Tesla's electric car sales will suffer due to increased competition from German automakers, according to J.P. Morgan.
The firm reaffirmed its underweight rating on Tesla shares, citing the electric car pipelines from Mercedes-Benz, BMW and Audi.
"Tesla has, to date, faced relatively little competition in the market for luxury electric vehicles, and so we think shoppers have been willing to cut the automaker some slack when it comes to some aspects of service and build quality," analyst Ryan Brinkman wrote in a note to clients Friday. "When similarly priced high-end long-range electric vehicles become available from prestigious brands with strong reputations for both service and build quality, we believe this could represent a meaningful headwind for Tesla."
Tesla's stock closed down 3.3 percent Friday.
The analyst said Daimler, the owner of Mercedes-Benz, has said it will launch 10 battery-powered electric vehicles by 2022. He also noted Audi's electric vehicle pipeline.
"We met with Audi, which appeared the most aggressive over the near-term, targeting the debut of a 310 mile range (95 kWh battery pack) 'e-tron' vehicle sized between a Q5 and a Q7, with an €80,000 price tag (nearly ~$100K)," he wrote. "These range, size, and price configurations seem designed to go toe-to-toe with the Tesla Model X."
Brinkman reaffirmed his $185 price target on Tesla shares, representing 38 percent downside from Thursday's close.
Tesla did not immediately respond to a request for comment.
The company is slated to report its first-quarter earnings results on May 2, according to its website.