MorganStanleythe recently dropped Tesla Inc. TSLA as the top automaker in the US, remains optimistic about the Elon Musk-managed company.

The Tesla Analyst: Adam Jonas is Overweight and has a price target of $220 on Tesla shares.

The Tesla thesis: The recent cuts in electric vehicles across all industry participants are not a fad but a trend, Jonas said in a note. Investors should expect more price cuts, with cost leader Tesla calling the shots, he said.

See also: Everything you need to know about Tesla stock

Tesla’s price cuts, the analyst said, are rational competitive behavior based on a variety of factors, including:

• It is Size and cost leadership in the global EV market.
• It the existence Pioneer in setting industry standards for industrialization.
• Recovery of supply relative to demand.
• Falling lithium prices.
• Improving car affordability.
• competitive pressure.
• Slowdown in market growth and lending.
• Jonas noted that there is a gap in the market for $25,000 vehicles paying under $400 a month. Cheaper EVs have some headroom as many legacy automakers abandon entry-level ICE offerings, he said.

The analyst has raised the specter of lower margins for the lower-priced vehicles, but sees a longer-term payback in monetizing the installed base from recurring revenue from services, aftermarket, charging, software, etc.

“As the supply/demand environment continues to change, we would brace for potentially lower margins (on gross and OP) than consensus is currently projecting for Tesla,” the analyst said. This could potentially lead to more opportunistic entry points into the stock, according to the analyst.

However, Morgan Stanley said it believes Tesla’s EV competition, including both startups and older players, will continue to struggle to catch up, driving restructuring and consolidation across the EV landscape.

Price promotion: Tesla closed Monday’s session up 1.73% at $183.25, according to Benzinga Pro data.

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