02:05 PM EST, 01/13/2025 (MT Newswires) -- Tesla (TSLA) is set to make "great strides" in autonomous vehicle development over time, with an initial introduction of its unsupervised AV fleet in cities likely next year, Morgan Stanley said in a note e-mailed Monday.

In October, the electric vehicle maker unveiled prototypes of a two-seat vehicle called "Cybercab" and a 20-person vehicle, "Robovan."

Morgan Stanley raised its price target on the company's stock to $430 from $400 following a review of Tesla mobility, or robotaxi, with the business seen contributing $90. The brokerage continues to see the EV maker's stock as a top pick.

Morgan Stanley said its base case calls for 7.5 million vehicles in the Tesla mobility fleet by 2040 and revenue per passenger mile of $1.46. Alphabet's (GOOG, GOOGL) Waymo operates at $2.40 per mile, in line with Uber's (UBER) US gross bookings, the brokerage said in a note to clients.

"While we expect an initial city introduction of Tesla's unsupervised (AV) fleet in 2026, we do not implicitly assume mass deployment of (AVs) in our Tesla mobility forecast until beyond 2030," Morgan Stanley said. "While a reassessment of self-driving policies at a national level could be inevitable, in our view, with the incoming (Trump) administration, we believe Tesla still faces significant hurdles to overcome in terms of technology, testing and permitting required for commercialization near term."

President-elect Donald Trump is scheduled to take office Jan. 20.

Morgan Stanley projects US ridesharing miles out until 2030, with roughly 5 billion trips likely in 2030, at which time it expects Tesla mobility to constitute 1.4% of all trips in the country. The brokerage expects the robotaxi to start operating at 8 hours per day, increasing to 12 hours. Robotaxi trips are projected to include goods and parcel movements, according to the note.

"For years, we've tried to focus investor attention on the potential for Tesla's leadership in EV hardware to convert vehicle owners into 'subscribers' generating highly recurring revenue," Morgan Stanley said. "While Tesla has had some modicum of success on this front to date, we believe recent advancements in (artificial intelligence) and AV, combined with (Chief Executive) Elon Musk's place of influence within the Trump administration are helping to accelerate investor attention on the (more than) 1 billion miles traveled per day we forecast Tesla will achieve from its global vehicle fleet by 2030."

The brokerage lifted its bull case valuation for Tesla to $800 from $600, while its bear case valuation moved to $200 from $170, according to the note.

"As we look ahead to (2025) and beyond, we expect to see (Tesla's total addressable market) aperture further expand to broader domains, many of which are still not included in buy-side or sell-side financial models for the company," Morgan Stanley said.

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