A cornerstone of the Tesla story may be crumbling amid indications that the company’s envisioned battery price advantage could evaporate long before the company’s Gigafactory has gone into full swing. An analyst note from Morgan Stanley says that Chinese battery suppliers may cut their prices by 35%-40% in 2017, while still making a profit. On Thursday, shares of electric vehicle battery maker Samsung SDI dropped 4% on the news, while competitor LG Chem was down 1.8%. Tesla stock was unchanged in after-hours trading.

In the note cited by Barrons, Morgan Stanley analyst Shawn King said:
“According to Gaogong Industry Institute, some EV makers in China have proposed that battery vendors cut prices by 35-40% in 2017. Our China analyst Jack Lu sees this proposal as likely to proceed, as some battery vendors in China could still make a decent profit after such a cut.”