Tesla is a cost leader and achieves profitability that competitors cannot match. While many investors speculate that the Inflation Reduction Act (IRA) will narrow its lead, Morgan Stanley has the opposite view.
Morgan Stanley analyst Adam Jonas believes the IRA will primarily benefit Tesla. According to him, Tesla will get significantly more benefits from it than other automakers. By taking advantage of this, the company will be able to pass on the benefits to its customers, resulting in additional market share. Tesla will benefit more from IRA tax credits than newcomers as well as legacy car makers.
The analyst bases his claims primarily on the supply of batteries to the industry. Here Tesla has a huge advantage over its competitors. In addition to its battery joint venture with Panasonic, Tesla is also ramping up its own 4680 cell production in Austin and Fremont and could increase production in Nevada by another 100 gigawatt hours. Through it all, Tesla holds about 75% of the tax credit for battery production, while Panasonic holds around 25%, according to Morgan Stanley.
While other automakers also have struck deals with battery makers, it is unlikely they will get the same benefit. Jonas suggests that General Motors and Ford will share about half of the credits with their partners LG Energy and SK On, respectively. The analyst reiterated his $200 target price for Tesla stock due to its positive valuation. He still advises buying TSLA stock.
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About the Author
Eva Fox joined Tesmanian in 2019 to cover breaking news as an automotive journalist. The main topics that she covers are clean energy and electric vehicles. As a journalist, Eva is specialized in Tesla and topics related to the work and development of the company.