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Tesla‘s increasing production rate and active resale market may be hurting the brand’s appeal and diminish demand for its cars, Morgan Stanley said on Friday, in a counter-intuitive note to clients.

“Many auto companies make great efforts to maintain and remarket their used vehicles to increase accessibility of the used product to customers who otherwise cannot afford to buy new … we note there may be a simultaneous price to pay in terms of eroding scarcity value,” Morgan Stanley analyst Adam Jonas said in a note to investors.

Jonas added that, at this stage, “the impact on the residual values of Tesla vehicles and the financial impact to Tesla and/or its customer base is unclear.”

The analyst is widely followed for his thoughts on Tesla and electric vehicles, as Jonas was one of the earliest on Wall Street to point attention to Elon Musk’s company. His latest note covered a broad range of points under the heading “Our thoughts on the ever-growing second-hand Tesla population.”

In the same note however, Jonas says all the cars on the road could help sales.

“With Tesla, we are witnessing a scale of on-the-road car population growth not seen since in the better part of a century,” Jonas said. “Adding more cars to the road is a form of ‘free advertising’ and promotion of the product to would-be buyers.”

Morgan Stanley estimates there will be more than 860,000 Tesla vehicles driving by the end of this year. That means there are “2.5 cars for every new one sold,” Jonas said. He added that this is “likely a contributing factor to decelerating demand.”

Morgan Stanley has an equal-weight rating on Tesla with a price target of $230 a share.

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