Here's Wall Street's take on how to play the auto market right now, covering Tesla, Rivian and more

Published Tue, Mar 8 20228:46 PM EST

Lucy Handley @in/lucy-handley-b2b0a61a/@lucyhandley

Here's what analysts from some of Wall Street's top investment banks have to say about auto stocks, as Russia's invasion of Ukraine continues , helping to send oil to 14-year highs . UBS Tesla and Volkswagen should benefit as governments look to reduce their dependency on Russian oil, according to UBS analysts in a research note published Monday. "As western-world countries are likely to introduce policies to reduce dependency on Russian oil & gas, we think the shift to EVs will accelerate even further, not least because the TCO [total cost of ownership] advantage becomes even bigger vs. conventional cars due to rapidly rising gasoline bills," they wrote. "This should favor Tesla and the fastest-moving legacy OEMs [original equipment manufacturers], especially VW," UBS added. The bank is has a neutral rating on Tesla and a buy rating on VW. Auto suppliers including Valeo , which has increasing exposure to EVs through its charging stations and powertrains, as well as Faurecia , are favored by UBS. The bank has a buy rating on both and notes that Russia only makes up a fraction of sales for both companies. UBS noted that other manufacturers including BMW (neutral-rated) and Mercedes (buy-rated) have stopped selling cars to Russia, but said the impact would be limited as sales there only make up about 2% of European auto sales. However, UBS warned that if the conflict accelerates, traditional automakers could be particularly badly hit — Russia produces around 40% of the world's palladium, a metal component of catalytic converters used in combustion engines. Morgan Stanley The outlook for EV makers could be clouded by the sky-high prices of battery metals such as nickel, however, which is a key ingredient in stainless steel and a major component in lithium-ion batteries. On Tuesday, the London Metal Exchange suspended nickel trading after prices doubled to $100,000 a metric ton . In a note Monday, Morgan Stanley warned the cost of producing an electric vehicle is getting higher by the day . "It's probably time for investors to take auto company earnings forecasts down," Morgan Stanley's Adam Jonas said in a note Monday. Read more Nickel surge just raised the input cost for an electric vehicle by $1,000, Morgan Stanley estimates In a separate note, Jonas noted that Ford last week announced that it plans to produce over 2 million units by 2026 — and questioned whether this would be possible given the supply issues in nickel and other metals used in EVs. "We are growing increasingly concerned at the ever widening gap of company EV targets and the actual physically available/refined capacity of battery metals (cathode materials, etc.) to supply them," he wrote. "This is not a question of capital near term … no amount of capital can create new Nickel mines by 2024." Goldman Sachs Goldman Sachs has also noted the potential impact that supply constraints in battery metals could have on the autos industry. In a note from Feb. 28 — when battery metal prices were rising, but not stratospherically — the bank's analysts, led by Mark Delaney, noted that as well as accounting for 40% of the world's palladium supply, Russia accounts for 6% of global nickel supply, 6% of aluminum and 4% of copper. "While electric vehicles do not need catalytic converters, nickel is a particular consideration given that nickel is an important cathode input for some EV batteries, and battery materials have generally been in tight supply/demand. Nickel prices have risen substantially over the last year," the analysts stated. In a separate note on Monday, looking ahead to EV maker Rivian 's earnings on March 10, and colleagues said that production and delivery figures would be a key focus. "[T]here have been a myriad of cost and availability pressures (e.g. semis, shipping, raw materials) for the industry overall, and we believe that the war in Ukraine could exacerbate these issues." Goldman also noted that a number of automakers had halted production at some factories due to parts shortages. "Several European OEMs (such as VW, Renault, BMW and Mercedes) have stated that their supply chains have been disrupted and/or are at risk due to sourcing of parts from Ukraine (such as wire harnesses), and we believe the risk tied to European auto production has increased," Delaney added. Wolfe Research In a note from March 8, Wolfe Research's Rod Lache said he now expected lower production numbers from Europe's automakers. "For the near term it will be difficult to ascertain which factor is having a bigger impact—Supply chain disruptions or macro weakness. But this probably won't matter," he said, cutting production forecasts by 2 million units to 16.3 million units. He also cut his price target on both Ford and GM (to $19 from $22, and to $67 from $86 respectively), noting a negative impact on the companies from rising gas prices as consumers look to more eco-friendly options. Russia's war on Ukraine — and the subsequent fears of supply shortages — has sent gasoline prices to 14-year highs in recent days . Wells Fargo Wells Fargo has highlighted a potential shortage of semiconductors, an important component in autos, in a March 3 research note. "Reports estimate that 90% of semiconductor-grade neon used to produce chips is from the Ukraine. Our semi team believes the exposure is likely lower as large chipmakers like Micron & Intel expect limited disruption. However, any small disruption is [a] risk to the fragile semi recovery," the bank's Colin M. Langan stated. Wells Fargo also expects broader complications for German automakers. "German OEMs and suppliers operate [around] 49 production sites in Ukraine and Russia, according to German Auto lobby group, VDA. These plants largely support their operations in W Europe," Langan wrote. — CNBC's Elliot Smith and Michael Wayland contributed to this report.

A Tesla dealership in Colma, California, U.S., on Wednesday, Jan. 26, 2022.

David Paul Morris | Bloomberg | Getty Images

Here's what analysts from some of Wall Street's top investment banks have to say about auto stocks, as Russia's invasion of Ukraine continues, helping to send oil to 14-year highs.