Morgan Stanley Sees a Looming Battery Supply Shortage That Could Impact Tesla's (TSLA) Growth Curve
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Morgan Stanley analyst Adam Jonas reiterated an Overweight rating and $880.00 price target on Tesla (NASDAQ: TSLA) noting that as demand and production levels pick up, there are reasons to expect a shortfall in battery supply that could vary widely by region. But don't just take his word for it, there is commentary from Tesla, Ford and GM, highlighting the risk. While he does not offer an investment conclusion based on this issue, he highlighted the concern to make investors aware of the potential problem.
Elon Musk, CEO of Tesla stated “So the fundamental limit on electric vehicles right now, in general, is total availability of cells, what's the output of factory cells in gigawatt hours. And you can't grow faster than that.”
Jim Farley, CEO of Ford, stated “(the) next step is going to be a much more aggressive electrification plan, with the subsequent impact on our battery strategy. And we cannot afford to be in the situation we are with semiconductors right now, which is a good metaphor for what you're bringing up.”
Mary Barra, CEO of GM stated “we're working to make sure we have adequate supply all the way from the mines. You rightly point that it's one of the reasons why we're investing in our own cell manufacturer. So we want to be in control of our own destiny, not only from making sure we have the ability to have the cells that we need but also to work on cost improvements and technology improvements.”
The analyst stated "Our Asia battery team forecasts nearly a 3-fold increase in global battery cell capacity to 1.2 TWh by 2025 vs. just over 0.4 TWh today. At the same time, the global autos team forecasts nearly a 6-fold increase in global EV sales to approx. 12mm units by 2025 vs. just over 2 million units in 2020. We forecast global EV volume to grow nearly 2x faster than the growth in global battery. Does something have to give?"
Shares of Tesla closed at $813.00 yesterday.
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