Tesla is now facing off with a new threat in the auto industry, but Morgan Stanley analysts aren’t buying the idea that hydrogen will beat Tesla. Adam Jonas, Ravi Shanker and Paresh Jain have been among the most vocal Tesla Motors (NASDAQ:TSLA) bulls, and they think the new emphasis on hydrogen cars is nothing but hot air.
Advancements in hydrogen technology?
“The auto industry’s sudden double-down on hydrogen technology is a little too obvious to us,” they wrote in a report dated June 25, 2014. “Over the past few months, the industry has been bubbling with support for the future of hydrogen fuel cell vehicles.”
John Buckingham: Busting the Myths & Seven “Valuable” Themes for 2021 [ValueWalk Webinar slides and video]
John Buckingham's presentation titled, 'Busting the Myths & Seven "Valuable" Themes for 2021'. The webinar for ValueWalk Premium members took place on 2/23/2021, and was followed by a Q&A. Stay tuned for our next webinar, Q4 2020 hedge fund letters, conferences and more John Buckingham Principal, Portfolio Manager, Kovitz Editor of The Prudent Speculator newsletter Read More
They note that in particular, Ford Motor Company (NYSE:F), General Motors Company (NYSE:GM), Toyota Motor Corp (ADR) (NYSE:TM) (TYO:7203), Hyundai Motor Co (KRX:005380) have had strong comments regarding hydrogen car technology. At the same time, they have been de-emphasizing electric vehicles. In spite of all the noise around hydrogen cars, however, the Morgan Stanley team said they’re not aware of a “recent breakthrough” in hydrogen fuel cell technology.
Tesla, the lone EV standout
They have noticed though that most electric vehicles haven’t been able to achieve their targets for volume. They also say that Tesla Motors’ Model S has stood out as the only winning electric vehicle in the market so far. The company has been focusing on dominating the global electric vehicle market. In fact, Tesla has even partnered with Deutsche Bahn to build its Supercharger network in Germany, a country where some of the world’s best cars have been born.
The Morgan Stanley analysts note that Tesla Motors is far ahead of the world’s biggest automakers—despite the fact that they have more money and technical resources. They also say that none of the world’s major automakers have made any significant effort in building infrastructure for electric vehicles. They don’t expect any of them to do so in the near future either.
And without Tesla Motors, they note that the auto industry’s electric vehicle has stalled. While Cadillac sold only 52 units of its ELR electric car in May, Tesla sells twice as many in a single day. They believe Tesla has drawn a line in the sand with the aim of making itself the dominant electric car maker.
Tesla battles hydrogen cars
Jonas and his team said it’s no coincidence that Tesla Motors opened its patents during a time when competitors were pushing hydrogen-powered cars. They say the more traditional automakers try to push out electric cars, the more Tesla will probably “open up its expertise to those who are willing to use it.”
They remain just as bullish on Tesla Motors as ever, saying they expect Tesla, rather than hydrogen cars, to “corner the market” for zero-emission vehicles. Rules set forth by the California Air Resources Board target 30% of the U.S. automaker being zero-emission vehicles by 2025. Meanwhile Tesla keeps accumulating zero-emission credits in the states that follow the CARB rules, although it has not sold any of them in a year. They think competitors are just using hydrogen-powered cars to battle Tesla.
“We see the FCV [hydrogen fuel cell vehicles] push as a diversionary tactic to slow down, if not completely reset, a regulatory framework scripted to support mass adoption of EVs that don’t appear ready for prime time,” they wrote in their report.
The Morgan Stanley team reiterated their Overweight rating and $320 per share price target for Tesla Motors.