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In an increasingly competitive electric vehicle market, Tesla (TSLA) - Get Tesla Inc Report is starting to figure out one of the key production issues it's faced in churning out large numbers of its cars. 

"We believe Tesla continues to clearly streamline its battery manufacturing efficiency process to a point that is a major competitive advantage vs. encroaching EV competitors, "wrote Wedbush Securities analyst Dan Ives on Wednesday. "After spending a few days with the Tesla team and seeing the evident changes around streamlining its battery/auto production efficiency, we walk away incrementally more positive on the long-term bull story for Tesla." 

Tesla investors have begun to realize that the company would not have the EV market all to itself forever. Hyundai, Kia and Nissan are all launching competitors to the Model 3 this year, while Volkswagen (VWAGY) plans to start producing EV's in the U.S. by 2022 according to a press release. In China, Nio (NIO) - Get NIO Inc. (China) Report has emerged as an EV player, and officially listed shares on the New York Stock Exchange in August 2018. 

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But "with more automation, robotics, data analysis, and streamlined capacity in Giga, we believe [Tesla's] target goals of producing enough batteries for 7k Model 3 cars per week is a very attainable goal by year end," Ives wrote. Add to that the fact that "encroaching EV competitors who have not gone through the rigorous learning process Musk & Co. have battled through over the past few years," and Tesla has an advantage, in Ives' view. 

Ives' assessment comes as other analysts have expressed concern over battery production. "We are concerned that the company may not successfully produce its Standard Battery version in time in order to compensate for a potential drop in demand for its high-end vehicles," wrote Needham and co. analyst Rajvindra Gill, in a January note. Tesla may now have to rely on stronger sales of the lower-priced $35,000 models, which won't help gross margins. Ives highlighted the fact that demand for the $35,000 model isn't exactly a shoo-in. 

But Ives' recent finding reaffirms his view that Tesla can be consistently free cash flow positive by 2025. His base case assumes $20 in earnings per share and $5 billion of free cash flow in 2025, supporting a $390 per share valuation. That's a 46% increase over the current stock price, which has slipped 16% so far this year, as Elon Musk has found himself in more hot water with the Securities and Exchange Commission.  

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