Morgan Stanely, $MS, states it thinks Tesla, $TSLA, will make a phone

Develop a smartphone that functions as a pocket-sized version of the car.

"Will Tesla Do a Phone? Yeah, We Think So," said analysts in an emailed note to investors this week from Morgan Stanley.

Based on discussions with automotive management teams and industry experts, analysts concluded that the smartphone and connected car are converging: "The car is an extension of the phone. The phone is an extension of the car. The lines between car and phone are truly blurring," said the Morgan Stanley analysts.

With its 15-inch touchscreen and Tesla app, the Tesla is already essentially a "giant iPhone," as described by The Washington Post back in 2018.

For several years, Morgan Stanley has discussed Tesla's potential to expand into edge computing areas beyond the car. This forecast includes "last October when we described a mobile AI assistant as a 'heavy key.' Following Apple's WWDC, Tesla CEO Elon Musk re-ignited the topic by saying that making such a device is 'not out of the question.' As Mr. Musk continues to invest further into his own LLM/genAI efforts, such as 'Grok', the potential strategic and user experience overlap becomes more obvious." Grok is an AI chatbot developed by Elon Musk's AI company, xAI.

Musk expressed security concerns this week on X/Twitter over Apple's recent integration with OpenAI's ChatGPT. X users speculated whether Musk's reaction meant he could be considering a smartphone launch, to which he responded that the idea was "not out of the question."

Musk had a different stance in November 2023 at the New York Times DealBook Summit, stating, "I don't think there's a real need to make a phone. If there's an essential need to make a phone, I'll make a phone. But I've got a lot of fish to fry."

Currently, phones with Near Field Communication (NFC) capability and the Tesla mobile app can be used to lock and unlock the car, according to Tesla's Model 3 Owner's Manual. A Tesla smartphone could extend this functionality, serving as a 'heavy key.'