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Morgan Stanley reiterated an Overweight rating and $220.00 price target on Tesla (NASDAQ:TSLA) as Chinese battery analysts note a continued rise in domestic EV battery inventory.
According to analysts, domestic EV battery inventory continued to rise to ~152GWh at the end of February.
Chinese Lithium carbonate spot prices have fallen by roughly half since early December 2022, representing several thousand dollars lower raw material price per EV. With China being the largest EV market in the world, MS analysts believe excesses throughout the battery supply chain could find a way to ex-China markets over time, driving competitive actions.
They wrote in a note, “In a globally connected auto industry, China’s EV price war may suggest a broader adverse imbalance in EV S/D. Fungibility of supply can impact non-China markets too. We’re prepared for more EV price cuts in EU and US.”
Morgan Stanley believes that TSLA will be able to achieve its goal of a minimum 20% auto gross margin in 1Q23. However, they note that it will be difficult to defend in subsequent quarters in the event of continued downward price competition.
Shares of TSLA are up 3.37% in early trading on Monday.
