Tesla TSLA Gets Bullish Outlook from Morgan Stanley as All Model 3 Variants in US Qualify for Full $7,500 Tax Credit

Image: US Department of Energy (via @SawyerMerritt/Twitter)

Tesla (TSLA) gets bullish outlook from Morgan Stanley as all Model 3 variants in the US qualify for the full $7,500 tax credit. Analysts noted that Tesla is best placed to navigate the geopolitical and economic challenges of rewiring the EV battery supply chain.

Morgan Stanley has affirmed its Overweight rating and $200 price target for Tesla, according to investing.com. This comes after the manufacturer announced that all variants of Model 3 now qualify for the full $7,500 tax credit offered under the Inflation Reduction Act (IRA).

Under IRA provisions, the $7,500 consumer tax credit for EVs is split into two parts. Electric vehicles can receive $3,750 if 50% of the value of their battery components were manufactured or assembled in North America. The remaining $3,750 can be obtained if 40% of the cost of critical materials is sourced from the US or another country that has a free trade agreement.

Tesla announced late last week that all variants of its Model 3 sold in the US are now eligible for the full $7,500 federal tax credit. Prior to this, only Model 3 Performance was eligible for the full tax credit. This means that Tesla has likely made adjustments to its supply chain to meet both IRA requirements.

Analysts wrote in a note, “Tesla is in the midst of an industry-wide EV price war, falling margins and EV market deceleration. If the company wasn't benefitting from significant government incentives (IRA) and price cuts (30% on Model Y YTD), Tesla could be burning cash – yet despite these headwinds, we remain OW. Within our coverage, we see Tesla as best positioned to navigate the geopolitical and economic challenges inherent in re-wiring the EV battery supply chain. More than 'AI play,' we believe Tesla's role in building a de-risked EV supply chain is underappreciated by the market.”

On Tuesday, the US Department of Energy updated its website confirming that all new Tesla Model 3s and Model Ys sold in the US are eligible for the full $7,500 EV tax credit.

© 2023, Eva Fox | Tesmanian. All rights reserved.

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