Morgan Stanley (NYSE:MS) said it is slashing its position in Tesla (NASDAQ:TSLA) stock, citing a “continued slowdown in the auto industry, intense competition among electric vehicles (EVs) and reduced consumer preferences” for EVs.
TSLA has been a part of Morgan Stanley’s model portfolio since March 2021, with the position increased in both September and December 2022. However, the stock was reduced in November 2023.
Since the last stake boost in December 2022, Tesla has delivered a 15% return, trailing the Russell 1000 Growth Index (RLG) by 46%, Morgan Stanley strategists highlighted.
“While we continue to hold a position in TSLA, due to the optionality of its various nonauto assets, we see an attractive opportunity to reallocate some of the position to other, less-volatile stocks that are not as economically sensitive and may have less pricing pressure,” they wrote.
Despite Tesla’s status as the leading electric vehicle company in the U.S., with potential growth avenues in robotics, AI, and energy storage, the strategists have decided to reduce the position to make room for stocks with higher earnings viability such as Spotify (NYSE:SPOT).
Earlier this week, the European Union announced that it would reduce planned tariffs on Tesla vehicles imported from China, lowering them from 20.8% to 9%. The EU is also cutting planned import duties for several other electric vehicle manufacturers.
These new tariffs will be in addition to the existing 10% duties already imposed by the EU on battery electric vehicle imports.
In June, the EU indicated it would impose higher tariffs on Chinese electric vehicle imports, arguing that these vehicles "heavily benefit from unfair subsidies" and present a "threat of economic injury" to European EV producers.