Morgan Stanley – “EVs Are Dead, Long Live TSLA!”

3 years ago by Eric Loveday 54

Morgan Stanley Says TSLA Is A Winner

Morgan Stanley Says TSLA Is A Winner

“EVs are Dead, Long Live TSLA!”

Reads the headline of the latest note on Tesla Motors put out by Morgan Stanley.

Tesla does it different, writes Morgan Stanley.  The primary focus for Tesla is performance.  The battery aspect of the vehicle is secondary.  This is why Morgan Stanley thinks Tesla gets it right, while other electric vehicle makers fail to produce vehicles that reach sales expectations.

Morgan Stanley’s most recent TSLA note is reproduced below:

TSLA Note - Morgan Stanley

TSLA Note – Morgan Stanley

Full TSLA report from Morgan Stanley here.

Tags: , ,

54 responses to "Morgan Stanley – “EVs Are Dead, Long Live TSLA!”"

  1. David Murray says:

    Guess they didn’t bother to look at the Leaf, or the Ford PHEVs, or the BMW i3.

    1. Rob Stark says:

      Look at Nissan LEAF vs Versa sales.

      i3 vs 3 Series sales.

      Ford PHEV vs standard Ford model sales.

      Have these fulfilled sales expectations?

      1. kdawg says:

        You’d have to know the sales expectations to answer that question.

        1. Alonso Perez says:

          Yep. And Ford’s is a compliance effort. They don’t want the EV to succeed.

          Nissan (and now BMW) are serious. But they try to straddle the line between hurting their ICE offerings and selling a compelling EV. The result is “distinctive” (weird) cars of niche appeal. Still, I expect both of these to improve. The Leaf, even hobbled by the range, is a great car for a lot of people in real life, and it’s starting to take. The i3 is strange but attractive and performs well.

          As these companies sense they have tapped into something, their offerings will improve.

      2. Aaron says:

        If the cars are making a profit, they’re meeting expectations. Both the Tesla and the LEAF are making a profit.

  2. Cavaron says:

    So… they are saying that Tesla builds great performance cars and other company’s don’t do it as good (because Tesla sells best among the competitors in it’s price and class range).

    If someone could build a silent, performance ICE car similar to the Model S, they could make as many sales?

    Their logic seems to be faulty 🙂

    1. kdawg says:

      The other problem w/their logic is you will never get an ICE car to perform/feel the same as an EV. Even if it gets 100mpg, it’s not the same experience.

      Once people realize how sub-standard driving an ICE car is, they won’t buy another one.

      1. Mint says:

        I don’t see how this is contrary to what Morgan Stanley is saying.

        They’re saying performance is an EV strength, and Tesla is the only one embracing that. The “feel” you speak of included in that, but feel can’t make up for 9s 0-60 times and uncompetitive 50-70 times.

        When people buy a car that isn’t the base model, it almost always includes better performance. If you want to charge a premium, it must include performance to match. None of the other automakers are heeding this very basic, time-proven principle, and on top of that they aren’t even offering higher performance variants.

        Only Tesla is doing it right. You save almost nothing by putting a low power motor in an EV, so why bother?

      2. Spec9 says:

        Yeah, when I drive gas cars now, I feel like I’m driving a steam engine. They vibrate, the make noise, they lurch when shifting gears, they spew exhaust. It all seems so 19th century.

        1. See Through says:

          Spec9,
          You must be driving a really really cheap gas car. At least get an used Hyundai.

          I drive an EV too. Then, I’ve a gas SUV. Initially, felt a bit guilty drivign the midsize SUV. Now, both seem good for their purposes. No more guilt.

          1. Mark H says:

            SherylG made the same comment recently. So what EV do you drive?

        2. GSP says:

          Exactly. So twentieth century. That is still archaic.

          GSP

      3. Ericp says:

        +1

  3. MDEV says:

    I totally agree Tesla goal was build an amazing car that happen to be electric.

    1. See Through says:

      So, Tesla goal doesn’t solve the critical issue of global warming and pollution. We need a lot more cheap, affordable, reliable non-polluting cars; or other mods of transportation.

      We should declare the Tesla car un-green. It’s just a toy for rich hypocrites.

  4. kdawg says:

    That Morgan Stanley article was obviously written by someone who doesn’t own an EV.

  5. Francis L says:

    If I recall well, Nissan cant produce enough Leaf to fill up all the needs, no?

    1. Rob Stark says:

      Nissan has the capacity to build 200k LEAF’s in the USA but actually sold less than 23k last year and has sold less than 11k this year no?

