Morgan Stanley remains bullish on Tesla (TSLA) as price cuts fail to trigger demand

Morgan Stanley reiterated an Overweight rating and $220.00 price target on Tesla Inc. (NASDAQ: TSLA) as recent price cuts fail to trigger the strong demand-response expected by the industry.

Morgan Stanley’s China team believe that Tesla's price cuts started a broader round of industry price reductions across EVs and now ICE/traditional nameplates. Unlike earlier cuts that triggered a strong demand-response, this round has not seen follow-through as consumers wait for further cuts.

The China team also believes that investors are beginning to appreciate the pricing war and stagnant demand and that it will take a more meaningful sales/price uptick into 2Q to restore investors' confidence. However, according to the team, the situation has potential to get worse as they expect to see a few more traditional OEMs likely reactively slashing prices in the next few weeks.

Analyst Adam Jonas wrote in a note, “We gauge a full-blown price war would urge consumers to stay sidelined and await more promotions/discounts to come. Vehicles price elasticity of demand is decaying as consumer’s pricing expectation has also been falling YTD. This might pinch the sales resurgence and order-intake that should supposedly pick up in March.”

Shares of TSLA are down 2.23% in pre-market trading on Monday.

By Michael Elkins | Tesla (NASDAQ: TSLA)

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