Tesla’s dominance of the U.S. electric car market is under increasing threat as rival Rivian recently secured a new $1.3 billion financing, raising its total funding for 2019 to $2.8 billion. The sum, which is double Morgan Stanley’s capital expenditure forecast for Tesla for fiscal 2019, would make Rivian a “real” competitor.
“Tesla may have a big lead today, but we expect that to change over time,” a team of Analysts at Morgan Stanley in New York, led by Adam Jonas, wrote in a note to clients on Tuesday.
Analysts say Rivian could attract more capital injections than Ford and General Motors will invest in electric vehicles in 2020, enough to build a superfactory in a low-cost area. That money would also be enough to build two or three new electric cars.
Jeff Bezos, Amazon’s chief executive, said the investment in Rivian was to bring 100,000 electric trucks to the market by 2030.
Tesla currently controls about 80 per cent of the US electric car market, but Morgan Stanley’s team of analysts said Tesla’s current position was “unsustainable in the long run” and expected a start-up with talent and capital to be “the next strong competitor”.
In addition, analysts believe that traditional carmakers are eroding the market share of electric vehicles.
Fiat Chrysler and Peugeot, for example, announced a $50bn merger in November as a threat.
At the time of the deal’s announcement, Eric Schiffer, chief executive of Patriarch Organization, a Los Angeles-based private equity firm, said the deal would create “intense competition” over the next five years and be “one of the greatest dangers” to Tesla’s survival.
This week, Tesla’s share price reached $420 for the first time, reaching the $420-a-share privatization level that CEO Elon Musk referred to last year.
After Tesla’s share price broke through $420, Musk quipped on social media, “Wow… The stock price is really high.
In August last year, Mr Musk’s suggestion on social media that he would privatise the company at $420 a share was “funded” and led to a lawsuit by the Securities and Exchange Commission for misleading investors.
Over the next 16 months, Tesla’s share price fell to a three-year low of just under $177 a share in June, then recovered and broke through $420 on Monday.
However, in a report released Monday, Jonas said Tesla’s current share price is too high for a automaker.
Investors will eventually no longer see Tesla as a technology company, the analyst said, leading to a plunge in its share price to levels comparable to that of other companies in the auto industry.
Morgan Stanley gave Tesla’s shares a neutral rating. Jonas’s target price of $250 means Tesla’s market value has fallen by 40 percent to about $45 billion from $75 billion on Monday.
“We’re not optimistic about Tesla’s long-term prospects, especially as time goes on, and we think Tesla will become more and more like traditional automakers,” Jonas said. “We are ready for a brief surge in popularity, but doubts about its sustainability. “