      Last year Nissan sold 117,352 Versa and this year so far has sold 56,327 Versa.

      1. radim says:

        I think you are missing the fact that Leafs are being sold at a few dealerships in comparison to Versa being sold in all Nissan dealerships. Worldwide Nissan is not selling the Leafs in many countries, while they sell the Versa (and its variations under a different names) in just about every country on the planet. Just for example I live in the city with 40k residents and about 100k residents in the whole county, but if Nissan is not selling the Leafs in any of the 3 dealerships in this area. If they really want to I bet they can sell 5x more of them worldwide. The same applies to most if not all EVs, the constrain is not limited demand, but rather limited supply.

      2. evnow says:

        Wrong. The facility in TN will allow eventually to produce 200k cars. Nissan can’t make that many now – search this site for articles on Nissan’s effort at increasing production. Currently Leaf inventory is less than 30 days.

  6. Assaf says:

    2 cents:

    1. Those are the same analyst crowd who were bullish on stocks, home prices and the economy in general, right up to 2008. And that was their “professional” view about their own business, not something they are rather clueless about to begin with.

    2. The tiring old American-media tendency to turn everything into personality politics and hero-worship. Tesla is some exceptional phenomena, which *just happened* to be the 1st new automaker to become viable in the past 80 years, and it’s a pure *coincidence* of course that it was via EVs that this happened. Because all the other EVs out there are lousy cars, of course.

    Bend reality 180 degrees and twist it around, to fit your pre-confirmed notions and surely some narrow self-interest. Heckuva job as always, Morgan Stanley.

    1. Rob Stark says:

      1) What group of people that predict the future are 100% right 100% of the time? Have your prediction been correct 100% of the time.

      2)One of the few countries that has never had a dictatorship has a unique and singular problem with cult of personality?

      1. kdawg says:

        60% of the time I’m right every time. 🙂

        1. Assaf says:

          What kdawg said 🙂

          1. Assaf says:

            Plus – as @ffbj below reminded us – given Wall Street’s very recent track record on predicting TSLA, they should be the *last* people you should listen to on TSLA in particular and EVs in general.

  7. Omar Sultan says:

    Probably not a popular opinion here, but I do agree with this analysis.

    Tesla is building a car to appeal to a specific segment–the Model S stands on its own merits when a buyer cross-shops a segment (the article posted today). Most everyone else targets EVs for the niche buyer where “greenness” is the primary buying criteria, which is a limited adressable market.

    Seriously, if a typical buyer has a $50K budget, do you then they’ll likely opt for an i3 or a 3-Series and which direction do you think the BMW dealer will steer a buyer?

    O

    1. kdawg says:

      The difference is Tesla only makes EVs, so its not like they have something else they can offer.

      1. Brandon says:

        whats better than an EV?

    2. Assaf says:

      Omar hi,

      Good to “see” you here, remember you as the main documenter of the historic first Supercharger coast-to-coast after party 🙂

      You are correctly describing EVs’ original target niche in 2010-2012. But that doesn’t come close to explaining the current depth and breadth of sales.

      Here are some more markets targeted successfully:

      – The Leaf has done a very good job of entering mainstream, both as very affordable and worry-free 1 of 2 family cars, really the 1st car rather than the 2nd (being the “daily workhorse” one), and as the only car for those whose lifestyle fits it (not necessarily from a “green” angle).

      – The Volt could find many target markets – for example, people who want something like a Model S in terms of overall quality and EV-style acceleration, but cannot quite afford a Model S – but GM has not been actively looking for such a target, so after exhausting the green/early-adopter and government(?) fleet deals, it has stagnated.

      – Smart ED, MiEV and other subcompacts which are unfortuanately only compliance at this point, can easily target an urban, young/small-household but limited income market segment.

      – PHEVs in general, and in particular the 5-seat PiP and Ford PHEVs, all have mainstream appeal for affordability/gas-prices reasons, besides the “light-green” tint they offer.

      All these are not small niches by any means. Together they cover a good chunk of the entire market.

      As to BMW, they seem to be “doing a Leaf” with the i3, i.e. introducing it as a flagship model like Nissan did, rather than as a white elephant like GM is doing. There’s good reason to believe many dealerships will follow suit.

      Furthermore – and many thanks to Tesla for that – besides the “green” image that will still be part of the EV package for years to come, EVs have also become “cool”. It’s become a “thing” and it gets people curious, regardless of greenness (which doesn’t hurt in most places). That too affects all segments.

      1. Omar Sultan says:

        Hey Assaf:

        (I am always lurking here).

        Don’t get me wrong, I thing EVs have made huge strides in terms of sustained growth and I am glad to see it appears to be accelerating.

