Morgan Stanley Says Tesla ‘May Need Further Price Cuts’

Morgan Stanley Says Tesla ‘May Need Further Price Cuts’

Morgan Stanley reiterated an Overweight rating and $220.00 price target on Tesla (NASDAQ:TSLA) after the electric automaker reported 1Q delivery and production numbers.

Tesla delivered 423k units in the 1Q, in line with the company-gathered consensus with a 4.3% increase over last quarter. 1Q deliveries annualize to just under 1.7 million units while 1Q production annualizes to 1.76M units. Analysts estimate that further ramp of Berlin and Austin (both at 4k units/week) can collectively add 100k-200k units to the 1Q annualized rate. Along with further incremental output at Shanghai and Fremont, Morgan Stanley believes 1.9M to 2M units of FY deliveries is achievable. However, more price cuts may be needed.

Analysts wrote in a note, “Given the slowing economic environment, increased pressure on financial institutions willingness to lend, and competition (BYD and others), we believe Tesla and its EV competition may require further price cuts to achieve the higher end of consensus volume expectations this year. As we have written for some time, we believe it is Tesla’s objective to lever its cost advantages in the form of lower prices relative to the competition over time. We are of the opinion that without the aggressive price cuts, Tesla sales may not have grown on a sequential basis, a sign that even the most dominant EV player is not invulnerable to a slowing macro and competition.”

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