UBS tackles the auto sector amid the rapid-fire changes going on in the industry with electrification and mobility initiatives.
Tesla (NASDAQ:TSLA) is called the undisputed battery electric vehicle company still, with 43% of BEV purchase intenders considering a Model 3, Model X, Model Y or Model S. Despite its strong market position, Tesla's lead in EV powertrain is forecast to shrink as competition intensifies, while the autonomous vehicle opportunity is considered by UBS to be already fully priced in. That and new developments in China lead UBS to keep a Neutral rating on Tesla and lower its price target to $660 from $730.
Analyst Patrick Hummel: "Our key concern shorter-term is that Tesla's demand momentum in China is slowing, and our checks on the ground suggest that BEVs (battery electric vehicles) from domestic brands are gaining further ground vs. Tesla, which may trigger additional pricing action by Tesla and consequently lower gross margins."
For investors, early movers Volkswagen (OTCPK:VLKAF), General Motors (NYSE:GM) and Hyundai (OTCPK:HYMLF) are said to be likely to emerge as the best electric vehicle re-rating stories. UBS thinks the market is generally underappreciating the Mobility 2.0 opportunity for the legacy OEMs, which is said to provide optionality at current single-digit PE levels.