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00:00Adam I feel like it was in some ways a reluctant call because you were under weight over the summer day thing changed fundamentally with actually Tesla or is this more of a macro call now. Oh look at Tesla. We just think it's a must own here and I say that because we frequently speak with investors that say Adam I want to put together a long term Eevee or a V exposed portfolio but I'll never own Tesla. And we kind of take a deep breath and say well then you run the risk of not only the company that can make all the other stuff you do own obsolete. And so while we we do have better ideas and our recommendations for EDI Navy exposure than Tesla one of our most important messages to investor is that you still have to own Tesla as a bit of insurance due to their leadership and ability ability to attract and importantly to deploy capital. And I think the next year or two you're going to see them really dial that up as they as they become an infrastructure company drafting on all these projects and infrastructure bills all over the world. Adam just to be clear good morning it's guy you're not saying that you shouldn't own other TV companies you're just saying that Tesla needs to be part of the mix in terms of the portfolio that you're putting together. Yes that but also that due to the fact that Tesla has zero internal combustion angle meant and is in a position during an arms race type of you know forces to attract capital and talent perhaps more efficiently more advantageously without having to defend any of the melting ice. That is something we think is underestimated. So so sure there's lots of legacy companies there. All if you listen to what they're saying they all sound like they're Tesla. And in many ways they're frankly obsessed with Tesla. They wouldn't. If you listen to 30 seconds of a Volkswagen or GM or you'd think they didn't sell any internal combustion cars and it turns out they sell to 98 percent of their everyday sites they still suffer from a much lower multiple. And and Tesla's I trading on some pretty punchy multiples you could argue with. We can debate that point. But let's just walk into one side. Your Volkswagen is gone from what 120 to 240 in the space of about six months. You do wonder whether there's more these guys who these guys were valued as if they were going out of business. Yeah. Now they're starting to get a little bit of the Tesla Halo. I'm just I'm just wondering whether you get a bigger bang for your buck by owning some of or a mix of all of these rather than focusing on Tesla. Great great great question guy. And Volkswagen is covered by Harold Hendrix out of London. He has an equal weight. We think that there's great potential for Volkswagen and for many other legacy items. The value of their assets may still be potentially very very undervalued by investors. The thing that we think is being ignored is the not the ninety eight percent of the revenues that's coming from ISE maybe dramatically overvalued guy. We're running scenarios where the value of ice is massively negative. And so these auto companies have the burden of meat managing out. This is best just like toxic tort like tobacco like liability and still being able to attract ESG money to be an easy winner. And we think that that is going to prove it's going to force these companies into these uncomfortable but necessary strategic outcomes. But it's not like everyone's owning an Eevee tomorrow. I mean it's the same thing with oil and gas industry. It's not like tomorrow. No one uses coal or oil anymore. It's not about tomorrow. I think that the investors we engage with understand this will take decades to see through. And analogies to the rollout of the electric utility grid. Candles didn't just collapse overnight. Horse and carriage shared the road with the auto automobile for 20 years. Plus fixed wing aircraft and originals were in the skies at the same time. So it's just that what the market sees and knows is happening. Those are the bets that are being made today. Adam where is the value in Tesla. Is it as you say as it always is an infrastructure company. Is it in the chemistry. I'd be curious to know your views on who you think is going to come out with a solid state. And if that's not Tesla is that a problem that you're kind of more cautious on China as well. I'm interested to see kind of where that valuation kind of stacks up versus the others as well. What what is Tesla. Because I'm still years after Tesla was launched confused as to this kind of shape shifting valuation model that is applied to this company. So I think a good heuristic if you think about the value of Tesla is that it's a think about Apple NIKKEI. One of the worst kept secrets in tech is that Apple is developing a car. How would a company like Apple or fill in the blank other mega tech companies. How would they approach transportation. How would they approach autonomy electrification networking software A.I. we use. It's more than just unit times price. OK if you solve for just units for Tesla of course you get these really ridiculous things like Tesla needs 70 percent market share. And of course then that reinforces people saying I'll never own Tesla. But we think Tesla is an installed base play growing one million cars on the road to then 30 40 million cars by the end of the decade and getting an average revenue per unit or an R2 from their monthly active users and getting software like software derived revenues from that installed base. When you start doing that frankly you have Tesla not covered by old fashioned auto analysts like me. If Frank I genuinely believe this guy if if we had Morgan Stanley do our job properly over some number of years it will be covered by our CAC software team by which because it will make sense. That'll be the model and they can comp it versus those types of stocks. Instead of looking at a legacy auto company and saying Tesla looks expensive and then drop the mike. So how do you. OK that's one way to look at that. So Tesla becomes a tech company. But did the tech companies become car companies like. How do you see. Yes the apple cart. So this is important. We think that Volkswagen obviously as a national champion and one of Germany's largest private employers they're gonna make a run at ease and they'll have some degree of success. We don't doubt that. So you could say that Elon might be annoyed or a little you know distracted by Volkswagen. But what he thinks he's well. Well we think he's really focused on are the apples and that genre. Those are the ones that can really really get a big chunk of the market globally and in the US. So we think that that those risks that has led to risks are mega tech getting into transportation and being able to do things that Tesla does and even more right. Because they can attach to the ecosystem. The other concern which guy brought up is it's not it's not only to single out China or even Tesla but we think as the automobile becomes a transport and utility like telecom and electricity you'll see national champions and national security walls going up where these assert where this industry isn't global anymore. And it's not right to have a U.S. private company taking people around in the streets of harm over time. One final one final threat which which I was think about when I think about Tesla as well. And I think she was saying about the migration to kind of software like multiples. What does your modelling tell you about the valuation of Tesla. If we get bond yields where we're kind of we're at one point six now so we get to two so we get to three. So we get to four. How does that change the valuation case for Tesla. It does not mean mathematically it can only hurt it. There's just no way around that. You know I guess the question is does it hurt it more than any other opportunity that's looking at five or 10 trillion dollar TAM trying to disrupt it. So ostensibly there's no way around your answer. You got me. What. I think it depends who you ask though. If you asked software and tech hardware people about Tesla. Many of them look at it as strikingly good value if you ask auto people and people in my world about it. They say I can never own it. It's it's ridiculously valued. Maybe the truth is somewhere in between. Maybe it's both.

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Tesla Is a 'Must Own' Stock Now, Says Morgan Stanley's Jonas

Adam Jonas, Morgan Stanley head of global auto and shared mobility research, says investors need to own Tesla stock and he thinks the automaker will benefit greatly from the U.S. infrastructure package. He speaks on "Bloomberg Markets." (Source: Bloomberg)

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