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UPDATE: Tesla's Disruptive Model Will Take Decades to Play Out, UBS Says

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On Wednesday, UBS initiated coverage of shares of Tesla (NASDAQ: TSLA) with a Neutral rating and $230 price target.

Analyst Colin Langan views Tesla as a disruptive technology that will “play out over decades rather than years given the high fixed costs” of the auto industry.

Of the Chinese automakers since 2000, “none have reached production of 1m vehicles,” said Langan. However, the analyst estimates Tesla is “already pricing in 1m units within 10 years.”

Lowering battery and variable component costs is “critical” to long term success. Langan estimates there is a “$19k variable cost gap relative to the slightly larger BMW 7-Series and a $29k gap to the slightly small BMW 5-Series.”

Tesla's Gen III, which will sell at a lower price than the Model-S, will be a challenge for the company because “operating leverage on fixed costs will not address the variable cost gap,” said Langan.

Shares of Tesla are up 0.84 percent to $220.44 in Wednesday's trading.

Latest Ratings for TSLA

DateFirmActionFromTo
Apr 2015JP MorganMaintainsUnderweight
Mar 2015Argus ResearchInitiates Coverage onHold
Mar 2015CLSADowngradesOutperformUnderperform

View More Analyst Ratings for TSLA
View the Latest Analyst Ratings

Posted-In: Colin Langan UBSAnalyst Color Analyst Ratings

 

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