Investing.com -- JPMorgan analysts said in a note Tuesday that they recommend investors sell Tesla (NASDAQ:TSLA) and instead buy auto parts suppliers Aptiv (NYSE:APTV) and BorgWarner (NYSE:BWA), arguing that supplier shares offer "relative value."
Despite underperforming automakers since tariffs were announced, auto parts suppliers face "materially less regulatory headwind," according to the bank.
JPMorgan notes that shares of the average U.S.-based auto parts supplier have underperformed the S&P 500 and U.S. automakers since March 25, the day prior to official confirmation of 25% automotive sectoral tariffs.
This is despite the "direct burden of tariffs falling squarely on automakers and not suppliers."
Additionally, JPMorgan says other regulatory changes, such as the "seemingly likely termination of two separate EV subsidies," are expected to materially weigh on some automakers, potentially costing Tesla "up to roughly half of its global EBIT."
The analysts point out that "No company we cover has experienced as much decline in 2025 consensus EPS since March 25 as has Tesla (-32%)."
Moreover, they state that "the Tesla brand seems increasingly controversial, competition is intensifying (especially in China but also around the world) and the automaker recently experienced a key departure."
JPMorgan suggests "selling Underweight-rated TSLA and using the proceeds to buy what we view as superior risk/reward auto parts suppliers, including Overweight-rated Aptiv (APTV) and BorgWarner (BWA)."
They highlight that these suppliers "stand to benefit from long-term industry electrification," but offer "this secular growth leverage at a much more reasonable 9.3x and 7.6x P/E, respectively," compared to Tesla’s 141.2x.