Tesla’s ($TSLA) been having a great week so far. Stock prices jumped from $208.76 to $230 on Tuesday and have been rising since. Furthermore, Tesla’s fourth quarter reports have shown a 13% jump, contributing to an optimistic forecast for 2014. Weekly production rates are expected to rise from 600 to 1000 Model S cars, and deliveries are expected to increase by over 55%. Here are two factors affecting Tesla’s current success:
Adam Jonas, Managing Director of Morgan Stanley who specializes in research for the automotive industry, released a report regarding Tesla’s opportunity for growth. His argument can be summarized by this chart from Business Insider below:
According to Jonas:
Tesla’s quest to disrupt a trillion $ car industry offers an adjacent opportunity to disrupt a trillion $ electric utility industry. If it can be a leader in commercializing battery packs, investors may never look at Tesla the same way again.
Because of Tesla’s success in designing and manufacturing electric vehicles, Jonas sees opportunity for large scale battery generation.
In fact, Tesla CEO Elon Musk has confirmed rumors of creating a Gigafactory and is scheduled to make an announcement later this week. This Gigafactory will house the world’s largest lithium-ion battery pack. Tesla is likely to partner with Panasonic and possibly Apple for this $1 billion project. The Gigafactory will produce finished batteries from raw materials rather than from components, significantly lowering manufacturing costs. According to Wall Street Journal, Tesla is aiming to reduce lithium-ion battery pack costs to less than $200 a kilo-watt hour. Tesla has not released their current costs, however it is estimated that each battery pack costs around $500 per kilo-watt hour.
Tesla shares reached a record high of $248 on Tuesday as rumors of the Gigafactory hit the streets. And that’s just the beginning; according to Adam Jonas, Tesla may create autonomous vehicles one day.
Tesla’s come a long way since rumors of S Model cars bursting into flames began circulating back in December. Earlier this year, the Tesla S Model was taken for a test drive from Texas to Panama without technical support. The total venture lasted 18 days and consumed 2,846 miles. Obstacles included jungles, waterways, volcanoes, and lack of charging locations in the Mexican back country. The test was overall a huge success and reinforced Tesla’s confidence in their product’s durability and performance.
According to Seattle Times, the Tesla S Model Sedan landed at the very top of Consumer Report’s “best overall” picks for its “blistering acceleration, razor-sharp handling, compliant ride and versatile cabin.” After reviewing over 260 vehicles this year, Consumer Reports’ director Jake Fischer of auto testing said about the S Model Sedan:
It’s truly a groundbreaking car. You get into it, and it really stands out. It’s the very best car I’ve ever driven.
Tesla is now expecting Model S deliveries to hit 35,000 cars, a 56% increase. As the youngest automaker company, winning the top ranking of Consumer Report is really quite an accomplishment.
Although Tesla’s newest Model X release has been delayed to 2015, Tesla still has a lot on their plate. Do you think Tesla’s success will last? If you liked this article, check out these related articles about GM’s new CEO and Tesla, SpaceX, and HyperLoop. Also remember to visit SprinkleBit for more updates and investment tips!