Tesla Could Be Worth $37 With Charging System Plans

Tesla Motors (NASDAQ:TSLA) recently unveiled plans to construct a network of “Supercharger” electric car charging systems across the U.S. and abroad. The company says that the system is superior to any other charging technology currently available and has the potential to revolutionize the electric vehicle industry by alleviating concerns such as limited range and lengthy charging times. ^[1]

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The system provides over 90 kilowatts of power and takes just 30 minutes to recharge a car’s battery by 50%. The Supercharger device will come with the 85 kWh Model S as a standard feature and will be available as an upgrade option for the 60 kWh variant. Access to the charging stations will be available free of charge to all Model S customers.

Tesla has currently set up six supercharging stations at various locations in California and will expand the network across high traffic corridors in the United States by next year. It also has plans to set up a similar infrastructure in parts of Europe and Asia in the second half of 2013.

Zero-Emission Charging System Based on Solar Energy

One of the biggest arguments used by detractors against EVs is that the electricity required to charge the vehicles is primarily obtained from fossil fuels, which would result in atleast the same amount of carbon emissions as in the case of conventional fuel vehicles. Furthermore, widespread proliferation of EVs could lead to an overloading of the power grids.

The Supercharger system, which was developed in partnership with SolarCity (one of CEO Elon Musk’s other ventures), is a strong response to these arguments. It will run purely on solar energy, which means zero emissions and minimal costs. Also, and here’s the clincher – the system will generate more power than the amount required to charge vehicles, and the excess electricity will be fed back into the grids.

Capex Increase can be more than Offset by Potential Increase in EV Adoption

The company says that the Supercharger system leverages the economies of scale of existing charging technology, which enables it to create the device at minimal cost. Nevertheless, we believe that its ambitious plans of constructing numerous Supercharger stations across the country and in other continents would result in substantial capital expenditures. We currently forecast capital expenditures to gradually decline to around 4% of revenues by the end of our forecast period.

On the other hand, if the system is a success, enthusiasm from other institutions, such as the Government, could enable widespread proliferation of charging systems based on similar technology across the country. This would encourage more people to purchase electric vehicles, which would in turn result in a larger target market for Tesla.

We currently have a Trefis price estimate of $37 for Tesla Motors, which is around 20% above the market price.

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1. TESLA MOTORS LAUNCHES REVOLUTIONARY SUPERCHARGER ENABLING CONVENIENT LONG DISTANCE DRIVING, Tesla Motors Press Releases, September 2012 [↩]