JP Morgan (NYSE:JPM) Assessment of Decrease in Oil Prices and Its Effect on Auto Industry

On Friday a research note was released by Ryan Brinkman, an auto-industry analyst at JP Morgan Chase & Co. (NYSE:JPM) Brinkman pointed out the effect that the decrease in oil prices has on the auto industry. Binkman expects the decrease in oil pricing to result in cost savings for consumers which will in turn increase the consumer’s spending. He also believes that the auto industry will benefit the most from the decrease in oil prices as opposed to other industries.

According to analysis the cost savings will have a positive effect on the following companies:

Ford Motor Company (NYSE:F)
General Motors Company (NYSE:GM)
Goodyear Tire and Rubber Co. (NASDAQ:GT)
American Axle and Manufact. Holding Inc. (NYSE:AXL)

However, Tesla Motors Inc. (NASDAQ:TSLA) is one exception that will not be benefitting from the decrease in oil pricing.

Generally when the gas prices drop, people try to avail that time by filling up their car tanks with gas and they tend to travel more on the road. People often plan trips which results in increased usage of the vehicles and the tires. Auto-part retailers and manufacturers benefit during this time due to the increase in demand.

During this time period, Brinkman has allotted an Overweight rating with a price mark of $19 to the stock owned by Ford (NYSE:F), showing return prospect of 26.41% from Friday’s closing amount of $15.03.

Analysts have allotted an Overall rating with a price mark of $47 to General Motors’ (NYSE:GM) stock, showing an upside prospect of 43% from Friday’s closing amount of $32.81.

During the decreasing gasoline prices, both Ford (NYSE:F) as well as General Motors (NYSE:GM) have been performing really well, by fulfilling the demands of the customers as far as SUV’s and pickup trucks are concerned. This year two new mid-sized trucks are being launched by General Motors (NYSE:GM), namely Chevrolet Colorado and GMC Canyon. On the other hand Ford (NYSE:F) began to deliver its latest aluminium 2015 F-150 truck. The truck is not only lighter in weight but also has a better fuel consumption and is good for economy.

As far as Tesla (NASDAQ:TSLA) is concerned, analysts believes that the decrease in oil prices will not have much of an impact on the company. The reason for this is that Tesla’s (NASDAQ:TSLA) present Model S sedan as well as Model X, which is due to be launched sometime next year are both directed at a slot based on their premium prices. However, it will be a major source of concern for Tesla (NASDAQ:TSLA) if the oil prices continue to be low or further fall down in the future, as it gets ready to launch its mass-market electric vehicle, Model 3 in the year 2017. Keeping the entire situation in mind, Brinkman pointed out the requirement to cut down the terminal value of cash flows for Tesla (NASDAQ:TSLA). Brinkman has a impartial rating for Tesla (NASDAQ:TSLA) stock, with $190 being the target price, showing a 13.4% downside potential from Friday’s closing amount of $219.3.