed to sell in any volume at all. However, technology and usability are improving, and charging times are falling. There will come an inflection point where range and usability combine with the right price."
And Morgan Stanley notes (via Electrek) that EV sales volumes look to improve while their prices fall: "Our modelling of an illustrative OEM transition from ICE to BEV drivetrain suggests that price and volume pressures could push down ICE profitability sharply from 2021, as new BEV products cannibalise sales and pricing power."
Above: The falling cost of building electric vehicles means they'll likely reach parity with gas-powered cars around 2025 (Source: Electrek via Morgan Stanley / IHS)
That said, electric vehicles are already posing a significant threat in certain market segments. Morgan Stanley's report points out, "The Tesla Model S has taken a 30% share in the $100k plus US luxury market share, and with over 400,000 orders in less than a month after initial launch, the Tesla Model 3 launch also suggests there is plenty of consumer demand for the right electric vehicle product at the right price."