Morgan Stanley Says Tesla Faces Strong Competition From Rivian, Others

Tesla Inc TSLA may be unable to maintain its big lead in the electrical vehicle market in the long run, as rival electric vehicle startup Rivian is going full throttle, according to Morgan Stanley. 

The Analyst

Adam Jonas has an Equal-weight rating on Tesla with a $250 price target.

Morgan Stanley's Tesla Thesis

With its latest funding round that raised $1.3 billion, Rivian has raised a total of $2.8 billion in 2019 alone, double that of Tesla's capex forecast for the year, Jonas said in a Wednesday note. (See his track record here.)

This makes the company a serious force in the race to decarbonize the global auto fleet, the analyst said. 

To put things in perspective, the $2.8 billion in funding Rivian has secured is capable of buying most of a Gigafactory in a high-cost country and a full Gigafactory in a low-cost country, while for a traditional automaker, it could be enough to develop two or three complete vehicles, he said. 

Rivian's core strengths are in its skateboard form factor and mega-fleet relationships, Jonas said. 

Tesla is the market leader in the U.S., with an 80% unit volume share in the U.S. battery electric vehicle market and about 90% share on a KwH adjusted basis, the analyst said. 

Globally, Tesla has a 20% unit volume share and 30% share on a KwH adjusted basis, he said. 

"We see Tesla's current share level as unsustainable long term & expect the next serious competition from a ‘clean sheet' start-up with access to talent & capital focused on the fastest growing segments of pickup trucks & SUVs." 

Morgan Stanley also expects increasingly credible offerings from legacy OEMs.

Tesla may do well to prepare for a substantial amount of increasingly capable EV competition going forward, Jonas said. 

"Tesla may have a big lead today, but we expect this to change over time." 

Tesla Price Action

Tesla shares were trading up 0.64% at $427.98 at the time of publication.

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Photo courtesy of Rivian.