        It would seem to me that there is a natural market out there for folks that have green/efficiency/etc as their primary criteria and the current crop of EVs are meeting that need, but what happens once that is satisfied.

        We had ~100K EVs sold in the US last year out of 15M total vehicles sold. Good growth, but lots of upside. The question is how many of the current EVs are compelling to the typical buyer who is looking at more typical criteria like price, seating, storage, fun-to-drive? BTW, that is not a leading question, I am really not sure. Basically, how many of the current crop of EVs can “cross the chasm” with main street appeal?

        My fear is that incumbent vendors are not going to work all that hard at making any of these cars overly compelling, since, at the end of the day, they would rather sell you an ICE.

        O

        1. Assaf says:

          Omar,

          “The question is how many of the current EVs are compelling to the typical buyer who is looking at more typical criteria like price, seating, storage, fun-to-drive?”

          I thought that’s the question I was answering 🙂

          Look, last month 1 of every 40 Nissans sold in the US was a Leaf. It wasn’t one of their leading sellers nationwide – it’s 2nd tier now (#10, narrowly beaten by the Juke, Maxima and Murano). But it’s not a limited niche car anymore either, esp. considering the huge uphill acceptance challenge it has faced.

          http://nissannews.com/en-US/nissan/usa/channels/U-S-Sales-Reports/releases/nissan-group-reports-may-2014-u-s-sales

          So the Leaf has answered the question, even with its limited range and climate-resilience issues.

          The Mitsu Outlander PHEV is catching like wildfire in parts of Western Europe and doing well in Japan too. More generally PHEV versions of many ICE/hybrid cars, when offered consistently, are considered mainstream now.

          Don’t forget, overall the auto market is far more conservative than e.g. the gadget market. So everything takes a few years longer. But things are looking good.

          1. Omar Sultan says:

            I guess I am still a bit more cautious. I think the offerings are continuing to diversify and get stronger, but I don’t think we have crossed the chasm yet.

            O

          2. EnerGT says:

            How many Leafs would be sold without Govt tax incentives? When it stands on it’s own, it will be time to celebrate. I live in GA and have both a C-Max Energi AND a Leaf. The C-Max got me hooked on ‘driving’ and EV (so much better in EV mode than ICE). The Leaf then became the next purchase.

            I believe the PHEVs are what will bring the masses to electric vehicles. Once the masses get hooked, pure BEVs will begin to flourish. Rightly or wrongly, that’s the way it will be.

  8. ffbj says:

    Oh! Pulleese. What is most shocking to me is that someone was actually paid to write this
    drivel. Analysis? We don’t need your stinking analysis. Smears of oil on the page from the petro-dollars handed over to write this tripe.
    Yes, they can hardly deny the success of
    Tesla, a company they said would fail miserably just a few short years ago.

    The London Whale. Billions of dollars in fines, in the pocket of big oil. Oh yes we can certainly trust the unbiased analysis of that old warhorse MS, and the virtuous knight who sits astride that nag: Jamie Diamond.
    After the best month for ev’s ever and creeping up on 1%. Also according to my calendar 2020 is not here yet. So using projections that far out to support your position that ev adoption has failed, is patently absurd. Also no mention of the various surveys indicating how delighted people are with their ev’s in general.
    Why even bring up the compliance cars, specifically the Fiat since they are just made to comply with CA law in order to do business there.
    Sure ice’s will be around for a while. Even Musk says it would take 20 years to turn over a fleet, and that would be if almost everyone stopped buying ice’s.
    The ice is a dying, inefficient, polluting,
    complex, technology that despite improvements can’t compare to the efficiency of the electric motor.
    It’s a laugh that they also use hybrid technology as and example of why ice’s will triumph. News flash! Hybrids have electric engines, that’s what makes their mileage so good. Doh!
    A typical knife job, not worth a plug nickel.

  9. ffbj says:

    I also call B.S. on that comment about the car being fun to drive is more important than doubling the range.
    Mere unsupported speculation.

    1. Omar Sultan says:

      I dunno, after living with my S85 for 24K miles, I am not sure I would pay for a bigger battery–the caveat is that I have the advantage of living in CA with good SuperCharger density.

      We are in line for a Model X and thinking hard at getting the 60kWh battery (or whatever the equivalent is).

      O

    2. Alonso Perez says:

      I think it’s true beyond a certain range, certainly at the Model S’s range. A slow, longer range Model S would not have been nearly as newsworthy.

