Post by highskier on May 21, 2018 16:33:29 GMT
I wonder if it would be worthwhile to buy Blink Charging (BLNK) or other charging companies to help build out the network, obtain more complete control and create a standard of the charging infrastructure, and increase cash flow?
Tesla's Supercharger Network Is Booming -- Here's Why That's a Concern
Tesla plans to open thousands of Supercharger stations. But there is a problem to ponder here.
Bret KenwellMay 20, 2018 2:20 PM ED
When people think of Tesla Inc. (TSLA - Get Report) , they usually think about its current fleet of cars: The Model S, X and 3.
Some may think of the coming Model Y or Roadster convertible, some will undoubtedly think about Tesla's Model 3 production woes and some will think of CEO Elon Musk. Very few will stop and think about the company's Supercharger network.
However, Tesla's Supercharger network is growing at a great pace. In fact, at a record pace, according to Electrek. Through April, the company has added 121 new stations.
There wasn't a lot of information known about Tesla's plans for future sites, but Musk has now helped to clear that up. Well, sort of. Musk says that thousands of new Supercharger stations are "going through permitting/construction" and that the company would publish an updated map in the next few days. Indeed, the automaker's interactive map shows plenty of stations scheduled to come online before the end of the year.
However, Musk didn't say how long or when these stations would come online. So while "thousands" of locations are coming, we don't know over what time frame. However, some investors are surely wondering how much all of this is going to cost and what it means to the company.
Valuing the Supercharger Network
On the automaker's most recent conference call, Musk replied to a question about the Supercharger network by saying Tesla was open to other automakers using the network, provided they shared the proportionate costs to their vehicles' use. The listener then asked why Tesla would do that rather than keeping the network exclusive, as the Supercharger network seems like a viable moat - to which Musk called moats lame and the ensuing Musk vs. Buffett situation was born.
But it raised an interesting point - is the Supercharger network a moat or isn't it?
Musk indicated that the rate of innovation is the true moat. That may be true to an extent, but then why go about building so many charging stations by itself? Why not partner with another company or companies, or let a third party do the work?
We don't see gas stations sorted by Ford Motor Co (F - Get Report) , General Motors Co (GM - Get Report) or Fiat Chrysler (FCAU - Get Report) vehicles, so why should electric car charging stations be that way?
We've seen this concept with the Ionity charger, which is launching in Europe. By the time the company's done building out its current plans for rapid-charging stations, it will be only second behind Tesla in terms of station count. While it's got Mercedes (Daimler), BMW and Volkswagen on board as partners, others aren't so sure, one of them being Tesla.
Further, leading U.S. automaker executives have been in support of a gas tax that would help contribute to the $1 trillion infrastructure plan Washington has been discussing. But in those plans, auto leaders want to make sure that technology is a focus -- not just fixing potholes and building bridges. One of those discussions is electric charging stations.
Even by allowing other car companies to use Tesla's charging network and sharing the costs, Tesla's still the one that has to pay for, organize and build the location. Perhaps Musk views it as a way to increase the adoption of electric vehicles, which bodes well for Tesla. But that trend is going Tesla's way anyway, regardless of Supercharger access.
While we try to answer the first question on whether the Supercharger network is a competitive moat for Tesla, we're faced with a second question: How is Tesla going to pay for more of them?
The Bottom Line
Why Tesla would want to significantly expand its Supercharger network seems simple: The larger the network, the more charging that can be done and the more convenient it is for customers. That's obvious. But how much is it going to cost, where is that money coming from and is it even worth it?
The company's financial metrics are all moving the wrong way: Debt is up, cash is down and cash flows are negative. Tesla did slash its CapEx budget from $3.4 billion to $3 billion, but with so many projects on the way, there's little doubt Tesla will need to raise some cash at some point. At least, that's the consensus on Wall Street even if Tesla is willing to do anything necessary to avoid it.
Granted, the company's biggest focus right now is profitably producing the Model 3. But at what point is it worth asking whether there's a better way of going about the charging infrastructure?
