Investors should temper expectations that Tesla Inc. will earn profits in China, Morgan Stanley analyst Adam Jonas wrote, adding that he’s cautious about the role the country will play in the carmaker’s long-term strategy and fundamental value.

Jonas cited Chinese authorities’ decision to suspend customs clearance for Model 3 sedans, an issue that’s been the subject of ongoing local media reports this week. Flawed labels have held up the cars at ports and highlighted “the risks inherent in U.S. auto/tech firms conducting business in the PRC,” Jonas wrote, noting the sensitivity of data privacy, cybersecurity, robotics and artificial intelligence.

A total of 4,678 Model 3s that have arrived at Chinese ports may have issues, including misprinted or missing local-language labels, China Central Television said Wednesday. The flaws first surfaced earlier this week when Caixin reported that ports had suspended customs clearance of Model 3s due to problems with about 1,600 cars.

Tesla is fixing the labels under the supervision of customs officials, who will resume clearances after they pass review, CCTV said. The company said in a statement Tuesday that sales of the Model 3 in China aren’t impacted and that it continues to deliver sedans that have already been processed.

China Concerns

Morgan Stanley’s Jonas listed a host of concerns, including Tesla’s reliance on China having “constructive trade relations” with the U.S. American regulations on exports to the country also should be considered, including the Treasury Department’s Committee on Foreign Investment in the U.S., known as Cfius, and the “unquantifiable risks of technology transfer,” the analyst said.

Electric- and autonomous-vehicle technology may be regarded as having “dual-purpose,” Jonas wrote, which could limit the role of U.S. companies within China’s transportation industry, and vice versa. He added that Morgan Stanley’s China team is aware of dozens of domestic Chinese electric-vehicle startups.

Further ahead, Jonas sees the auto industry “morphing into a public transport utility operated as a public good.” That might naturally limit the role of foreign entities, as national and economic concerns come into play.

Morgan Stanley rates Tesla shares the equivalent of a hold with a $283 price target. The stock was little changed as of 10:20 a.m. Wednesday and has slumped since Chief Executive Officer Elon Musk announced plans to close most of the company’s stores and shift to all-online ordering.