      Look at the Zoe. 0 to 60 in over 13 seconds and sales are pathetic. A car with those looks should have a 0 to 60 less than 10 seconds. Europe is the land of the GTI hot hatch, and they offer a car slower than diesel?

      It certainly has a large enough battery pack to do it. This was a design choice by Renault that makes no sense. It’s a deliberately hobbled car. I’d buy one, but I’m an EV Taliban, a niche demographic.

      A great question to ask Ghosn is why, with practically the same battery and with lower weight, the Zoe is more than three seconds slower than the Leaf.

      1. See Through says:

        It’s the motors – how big are they? How fast can they consume power to deliver quick acceleration?
        Battery pack size is like gas tank size -> range.
        Motor size is like engine size/efficieny -> power.

  10. vadik says:

    MS 0 ; BS 1.

    I mean their only argument to ditch all EVs is that somebody made an overly optimistic forecast years ago.

    And this fuel cell thing, the guy definitey has no clue what he is talking about.

  11. Spec9 says:

    Keep in mind that Morgan Stanley was a Tesla IPO underwriter.

  12. MrEnergyCzar says:

    Sounds like something an oil lobbyist would say….

  13. Wood Foss says:

    I tend to agree completely with this analysis, as a 2 year owner of the Ford Focus Electric with 32,000 miles on her.

    Owning an electric is fun, out the gate, but the fun of the electric car diminishes quickly over time and particularly when every time you stop you have to plug-in. Mine is a small vehicle virtually identical to the ICE version. The money saved on gas is working out to a wash with the price difference between the ICE and EV.

    But, I would buy the Tesla if it were in my budget!

    It is a statement car which I am glad I made, but few people want to make the same statement. The numbers are very telling. According to your charts, in the US, we will see 100,000 EVs sold this year. On a 7-8,000,000 vehicle market that is a drop in the bucket and a drain on the automakers profits. Think Edsel here…

    Where will it go? I am uncertain, I don’t think hydrogen or propane are practical, but they said that about electric for years. So we’ll see.

  14. No mention in the MS report that the other automakers, with the exception of Nissan, Chevy and BMW, do not advertise or promote their plug-in cars.

    Little surprise that they have not met “expectations”.

    When the CEO of a major automaker tells people not to buy his cars, little is left to interpret.

    Interesting that the Fiat 500e is the second most popular car in the Electric Car Guest Drive lineup, right after the Model S. Either the engineers didn’t get the memo, or Marchionne is crazy like a fox, and understands that the 500e is the only reason a whole lot of people have stepped back into a Fiat showroom after a few decades absence.

  15. Calitran Dresdener says:

    In my opinion, from an investment house that is expected to provide sound information and reasoned prognostication for the small investor this is both very poorly researched and written OR its author or the editor has ulterior motives, the first of which is to prop up continuing individual financial investments in the ICE tech. The article or press release opens a conversation on ICE, FCEVs, BEVs and EREV options but then doesn’t say anything useful and then goes on to say the Tesla S is sporty and suggest that ICE is still a good investment, I guess to purchase for personal transport or for R&D. I otherwise don’t get the goal of its release and don’t agree with the various conclusions made.

    Significant ICE improvements have been happening since the 70’s to one degree or another, though the expertise and applications have really taken off in the past 5 to 8 years improving mileage and performance. Everything noted in the article about the ICE being refined is fine, and advancements will continue, faster or slower than the present, but it’s still an ICE with limitations and lots of parts to put together and wear.

    As such, electric drive whether battery only, as an EREV using an improved ICE, a turbine, or hydrogen fuel cell, is the future, period. Go ahead, improve the ICE, continue fuel cell development or other portable energy providing mechanism, but from what I have (hopefully objectively) learned and believe to recognize as true (not being an expert in transportation engineering) electric mode, regardless of the tool that stores or generates the electrons is the future of transportation.

    It will be so not just for reducing petro sourcing or burning, not just for improving efficiency or reducing an inherent environmental impact, but because it will likely ultimately reduce complexity, certainly provide reduced maintenance and overall expense associated with operation and maintenance, provide a superior driving comfort experience even if the driving is automated, and though secondary to the benefit of society, the performance benefit to the individual I expect will trump all nostalgic desire to make noise and pass gas.

    The author references the “possible intent” of the OEMs is to slow down the regulatory expectations on EVs because of FCEV. It’s likely that I’m not a very astute fellow and so I may not exactly understand what point is being made here. Even if FCEV technology (I don’t buy into this myself) is developed faster than expected, this sort of vehicle is still an EREV. Is it because the burning of H is supposed to be “clean” and thus meet some sort of zero emission goal and shifting the focus to that will delay fed and/or state requirements that leave ICE tech in place for longer which is what “they” want? Who is “they?” The auto manufacturers, the petro industry, the greater uninformed and clueless general public, the investment houses and brokers or others I can’t fathom? To what end will the “they” benefit by slowing down electrification?

