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Tesla CEO Elon Musk.
Shares of Tesla on Monday slid 3%, to $314, after Morgan Stanley's lead auto analyst, Adam Jonas - a reliable Tesla bull - downgraded the stock from "overweight" to "equal weight."He retained his target price of $305.
Jonas said he thought Tesla would struggle to deliver its Model 3 mass-market vehicle in 2017. The car is scheduled to launch in July, with a production ramp-up after.
Tesla expects to produce 5,000 Model 3s a week by the end of 2017, with that pace increasing to 10,000 at some point in 2018.
Jonas said he thought Tesla would deliver only 2,000 vehicles in 2017 and sell 90,000 in 2018 - figures the analyst considers to be below investor expectations.
The $35,000 Model 3 is a critically important car for Tesla as it transitions from selling all-electric luxury vehicles and pushes toward 1 million annual deliveries by 2020.
Jonas says Tesla is on the verge of facing competition from Silicon Valley tech companies that are casting their eyes on the potentially lucrative transportation industry.
"We are intrigued by how many investors we speak with view Tesla's biggest competitive risk as coming from the existing auto industry," he wrote. "We do not see it that way. We believe Tesla's most important competition will ultimately come from the world's largest, best-capitalized tech firms. Many of these firms (such as Alphabet, Apple, and others) are already testing fully autonomous vehicle fleets on public roads."
He added:
"While shared autonomy may not be a winner-take-all game, we have an increasingly difficult time imagining Tesla as the dominant player and as a stand-alone company longer term. We wonder if the firm is better off finding a partner that can help fund the necessary up-front investment while extracting greater value from the data produced by its machine-learning ecosystem.
"These may seem like issues that may take a long time to answer. But we wouldn't be surprised if some of the early clues are on display within the next year or so."
Jonas' views are consistent with his rather far-reaching thesis that the old business model of building and selling cars - which remain idle most of the time for their owners - will be replaced by a miles-driven model that favors shared mobility, autonomous cars, and software.
Beyond his rating downgrade, Jonas also said he thought Tesla would burn more cash in 2017 than expected - over $3 billion, versus $2 billion to $2.5 billion - and that the Chinese market wouldn't provide Tesla with immediate opportunities for global expansion, contrary to what some investors expect.
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