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