The Rich Like Other Luxury Brands Over Tesla (TSLA), UBS Survey Shows

September 23, 2016 8:31 AM EDT
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UBS analyst Colin Langan weighed on Tesla Motors (NASDAQ: TSLA) after results of their survey which showed high income households choose other premium brands over Tesla.

The firm's UBS Evidence Lab Electric Vehicle Survey of 9,400 individuals across 6 countries shows that coming BEV models mostly meet consumer expectations and that BEV penetration is likely to take off in premium first. Within the results we see that highincome households ($100k+) strongly prefer other luxury and quasi-luxury brands over Tesla.

When polling all individuals on whether they prefer buying an all-electric car from incumbent brands vs. TSLA, only 13-31% of respondents said they are likely to choose an incumbent brand compared to 20-44% who would choose Tesla. However, when looking at only $100k+ income households, 41-52% would choose an incumbent brand compared to only 20-29% who would choose Tesla.

"Given that we believe high-income households are more likely to purchase a Tesla, these results suggest that Tesla will face stiff competition as other premium OEMs begin to launch their own EV models in 2018," .Langan said. "We remain cautious on Model S demand as a result."

Further, the survey showed 43% consider 200 miles an acceptable minimum range for a single charge (Model 3 is expected to be ~200 miles). This percentage increases to 69% for 300 miles (expected range of upcoming German premium brands).

In addition, with all else being equal, 54% of respondents would expect an EV to be cheaper or the same cost as the equivalent ICE vehicle. However, based on calls with EV experts, they expect EVs to cost 11-20% more. Consumers also underestimate the cost of the battery pack. The median US consumer expects a replacement EV battery to cost $2,001-5,000 (weighted average of $4,200). They estimate that with repair cost, the battery replacement will cost ~$7,000 by 2025.

The firm maintained a Sell rating and price target of $160 on TSLA.

For an analyst ratings summary and ratings history on Tesla Motors click here. For more ratings news on Tesla Motors click here.

Shares of Tesla Motors closed at $206.43 yesterday.

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