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Tesla  (TSLA) – Get Report shares were falling on Friday after analysts at Jefferies downgraded the stock on concern that the company won’t be as dominant in the electric-vehicle space as some assume.Â
Jefferies analysts downgraded the stock to hold from buy while lifting its price target on the Palo Alto, Calif., company to $650 from $500.
“We don’t believe Tesla can dominate autos given industry structure and politics, but multiple challenges to the auto business model (EVs, batteries, software, autonomy, design-to-manufacture and direct selling) ensure a durable competitive edge, with a ‘messianic’ brand reaching far beyond autos,” Jefferies analyst Philippe Houchois said.
Shares of Tesla at last check were down 2.6% to $610.91.
While the firm is confident of the electric-vehicle space, with expectations of falling battery costs and increased adoption, Tesla is still playing in a field dominated by legacy companies like General Motors  (GM) – Get Report, which are also innovating.Â
The biggest opening Tesla has is that legacy companies have failed to address the valuation gap: startup EVs and their high market capitalizations vs. legacy companies with relatively lower valuations. This could grant the newer companies an open runway to viability, according to Houchois.
Tesla has a market capitalization of nearly $600 billion while GM is valued at about a tenth of that.
“Shares of Tesla and EV startups have built up the terminal value and access to capital [that original-equipment manufacturers] have been denied for years,” the analyst wrote.
“With damage to multiples already done, this is bullish for [OEMs] willing and able to proactively address stranded assets. The industry may be changing for the better with less complexity, but low entry costs and lower thresholds for [battery electric vehicle] scale may slow consolidation.”