Morgan Stanley's Adam Jonas Downplays Impact Of Tesla's 2M Vehicle Recall, But Flags Delay In FSD V12 And Departure Of Key AI Executives

Morgan Stanley analyst and Tesla Inc TSLA bull Adam Jonas on Thursday offered his two cents on the EV maker’s recent recall of over 2 million vehicles.

What Happened: Early on Wednesday, Tesla issued a recall for over 2 million vehicles equipped with all versions of Autosteer, an autopilot feature, citing insufficient controls to prevent misuse, and offered a free software update.

Jonas does not deem the recall to have a cost impact on Tesla in the upcoming year as it involves merely a software upgrade for the ‘fix’ to be deployed.

Tesla’s Self-Driving Dreams: Citing his own experience as an autopilot user for over 3 years and Tesla’s Full Self-Driving (FSD) capability for over a year, Jonas said that FSD presently has greater value as a convenience feature than a safety feature. The most important aspect of it is knowing when to use it and when not to, Jonas said.

While Tesla would have its own data to prove its FSD-enabled vehicles safer than human-driven vehicles, third-party validation will help prove the reliability and safety of the system, Jonas said. Though Tesla has often reiterated it, U.S. auto safety regulator NHTSA is currently investigating a number of accidents where autopilot was involved.

Jonas had previously anticipated that version 12 of FSD- touted by Tesla CEO Elon Musk as the non-beta version of the feature enabling fully autonomous driving- to be released by the end of the year.

“Instead, we have seen departures of key executives from the Tesla AI team,” Jonas wrote, referring to recent reports of key executives Ganesh Venkataraman and Tim Zaman leaving the company. While Venkataraman was Tesla’s head of the Dojo supercomputer project, Zaman was the company’s AI Infra & AI Platform Engineering Manager.

More Than Auto: However, in conclusion, Jonas remains overweight with a price target of $380, as he deems Tesla to be more than an auto company with value coming in from network services, mobility, third-party party battery and FSD licensing, among others. Despite the nearer-term headwinds, there is long-term potential in the products and services offered by Tesla, he said.

The company’s fundamentals will also be more resilient under more challenging economic scenarios as compared to rival automakers given that it had about $22 billion of net cash at the end of the third quarter, he added.

“We expect to see Tesla competitors significantly pull back on EV investments ceding higher levels of market share to Tesla, particularly outside of China, in the years ahead,” Jonas wrote.

Price Action: Tesla shares closed up 4.9% on Thursday at $251.05.

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