Why Tesla Might Have The 'Competitive Advantage' Post-Pandemic

The coronavirus (COVID-19) pandemic has sidelined the Big Three and forced them to cut near-term expenses. They’ve stalled factories, furloughed workers and sliced their marketing budgets.

Now, they face a new choice: press forward with costly Auto 2.0 projects or push spending to 2021. The pickle puts Tesla Inc TSLA in a relatively strong position.

The Tesla Rating

Morgan Stanley analysts Adam Jonas and Armintas Sinkevicius maintained an Equal-weight rating on Tesla with a $440 price target.

The Tesla Thesis

The coronavirus has already bought Tesla time on the EV front. General Motors Company GM has delayed some SUV, truck and sports car launches, and Rivian (which Ford Motor Company F has a stake in) has pushed back its R1T and R1S rollouts.

“The further along other competitive EV programs get pushed out, the more Tesla will, in our view, be able to extend its competitive edge in electrification from the perspective of the consumer,” Jonas and Sinkevicius wrote in a note.

The analysts expect additional benefits in the autonomous vehicle market, as automakers face a choice between EV projects and AV projects.

“We believe budgets will prioritize projects with near-term impact on regulatory costs and payback periods (EVs) rather than longer-term ‘moon shots’ with a more uncertain path to revenues (AVs),” they wrote. “...Either way, we believe this situation overall favors Tesla in the medium term as there would be less competition from higher quality electric vehicles and the disruption could inadvertently help sustain Tesla’s premium multiple on the AV front as well.”

Morgan Stanley suspects government stimulus is required to support innovation and manufacturing jobs, and automakers will lobby Congress to consider safety technology in its distribution formula. Tesla could disproportionately benefit with its advanced driver-assistance system.

TSLA Price Action

Tesla shares closed Thursday's session up 4.4% at $573.

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