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Thursday, December 8, 2011

Morgan Stanley Delivers Some Heartbreaking News For Elon Musk And Tesla

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Thursday, December 8, 2011

Morgan Stanley Delivers Some Heartbreaking News For Elon Musk And Tesla

Morgan Stanley has downgraded shares of Tesla Automotive from Overweight to Underweight, chopping its price target from $70 to $44.

The stock is tanking 9%.

One big reason for the downgrade? Morgan Stanley has lowered its outlook for EV (electric vehicle) adoption. saying the whole space is "not ready for prime time."

So why has the firm lowered its outlook on the overall space?

Well for one thing, the makers of traditional cars are innovating!

2011 has witnessed a breathtaking level of technological innovation for the internal combustion engine that is ready or near-ready for market. We have been surprised by how quickly and aggressively the OEMs have moved to incorporate fuel-savings content into the model line-up.

What's more, the whole industry just isn't ramping as quickly as expected:

While we’re still in the very early innings of vehicle electrification, the commercial progress of EVs in the marketplace has been mixed at best, and largely been unimpressive to date. In the US market, we estimate total sales of xEVs (plug-in hybrids and pure EVs) to reach 18k units. While only slightly below our 19k expectation earlier in the year, it masks a real-time deceleration in the US market. Globally, the picture is worse. We expect xEV sales to reach 47k units in 2011, nearly 30% below our prior estimate of 64k.

Sales of the Nissan Leaf have declined 3 months in a row despite an accelerating US SAAR while GM admits it will fall well short of its 10k volume target for the Volt in 2011 despite allowing dealers to sell demonstration models. Negative PR surrounding post-crash-test electrical fires of the Volt battery have not helped consumer sentiment for the product.

Then there's the overall macro picture. The fact that Europe is in this big deleveraging phase means that a crucial market for electric vehicles is going through an unexpected amount of pain -- tax incentives for these new cars are likely.

Anyway, here's the new and old electric vehicle outlook.

Read »

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