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Tesla Motors Inc (TSLA): A Deeper Look Into Tesla And Its Competitive Landscape

 July 18, 2013 01:29 PM


(By Ashit Gulati) Since April 2012, Tesla's shares have appreciated approximately 200%, in comparison the performance of its peers such as Toyota and GM is pale. Tesla's performance has been remarkable, however, critics still question if the stock is overvalued. Contrary to conventional investment pattern a new trend of investing in environmental friendly companies is emerging. The emergence of this new trend is not underpinned by investors that pick environment over high returns; rather it's a deep understanding of horrific outcomes on companies through climate related threats. However, the competition in this space is constantly increasing; therefore, I believe Tesla's stock will soon run out of gas.

Competitive Landscape

[Related -Forget Tesla: Profit From These 2 Surprise Electric-Vehicle Stocks]

So other than Tesla, companies such as Toyota and GM are doing their bit by investing in electric vehicles and renewable energy. GM recently got into a strategic alliance with TimberRock Energy Solutions, a company which develops solar charging canopies for charging stations. The primary objective of this alliance is to regulate the volume of renewable energy consumed by GM's electric vehicles. TimberRock is positioned to supply only the needed energy to electric vehicles, which essentially means all the unused energy will be stored back into the grid and sold elsewhere by the company.

This project is expected to develop on demand response technology or quick response in order to communicate in-time effective information to TimberRock, which can be later exercised to evaluate the amount of surplus energy that can be returned to the grid. I believe this is a radical innovation and can completely transform the landscape of the industry once it becomes available.

[Related -Tesla Motors Inc. (TSLA) – 3T Analysis: Driving Towards the 52-Week High]

Similarly, the Japanese car maker Toyota is working on a radical concept called iRoad, which is a trendy mix of a car and bike. The first of its kind, three wheeled electric machine will be charged through two 2KW electric engines that can cover up to 48 km per charge. Going forward, if iRoad can be made commercially available to regions where demand for electric vehicles has risen exponentially in recent times, I believe it has the potential to be a game changer. In the recent past, China has witnessed a huge surge in demand for electric vehicles; therefore a radically innovative concept such as iRoad certainly can be promoted as a mainstream product.

Investment in Charging and Battery Swap Stations

Realising the importance of charging stations Tesla has made a purposeful effort in increasing the network of its super charger stations.  At present Tesla has eight super charger stations in California and the east coast; however, the company plans to add four more stations by the end of this summer. Going forward, Tesla has extensive plans to increase the network as the company expects to install charging stations accessible to approximately 98% U.S. and Canadian population. The average cost per station is estimated at around $150,000, however, with the inclusion of solar charging the cost will be propped by another $150,000, pushing the total cost of each station to $300,000.

Alongside its supercharger network, Tesla recently unveiled a new option of battery swapping. The new battery swapping option will be installed at its existing super charger stations offering an alternative to Model S owners. The supercharger powers the battery in 30 minutes; however, the battery swap, which costs anything from $60 to $80, takes under 90 seconds. Battery Swaps was introduced to offer Model S owners a premium option of "fast fueling" at a price equivalent to 15 gallons of fuel.  Each swapping station will have an estimated cost at around $500,000; however, it allows the company to earn more clean energy credits, which are later sold to other companies in order to book higher profits.

The clean energy sector is growing rapidly, however, Investors must question if Tesla can sustain its competitive edge over the next few years.

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