Morgan Stanley lead auto analyst Adam Jonas published a research note this week in which he outlined the “structural advantages” the electric car has over vehicles powered by traditional internal-combustion engine.
Jonas’ views stem from his out-there notion that in the future, we won’t drive around in a way that even remotely resembles how we do now.
For example, he doesn’t think that people will want to actually own cars.
“As vehicular mobility potentially moves from a private ownership to professional fleet management of millions of vehicles providing an on-demand service, firms will be able to amortize the costs of technologies and infrastructure that may not be economical in a private ownership model where a car is only driven 10,000 miles per year,” he wrote.
Jonas is zigging here, while everybody else is zagging. The electric-car boom has become a bust. Big car companies are building EVs but not selling very many. Meanwhile, most electric-car startups have gone bankrupt or disappeared. The one major exception is Tesla — a company that Jonas has been been reliably bullish about, with a target price of $465 (shares are trading on Tuesday at $247).
Ultimately, for the future that Jonas envisions to become a reality, a big hurdle has to been surmounted: batteries need to get cheaper. Jonas believes that the price of batteries could be cut down to a fraction of current levels with, if costs are shared with multiple owners.
No one stands to benefit more from that development than Tesla, because CEO Elon Musk’s company doesn’t just build cars — it’s also constructing a huge battery factory in Nevada. But cheaper batteries also means that the EV market isn’t as moribund as it looks from the outside. Rather, it simple needs to have the most expensive part of the vehicles made cheaper. Then the economics look much better.
So Tesla is in an ideal position to benefit on both sides of this dynamic. It can make a sell batteries; and it can retain and grow its position in the electric-car market, ideally positioning itself for the end of the gas-burning vehicle that Jonas foresees.