Tesla (TSLA) may need to lower prices further to sustain sales following a potential electric vehicle tax credit elimination, especially with increasing competition in China and Europe, UBS said in a note Monday.
"[The] removal of EV consumer tax credits hurts Tesla's US competition more than Tesla, so they are relative winners and a wider gap could open over time," UBS said. However, this action is "not an absolute positive for US EV and Tesla demand."
The EV maker's significant income from regulatory credits will be considered "at risk" if environmental agencies get challenged, UBS said.
President-Elect Donald Trump's other possible policy changes, including the creation of a friendlier regulatory environment for artificial projects and closure of investigations into autopilot and full self-driving features, could benefit Tesla, the investment firm said.
While easier regulations might support Tesla's robotaxi plans, there aren't many strict federal rules to relax and major technological challenges still prevent the widespread deployment of fully autonomous vehicles, UBS added.
UBS maintained a sell rating for Tesla while raising its price target to $226 from $197.
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