Morgan Stanley Sees a $5k EV in Tesla's (TSLA) Future
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Morgan Stanley analyst Adam Jonas reiterated an Overweight rating and $880.00 price target on Tesla (NASDAQ: TSLA) highlighting the historical impact of manufacturing efficiencies in the early auto industry and predicting that this type of manufacturing revolution can occur in EV production and "investors should prepare for this moment".
In 1907, the last production year prior to the Model T, there were 255 carmakers in the US with an average price of $2,834, nearly $80k in 2021 dollars. The entry level Model T 'Runabout', cost $825 in 1909 or ~24k today. However, higher volumes and themoving assembly line brought far greater deflation in the price of the automobile and by 1925 the average price of a Model T Runabout was $260 ($3,790 in today’s dollars). Not only does the analyst think this type of revolution could happen again, he seems to believe Elon hinted it may happen on the 3Q20 call when he stated "Tesla's long-term competitive strength will be primarily manufacturing. This is counterintuitive, but I'm quite confident this will be what happens."
The analyst stated "Taking nothing away from Tesla or the ever-growing number of EV players entering the market every month, we have not truly had the equivalent revolution in high volume manufacturing for EVs at this point. We believe investors should prepare for this moment." He went on to state "We frequently get very concerned investors tracking the price cuts from Tesla and other EV manufacturers. In our opinion, we would be prepared for this to continue through at least the next decade. Based on our frequent discussions with OEMs, suppliers and domain experts in the EV business, we would not be at all surprised to see the prices of many EVs eventually fall to below $5k/unit. This sentiment was recently echoed by the CEO of the world’s largest electric motor manufacturer Nidec."
Shares of Tesla closed at $703.50 yesterday.
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