Tesla (NASDAQ: TSLA) began to attract particularly high attention in the second half of 2020, which was especially supported by the inclusion of the manufacturer in the S&P 500 index. Gradually, the stormy attention subsided and investors switched to assessing the company's production and delivery indicators, as well as to the relationship between Tesla and Bitcoin. In the note, Morgan Stanley proposed several aspects of what they believe should attract investors now.
Expanding production facilities outside of China is an important aspect. The opening of Giga Berlin and Giga Texas should give Tesla the opportunity to introduce unit economics that are expected to vastly outperform Fremont's. Morgan Stanley explains that in reality, it is very difficult for an automobile company to generate positive operating profit from manufacturing in California and the associated input costs. Car manufacturers have long since begun to scale back their presence in California, which is a great example. In addition to building factories in Texas and Germany, Morgan Stanley predicts at least five additional auto factories in the next five to 10 years, including markets such as India, ASEAN, Northern / Central Europe, further US expansions, etc.
Another equally important aspect is that Tesla will expand with new car models. At the moment, the company already can reach almost one million sales, mostly thanks to Model 3 and Y. However, in the future, Tesla will expand to all segments of the automotive market and will appeal to all new customer segments such as commercial, ride-share, affordable (very affordable) mega-city, and other segments.
Tesla will also expand into the production of batteries, including supplies to third-party manufacturers. Based on its analysis and discussions with various global OEMs, Morgan Stanley sees Tesla can act as a tier 1 technology provider. OEMs already believe it is more financially viable to leverage Tesla's scale and technology rather than to 're-invent the battery.'
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Eva Fox holds zero shares of Tesla, Inc., and currently (at the time of this article's publishing) holds zero options or securities in Tesla Inc. and/or its affiliates.