Tesla (TSLA) seen as able to ‘maintain a strong market position,’ gets support from Goldman Sachs

Tesla (TSLA) is seen as being able to “maintain a strong market position” by Goldman Sachs who upgrades the company in a new coverage update.

Amid the coronavirus crisis, several analysts are updating their model and view of Tesla.

Goldman Sachs auto analyst Mark Delaney is the latest to update its rating on Tesla and he sees the automaker able to “maintain a strong market position”:

We believe that the combination of Tesla’s product leadership (including its over-the-air updates to continue to improve vehicle performance), brand/early-mover advantage, vertical integration, and the long development cycles in autos (new cars can take 2-4 years to develop) will help Tesla to maintain a strong market position.

The analyst thinks that the auto industry is better prepared for the economic downturn than it was in 2008:

Importantly, based on our deep dive work on past cycles, balance sheets, and cash flows, we believe that the companies in our autos coverage are significantly better positioned to weather this current downturn than the one in 2008/2009 (even though we would not currently be buying stocks in the group broadly given the uncertainty about how long the current sharp economic slowdown will last).

Despite the economic downturn, Delaney believes that the global electric vehicle adoption is going to move from roughly 2% of the new light-vehicle sales in 2019 to 15% by the end of the decade.

In numbers, it would mean about 15 million electric vehicles sold in 2030.

Goldman Sachs sees Tesla as the “clear market leader” in electric vehicles and therefore, it is in a great position to capture a significant potion of those 15 million electric vehicle sales.

The analyst issued a $864 price target on Tesla’s stock, which was at around $725 per share today.

Electrek’s Take

I agree with Delaney’s logic, but he is stuck in this industry thinking of a super slow EV adoption this decade going from 2% to 15% over 10 years.

It’s going to be much faster.

Forget about climate change and air quality, which unfortunately doesn’t drive large purchase decision making like cars for most people.

With about a dozen great electric vehicle programs being launched in the next 3 years, there will be a massive consumer perception shift. They will see that the future is going to be electric and be reticent to buy a new gasoline car due to the resale value being at risk.

In my opinion, most people will agree that it will likely be an extremely poor financial decision to buy a gasoline car in 2025.

This will result in a crash in new gasoline car sales and electric vehicles will take over as fast as the industry can make them, which is going to be a lot faster than it is the case today — thanks to a more robust supply chain, especially with it comes to batteries.