Tesla Superchargers are shown in Mojave, California, U.S., March 11, 2019. Picture: REUTERS/ MIKE BLAKE
Tesla Superchargers are shown in Mojave, California, U.S., March 11, 2019. Picture: REUTERS/ MIKE BLAKE

Munich/ Frankfurt — Tesla was delivered another blow on Tuesday by Morgan Stanley analysts who slashed their worse-case scenario for the share price to just $10 over concerns the electric-car market is saturated.

“Demand is at the heart of the problem,” analysts led by Adam Jonas said in a note. “Tesla has grown too big relative to near-term demand, putting great strain on the fundamentals.”

Jonas lowered his “bear case” for Tesla shares from a previous estimate of $97, which assumes Tesla misses its current sales forecast in China by about half, and kept a price target of $230. The stock fell 2.6% to $200 a share in premarket trading.

Tesla has drawn criticism for weak deliveries. The company handed over just 63,000 cars in the first quarter, yet expects to deliver as many as 100,000 cars in the second and four times that for the year. Hitting the full-year target is going to be a “Herculean task”, Wedbush Securities analyst Dan Ives said.

To boost demand, Tesla will have to aggressively expand into China, offer lower-priced sport utility vehicles and supply mobility fleets, said Jonas. Trade tensions between the US and China and new competitors put this strategy at risk.

“We give Tesla credit for tapping into the world’s largest EV [electric vehicle] market for a number of years” in China, Jonas said. “We strongly suspect a host of national champions to emerge.”

Tesla has declined 38% since the start of 2019 and on Monday breached the $200 a share level, before closing 2.7% lower at $205.36. CEO Elon Musk last week called for a “hardcore” review of all the company’s expenses amid warnings of potentially severe fallout from a fatal crash involving the Autopilot driver assistance system.

Musk also raised concerns over the company’s cash burn, referring to Tesla losing $700m in the first quarter. The carmaker raised about $2.4bn in capital recently, but Musk said this would not last long.

Tesla is not alone in battling weaker global markets, including China. Germany’s central bank warned the nation’s automotive industry — one of the key pillars of Europe’s largest economy — is facing more trouble as China’s slowdown deepens. The slump, combined with US-China trade tensions, comes just as incumbent carmakers are spending heavily to develop electric cars.