Morgan Stanley's Adam Jonas remains bullish on Tesla even as shares drop Thursday following the electric vehicle maker's latest investor day. Tesla shares were down about 7% in midday trading. Wednesday's investor day was long on vision but short on specifics on any new Tesla products. Regardless, Jonas reiterated an overweight rating on Tesla, saying the Elon Musk-led company will fend off competitors as a pricing war heats up in the electric vehicle sector. "Tesla's audacious efforts on vertical integration are about to pay off. EVs are far too expensive today. Tesla gave a number of drivers for a 50% cost reduction for its next-gen platform," Jonas wrote to clients in a Thursday note. "In a race to the bottom, we seriously question how the competition can keep up." TSLA 1D mountain Tesla shares 1-day Jonas said competitors will "need to change or face potential obsolescence risk," as Tesla plans to ramp up spending to more than $170 billion to build out a manufacturing base for its electric vehicles and other services. He said the vertical integration in Tesla's Austin facility allows Tesla to "iterate far faster and with less waste" than its peers. "We expect to see most, if not all, of today's legacy auto company executive teams study the materials presented today and to tour the Giga Austin plant as they have toured the Tesla Fremont facility in years past," Jonas said. "Over time, we would expect the forthcoming innovations brought to market by Tesla become the industry standard, ultimately used by all automakers not unlike how Henry Ford's moving assembly line, William Deming's quality movement, and the Toyota Production system became auto industry norms," he said. The analyst's $220 price target represents just roughly 8% upside from Wednesday's closing price. Tesla shares have surged 64% in 2023, after falling 65% in 2022. — CNBC's Michael Bloom and Lora Kolodny contributed to this report.