Morgan Stanley Expects Tesla To Unleash Cost And Scale Advantages As 'Competitive Force': Will Other Automakers Survive The Thrashing?

Morgan Stanley believed Tesla Inc TSLA was set up to outperform the rest of the electric vehicle space after it gave up approximately $600 billion of market value over the past three months. 

What To Know: Morgan Stanley flagged a buying opportunity in Tesla shares Wednesday in a new note to clients shared on Twitter by Tesla investor Sawyer Merritt. 

The note mainly pointed out Tesla had already established itself as a leader in the EV space and competitors might be starting to consider alternatives to the presumed future of transportation. 

"Are we sure batteries are the only (or ultimate) path to decarbonizing transport? Is the technology cheap enough? Is our electric grid ready? ... Complimentary technology to EVs is worth watching," Morgan Stanley wrote in the note.

Check This Out: Tesla's Market Share 'Decimated,' Backlog Has 'Collapsed To Nothing' — Why Institutional Investors Are 'Very Concerned'

Given Tesla's position as the market leader, Morgan Stanley's Adam Jonas expects Tesla to use its cost and scale advantage as a "competitive force."

The Elon Musk-led company unleashed a series of price cuts in China, which should spread into Europe and the U.S., the analyst firm said. 

"Lower EV prices are important for the next leg of mass adoption, but depress the returns of many of the companies expected to compete against Tesla," Morgan Stanley said.

Ford Motor Company's F "Model e" business was likely battling profitability challenges, which Morgan Stanley expects to be disclosed in the first quarter of 2023. If the firm was right, it could discourage other automakers from racing into EVs.

See Also: Jim Cramer Says 'Tesla Has Peaked,' Elon Musk-Led Company Is Forfeiting Share To Ford

Morgan Stanley noted Toyota Motor Corp TM management questioned whether auto executives are over-committing to EV strategies. A majority of auto industry followers have criticized the company for such, but the "later/follower" approach may prove to be optimal over time, Morgan Stanley said.

"With respect to emerging EV startup strategy we believe 'hunkering down' to manage the pace of cash burn is a winning strategy. We anticipate [a] more challenging capital markets environment may limit the number of EV players that can achieve sustainable scale," Morgan Stanley said.

Morgan Stanley reiterated Tesla with an Overweight rating. The firm has a $330 price target on the stock.

TSLA Price Action: Tesla has a 52-week high of $402.67 and a 52-week low of $135.89.

Tesla shares are down 0.17% at $137.571 Wednesday at market close, according to Benzinga Pro.

Read Next: As Tesla's Stock Falls To New 2-Year Lows, How Are Its EV Peers Performing?

Photo: Courtesy of Tesla