Russia’s invasion of Ukraine and the sanctions imposed by the US and its allies as retaliation are having repercussions for the global economy. One impact that immediately springs to mind is on the price of fuel, which has soared as the West now plans on rejecting Russia’s vast energy exports.
You would think that this would provide a tailwind for the EV industry, but Morgan Stanley’s Adam Jonas has a surprising take on the matter.
“In isolation,” said the 5-star analyst, “Higher fuel prices may improve payback periods for owning EVs. But when considering the inflation of input costs (and their availability) for BEVs, the payback periods may be diminished.”
Over the past few days, nickel prices have risen, which Jonas thinks could potentially increase the cost of building a new BEV by $1k to $2k. There are also the energy costs required in smelting (grade 2nickel to grade 1) to consider, while these metals must be transported across the globe to make their way into EVs.
Another issue with EVs is supply. “EVs are great,” says Jonas, “if you can get them (and can afford them).”
Basically, what Jonas is trying to say is that in the near-term ICE vehicles “may categorically outperform” EVs, both on sales and profitability.
So, what are the implications for EV makers such as Tesla (TSLA)? Well, it’s clear that the current crisis has highlighted the long-term issues facing ICE-fueled vehicles and the current geopolitical unrest could accelerate renewable energy/infrastructure projects.
“This can increase the ‘ballast’ and conviction of penetration assumptions further out on the EV curve (i.e. beyond 2030…),” opined Jonas, “once we properly align the supply chain, material sourcing, manufacturing processes, on-shore manufacturing capability, down-stream infrastructure, etc.”
All in all, the analyst keeps an Overweight (i.e., Buy) rating for Tesla shares, while his $1,300 price target implies one-year upside of 55%. (To watch Jonas’ track record, click here)
Tesla is a polarizing name, reflected in the wide spectrum of analyst ratings; with 15 Buys, 7 Holds and 6 Sells, the consensus view is that this stock is a Moderate Buy. The forecast calls for 12-month gains of 24%, given the average price target stands at $1,068 and change. (See Tesla stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
