$174 Billion EV Infrastructure Plan Could Disproportionately Benefit Tesla (TSLA), Auto Investors Face Great Risk Not Owning Tesla Shares - Morgan Stanley

April 7, 2021 7:28 AM EDT
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Morgan Stanley analyst Adam Jonas argues that the huge infrastructure bill is likely to help Tesla (NASDAQ: TSLA) more than other legacy players.

The $2 trillion plan envisages $174 billion to accelerate the growth of the electric vehicles (EV) sector in the coming years.

“Within a range of potential outcomes, we believe investors may need to prepare for an EV infrastructure bill (including purchase incentives for EVs, development of charging and manufacturing infrastructure,grid enhancement etc.) that could disproportionately benefit Tesla and pure BEV startups near term while providing for relevant/if not thriving terminal value for non-Tesla players long term,” Jonas writes in a note sent to clients today.

Tesla doesn’t sell cars with internal combustion engines (ICE) and the infrastructure bill is likely to accelerate EV sales, as well as accelerate the de-adoption of ICE cars. Moreover, aggressive policies to stimulate EV sales should be expected to repress the market share of the legacy ICE players, even as they aggressively roll out EV products, adds Jonas.

Another two factors taken into account by Jonas and Co., is that Tesla has a higher volume of EV products in the pipeline that will be rolled out at higher volume over the next 3 to 5 years compared to most other original equipment manufacturers (OEMs). Moreover, Tesla has a more vertically integrated battery supply strategy than most other OEMs.

“We understand that the build out of the world’s EV infrastructure may follow a volatile/non-linear path. It will likely be complicated by a labyrinth of national and local laws that will present advantages and disadvantages to various OEMs depending on the year that you choose to analyze. And,very likely, there will be some policies that may incentivize technologies that may not be a part of the long term solution, requiring various overhauls along the way,” Jonas added.

Overall, Jonas argues that auto investors face “greater risk NOT OWNING Tesla shares in their portfolio than OWNING Tesla shares in their portfolio.”

Morgan Stanley rates Tesla as “Overweight” with $880.00 per share.

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

Shares of Tesla closed at $690.00 yesterday.

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