    The headline is an attention grabber but with or without Tesla (though thank goodness for Tesla – they got the big guys off their asses and I hope Tesla can continue to be competitive and innovate and stimulate) it is the electric car in some fashion that is here to stay and that while the ICE may always be useful in some capacity it is really the ICE that is being put to pasture as it were.

    With VIA and the other team that is mostly using the Ford trucks, with Tesla and the great start put forth by GM, with Nissan bought in and with Mitsu, Volvo, Porsche and the other Germans, the Chinese, Korean, and other Japanese and all the other automotive E-players not mentioned, electrification for efficiency and for performance is here to stay and improve at a far greater rate than the ICE alone can improve and be sustained.

    It is in the electrification of automobiles that is or will be the greater financial investment in the auto industry and I look forward to the future where I can drive as far as I want in the lap of electric drive luxury, utility and sporting performance. I hope Mark Reuss’ comments do bring us the C8 super hybrid (my C5 as fun as it is, is noisy, rough and not as much fun as it was – okay I’m getting old as the car is getting old) that I can afford to acquire in the relative near future.

    Boy this turned into a treatise. So be it. I wrote it so I’ll post it anyway, even if it’s too long to get read. Cheers.

  16. Pawel says:

    This proves that Wall Street Analysis is dead! Excellent discussion here. Perhaps it would make much more sense for all of us to invest in EV related companies than anybody who seeks advice from a Wall Street analyst.

  17. Breezy says:

    Tesla’s reason for being is the acceleration of electrificiation, in general…not 0-60 acceleration.

    Compelling performance vehicles that just happen to be EVs? Um, no.

  18. evnow says:

    Clearly they setout to present a particular POV – and used data selectively to “prove” that point. For eg. they talk about Volt sales stalling but don’t mention big increase in Leaf (or Energi, PIP) sales.

    They talk about 1% in 2020 – we are already at 0.75% in 2014.

    1. Wood Foss says:

      Correction – we are at 0.014% based on 2013 US vehicle sales.

      1. Jay Cole says:

        I think most people roll anything with a plug into the “EV”/adoption category – BEVS and PHEVs.

        Even this study from Morgan Stanley does as it references the Chevrolet Volt…and a big part of that 5% -10% market share forecast for 2020 was build on/because of the Volt – when expectations were that it was going to be selling in volumes of around 120,000 by now.

        No one was saying pure BEVs were going to account for 5-10% by themselves a “few years ago”…it always included the PHEVS as a big part. A “few years ago” it was pretty much the LEAF by itself as the only real world/viable choice for mass sales of a pure EV in the US.

        YTD Number/percentages…for fun

        May 2014 total sales: 1,608,693
        May Plug-in sales: 12,053

        .75%

        2014 YTD total sales: 6,742,948
        2014 YTD Plug-in sales: 42,570

        .63%

        If you want to go pure EV, then it is .33% for May 2014, .30% for YTD 2014 …BEV sales have seemingly come on much strong as time goes by – and perhaps as more people become aware of them/less afraid

  19. HVACman says:

    Nothing cures an ICE-addition like $8/gallon gasoline. I’m figuring two-three more years of $4 gasoline, then oil prices will become very volatile (and higher) and EV’s will no longer be niche vehicles.

  20. ffbj says:

    I should point out an error in my rather long, though, imo well written post. I was confusing MS with JPM. Though some may say all big banks are mostly the same. Sorry for that error.

  21. scott franco says:

    Lots of speculation in the article. The most worrysome would be the idea that by 2020, %1 would be a “good” sales figure for EVs.

    Ask yourself:

    If the Tesla Model S were selling for $35,000, how many people would buy one?

    The answer is that the car would be selling faster than water in the desert.

    So the point is the price. What people do and do not want or like is not the issue. People can’t afford it right now. Change the price, everything changes.

    1. Ericp says:

      The problem is not the price so much but people. Most people want a cleaner planet but most people having 50k to spend on a car will choose luxury or a V6 over an EV option. If people were buying these weird cars in large numbers, all manufacturers would devote efforts to building compelling EVs. I personnaly moved from a V8 M3 to an i3 and I wouldn’t go back.

      People often don’t want to pay 150$ more for a water heater that will save them 400$ in energy cost.

      When you factor in fuel savings over lifetime of EVs prices are not so bad…