Three factors are providing warning signs within the automobile industry, the head of Morgan Stanley's Global Auto Research Team said Friday.
"We think we're seeing some early signs of a bubble due to what we call the three Cs: credit, currency and capacity," Adam Jonas told CNBC.
"On the credit side, we're seeing some yellow flags. Banks are getting a little more aggressive in terms of credit availability. Subprime is back to where it was precrisis in terms of percentage of the new market. Credit losses are rising, albeit from a very low level. Leasing is going gangbusters, approaching 30 percent of the market."
On CNBC's "Fast Money," Jonas said that "yellow flags" means that the run in auto stocks isn't necessarily over.
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"It can run further," he said. "That's why we say we're in the early stages of a bubble, but we're seeing a warning."
Jonas also said that depreciation of the Japanese yen was also putting pressure on the industry. "It's like handing Japanese companies a $300,000 check to improve their product, and they will over the next 12 or 24 months."
Lastly, he added, "Capacity is probably the most underreported aspect here. As the industry's recovered, we're adding back over 100 percent of the capacity that we took out in the downturn. Those are dicey ingredients for me."
Subprime auto lending, including increasingly popular eight-year loans, could continue to increase its share of the new-car market.
"There's evidence that subprime lending could go on for much longer and make the previous peak of subprime auto lending look small," he said. "Like all bubbles, they start small before they pop."
Increased incentives in pickup trucks, however, weren't necessarily a warning sign, Jonas said.
"There seems to be a little bit of gamesmanship going on between the Ram, the F-150, the Silverado, right now month to month," he said. "GM pulled forward some sales with blowing out the '13 inventory. Ford's come back, more aggressively discounting its F-150."
Jonas said that it was part of a market finding equilibrium, adding that he wasn't concerned as long as the housing industry continued to recover.
One stock on which Jonas sounded positive was Tesla.
"We think it's a pretty fairly valued stock at around $150, $160," he said. "We're overweight because actually the average downside to a stock we'd cover right now is over 5 percent, so that actually screens pretty positively given the concerns we have for the broader group."
Quarterly earnings would provide a clue as to whether shares of Tesla had become frothy, Jonas said.
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"We expect a good set of numbers, and certainly making the coolest car in the world doesn't hurt the stock," he said.
Challenged by Stephen Weiss of Short Hills Capital on the high valuation multiple for Tesla vs. that of General Motors, Jonas said, "Auto stocks are usually cheap versus the market. Tesla's got a lot to prove. Even their own CEO would admit that."