Morgan Stanley analyst and Tesla Inc TSLA bull Adam Jonas proposed a partnership route for legacy automakers such as Ford Motor Co F, General Motors Co GM, and Stellantis NV STLA to navigate the rise of Chinese EV dominance in the global market.
The Big Picture: Jonas emphasized that the mass adoption of electric vehicles (EVs) and China are closely intertwined, highlighting that trade barriers on China could hinder the development and adoption of affordable EVs in Western markets.
He warned about the high costs and time associated with diversifying from China, citing potential delays and obstacles in on-shoring EV and battery supply. Jonas argued that leveraging Mexican manufacturing and serving as a bridge for Chinese EV partnerships could offer a feasible path to on-shoring low-cost EVs.
Furthermore, Jonas stressed the need for partnerships as a solution for legacy automakers to establish a robust EV supply chain, suggesting collaborations with startups, Chinese firms, and even each other as potential avenues forward.
Implications: The growing concerns of legacy automakers regarding the onslaught of lower-cost Chinese EVs into the U.S. market have been underscored by industry leaders. Recently, Ford’s EV unit’s chief operating officer expressed apprehensions about Chinese EV makers posing a significant strategic threat, particularly in light of potential circumvention of U.S. tariffs on EV imports through operations in Mexico.
Similarly, Tesla CEO Elon Musk echoed these sentiments, warning about the potentially devastating impact of Chinese EV makers if trade barriers were removed.
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