Morgan Stanley auto analyst Adam Jonas told CNBC on Wednesday that Tesla CEO Elon Musk's controversial behavior is actually welcomed by some investors.
Musk's strategy has been "play to win" or "play to dominate," Jonas said, along with "wanton disregard for traditional business communication norms."
"While that can ruffle some feathers along the way, many investors absolutely adore that and see that as a strength," Jonas said on "Squawk Alley."
Musk has in recent days pushed back against health officials in Alameda County, California, over his desire to resume production at Tesla's main U.S. car plant in Fremont, which is located in the county. Musk ultimately reopened the facility this week in defiance of local Covid-19 health orders, practically daring authorities in a tweet to arrest him. He has previously called such health orders "fascist."
Alameda County officials appear to be nearing an agreement with Tesla over its reopening plans provided adequate worker safety protocols are in place.
During this dispute over the Fremont plant, Musk also said on Twitter that the electric vehicle maker may move operations out of California. Jonas, who was one of the earliest bullish Wall Street analysts on Tesla, said it is economically "challenging" to produce vehicles in California, given that it is "arguably one of the most expensive places in the world."
"There is no doubt in our mind that over time, that Fremont's proportion of global production will go down and we think the next plant is clearly going to be in Texas," Jonas said, noting that Musk's SpaceX has a launch site in the Lone Star state.
Shares of Tesla fell 2.3% on Wednesday to around $790. Morgan Stanley has a $680 price target and equal weight rating on the stock.
Jonas said Tesla is "not immune" to widespread economic damage wrought by the coronavirus. "It is way too soon. There's a lot we're going to learn once they open up as to where true demand is in places like Europe and the U.S, mainly outside of China, which is where our concern is," he added. "We think expectations could use a bit of resetting before we revisit that recommendation."
For the auto industry in general, Jonas said there are early signs that demand for vehicles may recover from their coronavirus-related drop sooner than expected. Sales in April were about 70% higher than his expectations, he said, and May is showing positive signs, too.
Demand is not where it was before the crisis, Jonas said, "but the pace of recovery in demand, we think, is going to significantly exceed the recovery of production."