Why This Tesla Stock Analyst Lowered Their Price Target By 10%

The consumer appetite to buy a battery electric vehicle is at a new high globally, and Tesla, Inc. TSLA continues to be the undisputed leader — but it is threatened by competition, an analyst at UBS said Tuesday.

EV Momentum Accelerating: About 43% of consumers surveyed by UBS said they are likely to consider buying an all-electric car, up six percentage points year-over-year, analyst Patrick Hummel said in a note.

Specifically, consumers in the U.S. are becoming increasingly bullish, the analyst added.

UBS raised its China EV sales forecast for 2021 from 1.9 million to 2.5 million. The firm expects EV penetration of 20% in 2025 and 50% in 2030.

Tesla Leads, But The Lead Isn't Growing: While conceding Tesla is still the undisputed leader, Hummel said its market lead isn't growing.

In a face-to-face competition, German premium brands such as Volkswagen AG's VWAGY Audi, Daimler AG's DMLRY Mercedes and Bayerische Motoren Werke Aktiengesellschaft BMWYY are preferred over Tesla, the analyst said.

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Tesla's lead is likely to shrink from here, he said. The company's lead in the Chinese market is also at risk, as local EV brands have climbed in rankings, Hummel said.

Chinese brands such as NIO Inc. NIO, XPeng Inc. XPEV and BYD Company Limited BYDDF all showed positive momentum, the analyst said, citing the UBS survey.

These companies pose a threat to Tesla and legacy OEMs such as Volkswagen, he said. 

"Tesla's lead in EV powertrain will likely shrink while the AV opportunity is already fully priced."

UBS maintained a Neutral rating on Tesla shares and lowered the price target from $730 to $660.

TSLA Price Action: At last check, Tesla shares were down 1.24% at $680.21.

Related Link: Why Tesla's China Recall Is A 'Black Eye' Moment For The EV Maker In The Key Region

Photo: courtesy of Tesla.