Tesla going all-in on autonomy as China ’may have already won the EV battle’: MS

Investing.com -- Morgan Stanley said in a note Tuesday that it believes Tesla (NASDAQ:TSLA) is shifting its focus from cars to autonomy as the competitive pressure from Chinese automakers intensifies. 

“TSLA is moving away from ’car’ and going all-in on autonomy,” analysts wrote in a note Tuesday, pointing to the accelerating pace of innovation in China’s electric vehicle (EV) market.

Xiaomi’s upcoming YU7, its second EV, was highlighted as a key example. “It looks like a Ferrari (NYSE:RACE) Purosangue or Aston Martin (LON:AML) DBX but will be priced like a VW or low-spec Model Y,” the firm said. 

Morgan Stanley (NYSE:MS) added, “China may have already won the EV battle. Who can win the autonomy war?”

The YU7 follows Xiaomi’s successful SU7, which drew 120,000 pre-orders within 36 hours of launch. 

Morgan Stanley cited Ford CEO Jim Farley’s recent comments on the SU7: “But (at) the end of the day, it’s management’s responsibility to beat the SU7 straight up in a street fight.” 

Analysts warned, “It may take many years before Ford could have a comparable product to the SU7 or YU7 on dealer lots.”

According to Morgan Stanley, Xiaomi’s EV business could reach 233 billion RMB ($32 billion) in revenue by 2027, which is on par with Tesla’s auto sales in 2020.

The firm also believes, “China EVs are coming to US shores – we think it’s just a matter of time,” and suggested, “you can’t keep the best product away from the best consumer for very long.”

As competition rises, Morgan Stanley noted, “market expectations around Tesla’s near-term automotive business remain too high,” and Tesla’s pivot to autonomy is part of a broader strategy “extending far beyond four wheels.”

The bank maintained an Overweight rating and $410 price target on Tesla shares.