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Tesla To Benefit More Than Legacy Auto From Biden’s $174B EV Bill - Morgan Stanley

A note to clients out by Morgan Stanley says auto investors can't afford to not have Tesla in their portfolio. The note also discusses how the $174 billion Biden EV tax incentive will disproportionately benefit Tesla.


Tesla reported a record delivery number for the quarter ended March 31. In Q1 2021 Tesla produced more than 180,000 Model 3s and Ys and delivered north of 184,000 vehicles.

This is the most vehicles Tesla has delivered in a single quarter and it is also an astonishing 110% increase compared to delivery numbers for the same time last year.

Tesla’s delivery numbers for the quarter are even more impressive considering the entire quarter Tesla hasn’t produced the Model S and X. Tesla has been retooling the production lines to produce the refreshed version of the vehicles.

Tesla initially said Model S & X deliveries will begin starting from the end of February. However, there are signs that point to Tesla running into production difficulties with the new vehicles.

Following the blowout quarter, a number of analysts are increasing their Tesla price target. And those who aren’t are at least sounding more bullish about the EV maker. One such financial firm is Morgan Stanley.

In a note out to their clients, Morgan Stanley says “auto investors face greater risk NOT OWNING Tesla shares in their portfolio than OWNING Tesla shares in their portfolio.”

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Besides the blowout quarter, one important point Morgan Stanley raises for Tesla’s continued success is the potential for the EV maker to disproportionately benefit from President Biden’s proposed 174 billion dollars electric vehicle infrastructure bill.

The bill is expected to bring back the $7,500 federal EV tax rebate. The bill is also expected to allocate tens of billions towards charging infrastructure, converting the 600,000 vehicles in the federal fleet to BEVs, and go towards supporting BEV manufacturing.

If the bill passes it should create a boon for Tesla, legacy OEMs, and new entrants alike. However, according to Morgan Stanley, there are few reasons Tesla could still be disproportionately beneficiary. Although there are signs customers are delaying their Tesla purchase till the bill passes.

The first point Morgan Stanley points out is the bill will accelerate EV sales this should be good for any company trying to sell electric vehicles. However, as EV sales grow this also means lower sales of internal combustion engine (ICE) vehicles.

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That would mean lower sales even if legacy automakers aggressively tried to roll out EV production. And since Tesla only sells electric vehicles policies incentivizing EVs should only be a positive for the company.

Tesla Refreshed Model S

The second point Morgan Stanley raises is “Tesla has a higher volume of EV products in the pipeline that will be rolled out at a higher volume over the next 3 to 5 years vs. most other OEMs.”

And finally, Morgan Stanley says “Tesla has a more vertically integrated battery supply strategy vs. most other OEMs.”

Another point I would add is legacy automakers are directly subsidizing Tesla’s growth when they purchase green credits from the EV maker. Just last week Volkswagen entered a deal with Tesla in China where the German automaker will pay Tesla hundreds of millions to purchase green credits.

Morgan Stanley auto analyst Adam Jonas currently has an outperform rating on Tesla stock and has a price target of $810 per share.

So what do you think? Is Tesla better situated to benefit from the $174 billion EV infrastructure bill than other automakers? Also from legacy OEMs and new EV makers such as Rivian and Lucid which one do you think is more likely to succeed? Let me know your thoughts down in the comments below.

For more information check out: After Tesla’s Win Case Against Rivian To Go To Trial Also, see Tesla Giga Texas To Cost Only 400 Million According To Leaked Internal Documents

Tinsae Aregay has been following Tesla and The evolution of the EV space on a daily basis for several years. He covers everything about Tesla from the cars to Elon Musk, the energy business, and autonomy. Follow Tinsae on Twitter at @TinsaeAregay for daily Tesla news.