Weekly Auto Update: Tesla Adds Another Arrow To Its Quiver

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Tesla Motors (NYSE:TSLA) announced a new software update that will add four new features to the Model S. The Silicon Valley based electric vehicle manufacturer will dispatch a software update to the vehicles that will add new features like range assurance, trip planning, new safety features, and self-driving capability. [1] These technological enhancements further confirm Tesla’s status as a unique, innovative auto company, that is always thinking ahead of the curve. This is likely to impress a number of consumers and alleviate any concerns related to range anxiety (the fear that an electric vehicle will run out of battery far away from a charging station), thus making it more likely that people will go out and buy an electric vehicle.

The new added features will allow Tesla owners to plan trips through routes that contain Tesla charging stations without having to worry about having to plan trips to these stations in advance, because the car will communicate in real time with charging stations and direct itself to one in case the battery is running out. Additionally, the cars will become equipped with a self-driving feature that will allow drivers to go hands free on interstate highways and the cars to go driver-less on private property. This feature might run into some trouble with regulators since no state in the U.S. allows a self-driving car to run on its roads other than in testing mode. A number of regulators have already been alerted about this and are trying to figure out laws that will make it clear under what conditions such a car will be allowed to drive on the country’s roads. [2] The main concerns have to do with the delineation of insurance liabilities- it is not yet clear whether the liability in case of an accident will belong to the car company or the driver. Unless such details are resolved, the feature may have to lie dormant in the vehicles.

Another piece of information that the press release contained was that Tesla plans to build out supercharger networks all through the United States (except Alaska), Northern and Western Europe, most of Greater China (except the far inland regions), Japan, and Southern Australia. This would mean that the company is now planning to deliver cars in more regions than before, which could help it meet the ambitious 55,000 units target in 2015. This also means that the company will be using some of its projected $1.5 billion in Capital Expenditures not just on the gigafactory but also in the development of charging networks, service centers, and showrooms in these new markets.

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Currently, our valuation of $170 (market cap of $21.2 billion) for the company is about 8% below the current market price of $185 (market cap of $23 billion). We expect Tesla to report revenue of around $8 billion and gross profit of $2 billion for calendar year 2015. We forecast non-GAAP diluted EPS of $0.95, which is higher than the market consensus of $0.67 (Financial Times).

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Notes:
  1. Model S Has You Covered, Tesla Motors Blog, March 2015 []
  2. Regulators Have Hands Full With Tesla’s Plan for Hands-Free Driving, Wall Street Journal, March 2015 []