Tesla Motors Inc (NASDAQ:TSLA)’s Model S sedan is pricey. Its pricing begins at $70,000 and goes upward of $100,000 with various options. Many fear that the Elon Musk-led company will disrupt the global automobile industry despite its hefty price tag. But the company has a cost advantage over its traditional rivals.

Tesla Motors Inc Gaining A Cost Advantage Over Rivals

Tesla will see cost reduction while others run into trouble

The International Strategy and Investment (ISI Group) said in a research note, obtained by Neil Winton of Forbes, that it has initiated coverage of the stock with Buy rating and $320 price target. ISI Group analysts said other automakers will have to invest significantly in systems to clean up their carbon emissions to comply with regulations mandated by the European, Chinese and U.S. governments. Tesla cars are free from carbon emissions, so the company won’t have to take a hit.

European fuel regulations demand mileage of at least 57.2 miles per gallon by 2021. United States has set it at 54.5mpg by 2025. ISI analysts estimate that conventional automakers will end up paying up to $1,500 per vehicle in penalty due to these costs. In contrast, costs for Tesla will fall 17.3% because of the scale and technology advances.

The research firm believes Tesla can easily achieve its annual sales target of 500,000 units by 2020. The company is scheduled to launch Model X crossover next year. Pre-orders for the vehicle have already surpassed 20,000. The San Francisco-based company will get a big boost when it launches the mass-market Model 3 in 2017.

Lux Research bearish on Tesla

However, Lux Research is skeptical about Tesla’s future prospects. The Boston-based research firm believes the Gigafactory will cause about 50% over-capacity of Lithium-ion batteries. Lux Research added that the Gigafactory would reduce costs by only $2,800 per vehicle. While the company is eyeing 500,000 units in sales by 2020, Lux analysts expect annual sales to reach only 240,000 units in that time frame.

Yesterday, Morgan Stanley issued a bearish report on the stock, triggering a more than 9% decline in Tesla shares. Though Morgan Stanley maintained its Outperform rating, it said Tesla stock was getting ahead of itself.