Morgan Stanley & Co. LLC analysts Adam Jonas, Ravi Shanker, Yejay Ying, and Paresh Jain ruminate on Tesla Motors Inc (NASDAQ:TSLA) and the overwrought “catching fire” stories in the last quarter. In their report, they contend that it’s time to move on from the “fire risk” story.
Has anyone noticed there has not been a Model S fire for the past 2 months? Here we stand today, 19 months after the launch with around 25,000 Model S’s on the road and 170 million vehicle miles traveled (our est). 3 fires (1 every 57 million miles vs. a US average of 1 every 15 million miles). No injuries. Just last week, General Motors Company (NYSE:GM) announced the recall of 370k 2014 Silverado and Sierra pickups for fire risk, with 8 fires reported since launch. Nobody’s asked us about that. A 20 minute software fix at a dealer – problem solved. As long as the fires don’t impact Tesla Motors Inc (NASDAQ:TSLA)’s addressable market, then this is just background noise to the most exciting auto story in generations. There may be any number of reasons not to own TSLA shares at $150. We don’t think fire risk is one of them. Time to move on.
Tesla Model X: This could be the sleeper car of 2015
If you’re thinking about a Motor Trend Car of the Year candidate for 2015, the Model X already has to be on a very short list. Details of the production version of the ultra high performance crossover should trickle into the market in coming months, with test drives later in the year. Look out for a significantly upgraded powertrain, improved active safety, a vastly improved interior and potentially the most advanced 4WD system of any production car. What would people think if this company won the award for the 2nd time with its 2nd fully designed
product? Just luck, right? Our one genuine concern about the Model X is that it may be so good that it could cannibalize the Model S. A high quality problem.
Tesla Motors Inc (NASDAQ:TSLA): Going Giga: Bigger forces at work
Investors are worried about Tesla Motors Inc (NASDAQ:TSLA)’s plans to build a lithium ion battery ‘Giga’ factory. Is it a risk? Of course it is. But arguably not as big a risk if Tesla Motors Inc (NASDAQ:TSLA) lets others take the lead on battery technology to peddle broadly. For Tesla Motors Inc (NASDAQ:TSLA) to control its own destiny, it must control the supply and intellectual property of its battery technology. We think this is sound industrial strategy from a company who knows where it adds value. While impossible to quantify at this point, success in this area will determine if Tesla can be much more important than just an auto company.