Blog Title: Morgan Stanley’s Analysis of Tesla’s Charging Business
Electric vehicles are gaining popularity across the globe due to their efficiency, eco-friendliness, and low maintenance costs. Consequently, the demand for charging stations has risen, with Tesla being one of the most prominent providers. Recently, Morgan Stanley’s renowned analyst, Adam Jonas, evaluated the value that Tesla’s charging business can add to the company. In this blog post, we’ll explore the reports released by Morgan Stanley and explore the analyses they conducted to determine the potential value of Tesla’s charging network.
Morgan Stanley’s study on Tesla’s charging business is quite comprehensive, assuming various scenarios and possibilities for the electric vehicle market. The research team used several formulas to assess the potential value Teslas charging stations’ could provide if it began to produce and store solar electricity for its Superchargers. Using various assumptions, including an average efficiency of 4 miles per kWh and a $0.32 per kWh price, they ran simulations through valuation at 20x FY30 Net Operating Profit After Tax, discounted at a 9.0% weighted average cost of capital.
The analysis revealed the following valuations for Tesla’s Supercharger network:
- The “reasonable case” assumes 10% EV miles penetration, 50% Tesla share of Supercharging, and 30% net operating profit after taxes to result in a potential Net Present Value of $3 per share for the business.
- The “plausible case” assumes 20% EV miles penetration, 70% Tesla share of Supercharging, and 50% Net Operating Profit After Tax margin to lead to a potential net present value of $14 per share.
- The “dominant case” assumes 30% EV miles penetration, 80% Tesla share of Supercharging, and 70% net operating profit after taxes, leading to a potential net present value of $33 per share.
- The “monopoly case” assumes 50% EV miles penetration, 100% Tesla share of Supercharging, and 80% net operating profit after tax, leading to a potential net present value of $57 per share.
Apart from valuations, Morgan Stanley also analyzed rival companies working on similar charging technology. Their research highlights that Tesla has a competitive advantage because it owns and operates the facilities, unlike rival companies that work to expand their networks via partnerships. Another benefit is that Tesla only uses a proprietary charging protocol, assuring that it’s charging stations only serve Tesla owners.
Morgan Stanley also evaluated Tesla’s production of batteries powering its charging stations, putting the company in an advantageous position to manage costs. Further, Jonas believes the newly rolled-out Megacharger rates, which generate around 475 kWh, will only but help Tesla to extend its charging capabilities further.
Tesla’s charging business is an essential part of the company’s operations. Morgan Stanley’s analysis shows the potential value it can provide to Tesla in terms of future growth. The research conducted suggests that Tesla has a unique competitive advantage in the electric vehicle industry due to its ownership of charging technology and facilities. With the increasing popularity of electric vehicles, the demand for charging services will only grow, ranking Tesla in an excellent position for long-term business growth.