Tesla’s Growing Moat – Tesla Motors (NASDAQ:TSLA)

While everyone and their cat are focused on when Tesla will manufacture the 497th unit of a product that will likely sell in the millions, I keep my eye on the long ball.

Investment Thesis

One of Tesla’s (TSLA) several durable competitive advantages revolves around its vast and growing Supercharger network. Not a single traditional automaker even has plans to offer half of what Tesla offers today.

Why are Superchargers Important?

Superchargers allow an individual to have the piece of mind that an electric car can be used for both short and long trips, which makes a ubiquitous network of fast chargers critical.

That’s it.

The argument is as simple as that, but its implications are extensive. It means that an electric vehicle does not have to be a luxury purchase as a beach house is. With Superchargers, an electric vehicle can be someone’s primary car, or the only car. Without Superchargers, the consumer has to think about what they will drive for long trips; and having to own another car for long trips, just throws off the math.

In other words, without a ubiquitous network of fast-charging stations, demand for a manufacturer’s electric vehicles is limited.

Aha!

Maybe this is what the traditional automakers mean when they claim that consumers do not yet want electric vehicles.

But then, how do they explain the nearly half of a million people that paid cash deposits for a product unfinished, unseen, untested, and 18 months in advance?!

Hmm.

Maybe by, “consumers do not yet want electric vehicles,” they mean, “consumers really want electric vehicles.” Then I would agree, because that’s exactly what the facts show. Not the manufactured facts; the actual facts!

Or maybe, since this is a bit of a chicken-or-egg problem, if traditional automakers build their own networks, then they could also enjoy a waitlist longer than… the number of tweets that certain Tesla bears spew, per hour.

Smh.

Solution?

What Tesla did is they basically manufactured the chicken, so the egg can come out. Tesla built it, and they came.

This isn’t rocket science.

At the time of the Model 3 Reveal Event on March 31, 2016, Tesla had 3,600 Superchargers worldwide. On that day, this is what Elon Musk promised:

By the end of next year, we will double the number of Superchargers.

That would have meant 7,200 Superchargers by December 31, 2017.

As of October 12, Tesla has nearly 7,100 Superchargers already installed, and the network is expanding almost daily. At the current rate, Tesla will achieve its goal two months in advance.

Tesla now plans to have 10,000+ and 18,000+ Superchargers by the end of this year and next, respectively. This sure is an ambitious goal, to say the least.

While we’re on the subject: Everyone needs to take a step back, take a deep breath, take the chill pill, and understand that Elon Musk & Team always shoot for the moon, and sometimes hit, but sometimes miss, but they always land among stars.

No. They land on Mars.

No. They travel to another universe through a black hole, which has never been attempted, then come back in one piece, before their competitors even get out of bed. On the wrong side, if I may add.

Speaking of Competitors… Where Are They?

I’m not aware of even one traditional automaker with its own network of fast-charging stations, even if we define “network” loosely, as five.

Who knows when competitors will offer a compelling all-electric car, build a multi-billion dollar battery manufacturing facility, offer solar energy options so that their customers’ electricity bills don’t double, and in the meantime, rebuild an island so people don’t suffer.

Competitors Have A Plan!

BMW (OTCPK:BMWYY), Daimler’s Mercedes (OTCPK:DDAIF), Ford (F), and Volkswagen’s (OTCPK:VLKAF) Audi (OTCPK:AUDVF) and Porsche announced in November of 2016 that they created a joint-venture with the goal of building 400 stations, at least initially, starting in 2017.

The group reportedly also said that by 2020, “customers should have access to thousands of high-powered charging points.” In July of 2017, or eight months after the initial announcement, Porsche installed the first charger in Berlin. We also learned in last month that Porsche is bringing its ultra-fast charger to Atlanta, but we don’t know how many or what the expansion plans are going forward.

Then there is Volkswagen’s Dieselgate settlement, named Electrify America, which plans to invest $2 billion over the next 10 years, so by 2027. You can read more about where this endeavor stood as of July here, but in summary, it has not yet progressed much with less than 100 chargers, which are slower than Tesla’s Superchargers.

So How Will Competitors Compete?

That’s a great question, to which the answer is not yet clear. There are, however, three theories swirling around:

  1. Some say that competitors are not really interested in entering the electric vehicle space, that they simply are putting out press releases and pushing out just enough electrified vehicles to meet mandates – aka “compliance” cars.
  2. A second theory says competitors will work out a deal with Tesla to use its Superchargers. That may be possible, as Tesla seems open to that option if other automakers share the capital cost, but the lack of an agreement in the last three years has me wondering.
  3. A third theory says competitors will one day expand on their nascent networks of fast chargers.
  4. Finally, a fourth theory says that fast-chargers licensed and offered by individuals and small businesses can proliferate, providing Tesla’s competitors with an opportunity to expand their electrified fleets without having to invest the billions of dollars of capital expenditures that Tesla has been investing in the last several years.

I have not yet seen enough evidence to believe that traditional automakers have ambitions beyond manufacturing just “compliance” cars. Once Tesla’s competitors break ground on a mass-scale battery manufacturing facility, like Tesla’s Gigafactory, then I will consider theories #2 or #3 as possible.

The fourth theory is also unlikely to materialize in a large enough scale, because the technology behind charging a battery is a lot more complicated than filling out a gasoline tank, and compatibility among manufacturers is very difficult to achieve. This is why many online guides (here, here, and here) exist to walk non-Tesla electric vehicle owners through various charging levels and connector types. Yuck! Because of the ubiquity of Tesla’s Superchargers, Tesla customers, even today, do not need to worry about this problem.

Bottom Line

Ladies and gentlemen. LET’S GET READY TO RUMMMBBLLLEE!!!

Introducing first. From the red corner. Weighing more than 10,000 Superchargers. They hail from Palo Alto. And were rated by many, as the Winner, the best pound for best electric fighter of the last decade. With hundreds of thousands of deliveries, 30 of them coming by the way of knockout, and undefeated. It is, the defending luxury sedan champion, the roaring luxury SUV champion, and the future MASS-MARKET CHAMPION OF THE WORLD!!!

And from the blue corner… I don’t know.

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Disclosure: I am/we are long TSLA.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

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