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Tesla Reigns Supreme In Electric Vehicle Space, But Ford And General Motors Still In The Race

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Tesla Reigns Supreme In Electric Vehicle Space, But Ford And General Motors Still In The Race
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Tesla Inc (NASDAQ: TSLA) is being handed a near monopolistic opportunity to gain market share in the automotive industry, according to a Berenberg research report.

“Despite more talk of developing electric vehicles (EVs) for mass-market adoption, a lack of real action and strategic commitments by the traditional OEMs betray their underlying conviction. Challenged with finding the correct balance between future competitiveness and present profitability, OEMs have consensually opted for the conservative approach of a low-risk, low-investment strategy, which will prove to be inadequate against the momentum of Tesla’s all-in approach,” the report noted.

This opportunity has led a Berenberg team to upgrade Tesla to Buy with a $464 price target.

Incumbent Automotive Industry Has Lacked Vision

The report highlighted how the current electric vehicle strategies at manufacturers like Ford Motor Company (NYSE: F), General Motors Company (NYSE: GM), and Volkswagen AG (ADR) (OTC: VLKAY) have remained stagnant since the first electric vehicle generation. “OEM focus continues to be on lowering investments and costs through integrating EV production into existing plants and production lines, rather than fully scaled, dedicated high-volume production,” the Berenberg analyst led by Alexander Haissl stated.

Meanwhile, Tesla is estimated to spend $32.7 billion over the next five years on EV projects, which is about 40 percent more than Daimler and Volkswagen have spent combined on their projects.

Tesla's Huge Competitive Advantage

Tesla and Panasonic’s partnership creates a huge advantage for Tesla in the electric vehicle industry. Specifically, “Tesla’s small and actively tube-cooled cells, which are not currently replicated and are unlikely to be so by competitors, drives significantly better residual values and cost-of-ownership advantages,” the report stated.

Other Notable Ratings, Comments

  • Ford: sell, $10 price target.
  • “The current EV offering, the Ford Focus Electric, is not competitive on price versus range, and it looks unlikely to us that Ford will catch up on pure EVs in the foreseeable future. Unless Ford materially increases its efforts on the pure EVs, the gap versus peers is expected to widen even further.”

  • GM: sell, $31 pt.
  • “GM’s current EV offering, the Chevy Bolt/Opel Ampera, is more competitive to other traditional OEMs, but not enough to retain market share once competitors launch new models. From our perspective GM does not have a clear strategy on EVs and with the exit of the European market the effort is unlikely to reaccelerate any time soon.”

    Related Links:

    UBS Sees 50% Downside Potential In Tesla, Cautious On Model 3 Launch Timing

    Big Day For The Auto Industry: Ford, GM And Tesla Dominate Headlines

    Latest Ratings for TSLA

    DateFirmActionFromTo
    May 2017Independent ResearchInitiates Coverage OnHold
    May 2017Morgan StanleyDowngradesOverweightEqual-Weight
    May 2017Evercore ISI GroupReinstatesOutperformOutperform

    View More Analyst Ratings for TSLA
    View the Latest Analyst Ratings

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