Tesla, Rivian, FREYR and Ford seen standing out amid bumpy path for electric vehicles
Fahroni

Morgan Stanley sees a bumpy road for the automobile sector in 2023 after two years of price increases took auto affordability to the breaking point for consumers. The firm is especially cautious on electric vehicles with supply on the rise and demand starting to decelerate.
"We are preparing for a challenging FY23 outlook for auto earnings on demand decline (higher rates), deflation (lower price/mix) and unfavorable changes in the supply/demand balance for EVs. However, as the year evolves and as forecasts and stock prices decline, we are preparing for some potentially exciting value opportunities to emerge," noted analyst Adam Jonas. 
The overall forecast for automobile sales is for 2023 SAAR (seasonally adjusted annual rate) to be up 7% to 15.0M. The U.S. economy and financing conditions are seen as headwinds to auto demand, but increased inventories and production levels are expected to work in favor of higher sales levels.
For the EV sector, Morgan Stanley estimated global EV sales of 9.7M EV units and global EV penetration of 11.8% in 2023ecompared to 10.1% in 2022. For the U.S., the firm sees EV sales of 750K EV units and U.S. EV penetration of 5.0% in 2023 compared to 4.2% in 2022. Looking even further ahead, the EV forecasts for 2025-2030 were also reduced.
The EV forecasts are below expectations from the beginning of the year when the Green Tidal Wave thesis was riding higher. Now, Morgan Stanley thinks the market is too optimistic on EV penetration in the short term. Analyst Adam Jonas and team pointed to Tesla (NASDAQ:TSLA) cutting prices in China and seeing used prices fall for its older vehicles. In addition, Lucid Group (LCID) is noted to be seeing lower reservations and cancellations and Rivian Automotive (RIVN) stopped reporting reservations altogether. The firm's caution is also based on direct discussions with OEMs and suppliers throughout the value chain.
Looking at the 2023 setup, Morgan Stanley kept an Overweight rating on Tesla (TSLA) and Rivian Automotive (RIVN), with each having separate reasons to be seen as long-term winners. However, legacy OEs are anticipated to pair down their EV ambitions and pure plays in the sector are seen having a rough go.
Morgan Stanley's top 2023 auto sector stock picks are FREYR Battery (FREY), Ferrari (RACE), Ford (F), American Axle & Manufacturing (AXL), and Magna International (MGA). Meanwhile, the firm is cautious on Adient (ADNT), Avis Budget Car Group (CAR), and Lucid Group (LCID) with Underweight ratings in place.
As usual, Tesla (TSLA) is a battleground stock on Seeking Alpha with a Buy rating from Envision Research, Hold rating from Growth at Good Price and Sell rating from Bill Maurer all in the mix.