Report Says Tesla Will Shake-Up Energy As Well As Autos.
Computer Driven Cars Too Will Be Dominated.
Meanwhile, Tesla Plans Huge Battery Factory.
Some investors wonder if a small, upstart battery-electric car company like Tesla Motors can survive against the might of the established industry. No such qualms for Morgan Stanley analyst Adam Jonas, who thinks Tesla, which will sell about 35,000 Model S cars this year, won’t just survive, it will conquer the world.
The Jonas report said not only will it raise its sales to more than 700,000 by 2025 and breach one million in 2028, (double its previous forecast) disrupting the traditional auto industry along the way, it will also throw a spanner in the works of electric utilities, as the combined battery packs of its cumulative 7.2 million global fleet become a viable alternative to power generation. Tesla is also poised to dominate the upcoming market for self-driving cars, according to Morgan Stanley.
If that’s not enough disruption for you, Tesla also announced plans to invest $2 billion in a U.S. car battery plant costing between $5 billion and $6 billion that could supply lithium ion packs for 500,000 vehicles a year by 2020. It is using the strength of its share price to raise convertible loans totalling $1.6 billion.
Investors were bowled over by the Morgan Stanley report. The share price, already at what seemed a preposterous level valuing Tesla at more than $20 billion, zoomed again close to $260. This would value Tesla at over $30 billion. A year ago the shares were worth less than $50.
Tesla expects the new factory to produce 500,000 batteries by 2020, and cut costs by 30 per cent by 2017.
Dissenting views on Tesla prospects were hard to find.
“What’s not to like,” said International Strategy and Investments analyst Arndt Ellinghorst.
Moving the game forward
“We view the (battery plant) announcement as significant as the seemingly most technological minded manufacturer looks to move the game forward once more,” Ellinghorst said.
In the report, Morgan Stanley said its new target for Tesla’s share price was $320, as it excelled at energy storage and autonomous cars as well as electric vehicles.
“We estimate Tesla’s 7.2 million unit global fleet will contain the stored energy capacity of 443 GW, a figure exceeding the entire daily electricity consumption of Mexico. For autonomous cars, is there a better-positioned (manufacturer) than Tesla? We don’t think so. Tesla’s fleet is 100 per cent electric and connected. As the role of software engulfs the car, the world’s only Silicon Valley-based car company has the upper hand,” Jonas said.
“If this company can establish a technological and scale lead in energy storage and autonomous cars, might we one day look back at Tesla’s humble beginnings as simply a car maker much as Amazon began as a book seller?,” Jonas said.
“If Tesla’s $35,000 EV (Gen3) can reach hundreds of thousands of annual unit volume, Tesla may achieve pole position for the two most transformational developments in the auto industry over the next 5, 10 and 20 years: electrification and autonomous vehicle technology. We believe progress in one domain lends itself naturally to an advantage in the other,” Jonas said.
Apple rumours
The Morgan Stanley report over-shadowed earlier news that Tesla was being trailed by Apple as a takeover candidate. Tesla CEO Elon Musk acknowledge that there had been talks but a deal was very unlikely.
The Financial Times Lex column thought this was a bad idea, even though it reckoned Apple might one day want to build “its own business in tasteful, mass-market electric, even robotic cars.”
More news about Tesla to receive scant attention was its financial report for the fourth quarter of 2013, when it cut its losses to $16 million from $90 million in the same period of 2012. For the year, Tesla’s net losses narrowed to $74 million from $396 million. Revenue jumped to $2 billion from $413 million.
After that news, and before publishing its report, Morgan Stanley was gushing with praise.
“We believe we are witnessing the most disruptive intersection of manufacturing, innovation and capital experienced by the auto industry in more than a century. Tesla may be in position to disrupt industries well beyond the realm of traditional auto manufacturing. It’s not just cars. Tesla remains our top pick in U.S. autos,” Morgan Stanley said.
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