Tesla Poised For Outsized Benefit From Volkswagen Scandal, Morgan Stanley Argues

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  • Volkswagen AG (ADR) VLKAY is down another 2.6 percent Tuesday, bringing its losses since September 18 at more than 38 percent. Meanwhile, Tesla Motors Inc TSLA has shed just 4 percent during the same period.
  • Morgan Stanley's Adam Jonas said that Volkswagen's scandal is "negative for the broader auto industry," not just for the German manufacturer.
  • Specifically, Jonas suggested that it could "raise the cost of doing business" for traditional automakers, thereby accelerating electric vehicle adoption.
  • Morgan Stanley analyst Adam Jonas said that not only would the Volkswagen scandal raise the cost of doing business for combustion-engine producers, but that the cost "could take some investors by surprise."

    The market, Jonas pointed out, is trying to grasp these numbers. Meanwhile, publicly traded global auto companies have shed $200 billion in value – an amount equivalent to Toyota Motor Corps (ADR) TM's market capitalization.

    The Impacts Will Have A Far Reach

    Therefore, Jonas said that the impacts will be felt far and wide – not just with diesel engines. That will lead to higher fixed costs per unit, which is a factor that will ultimately benefit Tesla Motors, Jonas suggested.

    Related Link: Tesla's Model X Launch Seeing Mixed Sentiment From The Pros

    Not only do electric vehicle manufacturers like Tesla not spend any money on vehicle emissions regulations, but "they get paid for selling ZEV credits."

    Why Tesla?

    While Jonas conceded that it's "easy" to make an electric vehicle, he argued that replicating Tesla is much harder. "It's far harder to make a car with a completely in-house OS designed for machine learning via over-the-air updates to enhance energy storage, performance, mapping and autonomous features as the car is operated in the real world," he concluded.

    Rating Implications

    As a result of these strong currents, Jonas reiterated an Overweight rating and $465 price target on Tesla – a level that represents 86 percent appreciation from current levels. Further, Tesla is the firm's Top Pick in autos.

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    Posted In: Long IdeasReiterationTop StoriesAnalyst RatingsMoversTechTrading IdeasAdam Jonasautomotivescombustion-engineemissionsMorgan Stanleyscandal
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