Adam Jonas On Tesla: 'We're Serious EV Bulls Again'

In a report published Tuesday, Morgan Stanley analyst Adam Jones maintained an Overweight rating on Tesla Motors Inc TSLA, with a price target of $280, expressing optimism regarding electric vehicles.

While EVs have not achieved mainstream success on account of their economic payback periods being as high as 25 years, “the shared autonomy model of highly utilized mega-fleets completely flip the script,” analyst Adam Jones said.

EVs have been failing so far due to the fact that the cars aren’t used enough. “The 10,000 average miles driven/year disguises the fact that cars are used on average for less than 1 hour/day for only 4% utilization. This low utilization of the current automotive ownership model drove our rather bearish outlook on EV penetration earlier,” Jones wrote.

If the EV were to be used by a taxi or ride-sharing company for 60,000 miles per year, this would represent around 24 percent utilization, with the payback period declining to 4.6 years.

Jones said that EVs could stage a “major comeback,” backed by two “sea-change developments”:

• Shared mobility - “Mobile technology and relatively simple software increases driving utilization rates by an order of magnitude bring taxis and chauffeur services to the masses. This transforms the auto business model from B2C ownership to B2B shared. Enabling each car to drive a far greater number of miles per year helps amortize the up-front cost of a battery far more rapidly, shrinking the payback.”
• Autonomous cars - Eliminating humans as drivers could boost utilization and efficiency, while reducing cost per mile. The payment to the driver is the largest cost of ridesharing service today. If this human were to be replaced with “a few million lines of code and some commoditized sensors,” there would be significant savings.