TheStreet presents on May 22: "How to Stomach Market Volatility." Hosted by Fisher Investments, the exclusive live webinar will give you the tools to successfully navigate market volatility and discuss why having a wealth manager is more critical than ever before. Quickly register for the event here.
Some may think of the coming Model Y or Roadster convertible, some will undoubtedly think about Tesla's Model 3 production woes and some will think of CEO Elon Musk. Very few will stop and think about the company's Supercharger network.
However, Tesla's Supercharger network is growing at a great pace. In fact, at a record pace, according to Electrek. Through April, the company has added 121 new stations.
There wasn't a lot of information known about Tesla's plans for future sites, but Musk has now helped to clear that up. Well, sort of. Musk says that thousands of new Supercharger stations are "going through permitting/construction" and that the company would publish an updated map in the next few days. Indeed, the automaker's interactive map shows plenty of stations scheduled to come online before the end of the year.
However, Musk didn't say how long or when these stations would come online. So while "thousands" of locations are coming, we don't know over what time frame. However, some investors are surely wondering how much all of this is going to cost and what it means to the company.
Valuing the Supercharger Network
On the automaker's most recent conference call, Musk replied to a question about the Supercharger network by saying Tesla was open to other automakers using the network, provided they shared the proportionate costs to their vehicles' use. The listener then asked why Tesla would do that rather than keeping the network exclusive, as the Supercharger network seems like a viable moat - to which Musk called moats lame and the ensuing Musk vs. Buffett situation was born.
But it raised an interesting point - is the Supercharger network a moat or isn't it?
Musk indicated that the rate of innovation is the true moat. That may be true to an extent, but then why go about building so many charging stations by itself? Why not partner with another company or companies, or let a third party do the work?
We don't see gas stations sorted by Ford Motor Co (F - Get Report) , General Motors Co (GM - Get Report) or Fiat Chrysler (FCAU - Get Report) vehicles, so why should electric car charging stations be that way?
We've seen this concept with the Ionity charger, which is launching in Europe. By the time the company's done building out its current plans for rapid-charging stations, it will be only second behind Tesla in terms of station count. While it's got Mercedes (Daimler), BMW and Volkswagen on board as partners, others aren't so sure, one of them being Tesla.
Further, leading U.S. automaker executives have been in support of a gas tax that would help contribute to the $1 trillion infrastructure plan Washington has been discussing. But in those plans, auto leaders want to make sure that technology is a focus -- not just fixing potholes and building bridges. One of those discussions is electric charging stations.
Even by allowing other car companies to use Tesla's charging network and sharing the costs, Tesla's still the one that has to pay for, organize and build the location. Perhaps Musk views it as a way to increase the adoption of electric vehicles, which bodes well for Tesla. But that trend is going Tesla's way anyway, regardless of Supercharger access.
While we try to answer the first question on whether the Supercharger network is a competitive moat for Tesla, we're faced with a second question: How is Tesla going to pay for more of them?
The Bottom Line
Why Tesla would want to significantly expand its Supercharger network seems simple: The larger the network, the more charging that can be done and the more convenient it is for customers. That's obvious. But how much is it going to cost, where is that money coming from and is it even worth it?
The company's financial metrics are all moving the wrong way: Debt is up, cash is down and cash flows are negative. Tesla did slash its CapEx budget from $3.4 billion to $3 billion, but with so many projects on the way, there's little doubt Tesla will need to raise some cash at some point. At least, that's the consensus on Wall Street even if Tesla is willing to do anything necessary to avoid it.
Granted, the company's biggest focus right now is profitably producing the Model 3. But at what point is it worth asking whether there's a better way of going about the charging infrastructure?
TheStreet presents on May 22: "How to Stomach Market Volatility." Hosted by Fisher Investments, the exclusive live webinar will give you the tools to successfully navigate market volatility and discuss why having a wealth manager is more critical than ever before. Quickly register for the event here.
