With the supply chain in disarray, there's much discussion in the auto industry around vertical integration and localizing production.
Against this backdrop, EV pioneer Tesla, Inc. TSLA is transforming into a "renewable energy on-shore infrastructure company," according to a Morgan Stanley analyst.
The Tesla Analyst: Adam Jonas has an Overweight rating on Tesla with a $1,300 price target.
The Tesla Takeaways: The renewable economy relies on insufficient quantities of materials from distant and geographically insecure markets to store the required energy from the grid, Jonas said in a note.
The Biden administration could use the Defense Production Act to encourage domestic production of key materials for EV batteries, the analyst said, citing a Bloomberg report.
"National security resource nationalism is likely with us to stay," he said.
To build the renewable energy generation and transport infrastructure, the U.S. will need batteries everywhere electricity is generated and everywhere there are things to move, Jonas said.
Tesla, according to the analyst, fits in the bill because it is not only a car and tech company, but also an energy company.
As energy security becomes key for national security, recent geopolitical events may have accelerated the U.S.'s sponsorship for onshoring mission critical battery materials and advanced battery technology, Jonas said.
"Over time, we expect to see grid-level stationary storage receive significantly more attention for its role in enabling renewable generation and greatly reducing dependency of power generation from fossil fuel."
In a supply chain-constrained environment, the analyst said he would prioritize names with pricing power, supply chain visibility and renewable energy exposure. Ferrari N.V. RACE, Tesla, Rivian Automotive, Inc. RIVN and Freyr Battery FREY are among the names that are well positioned on this front, he said.
Among suppliers, the analyst recommends Aptiv PLC APTV, American Axle & Manufacturing Holdings, Inc. AXL and Magna International Inc. MGA.
TSLA Price Action: Tesla shares lost 1.5% Thursday, closing at $1,077.
Photo courtesy of Tesla.
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