Analysts at Morgan Stanley believe Tesla (NASDAQ:TSLA) remains a relative winner in EVs long-term, despite the recent challenges the company has faced.
"While we acknowledge the challenges to EV demand near-term (the Core Auto business only represents $68 of our $320 PT), we believe that Tesla is a relative winner in EVs long-term," said the firm in a research note.
Assessing the new EPA regulations, the investment bank noted that the final rule requires OEMs to meet average emissions limits for 2027 to 2032 across their entire product lines. However, there is flexibility.
The investment bank explained that "OEMs can comply by boosting sales of plug-in hybrid vehicles in addition to BEVs to reach their desired powertrain mix across the entire fleet."
For Tesla, Morgan Stanley believes the regulation disincentivizes near-term competition and helps set the stage for the Elon Musk-led company to represent a larger share of the global EV market.
"We remind investors that deflation drives consolidation, and the winner(s) in EVs will be those firms who can guarantee the supply of the battery metals at the highest scale and lowest cost," added the bank. "We struggle to see anyone who can compete with Tesla and BYD at this stage."