Tesla To Beat Hydrogen Cars In ZEV Market

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Tesla To Beat Hydrogen Cars In ZEV Market
Blomst / Pixabay

Tesla is now facing off with a new threat in the auto industry, but Morgan Stanley analysts aren’t buying the idea that hydrogen will beat Tesla. Adam Jonas, Ravi Shanker and Paresh Jain have been among the most vocal Tesla Motors (NASDAQ:TSLA) bulls, and they think the new emphasis on hydrogen cars is nothing but hot air.

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Advancements in hydrogen technology?

“The auto industry’s sudden double-down on hydrogen technology is a little too obvious to us,” they wrote in a report dated June 25, 2014. “Over the past few months, the industry has been bubbling with support for the future of hydrogen fuel cell vehicles.”

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They note that in particular, Ford Motor Company (NYSE:F), General Motors Company (NYSE:GM), Toyota Motor Corp (ADR) (NYSE:TM) (TYO:7203), Hyundai Motor Co (KRX:005380) have had strong comments regarding hydrogen car technology. At the same time, they have been de-emphasizing electric vehicles. In spite of all the noise around hydrogen cars, however, the Morgan Stanley team said they’re not aware of a “recent breakthrough” in hydrogen fuel cell technology.

Tesla, the lone EV standout

They have noticed though that most electric vehicles haven’t been able to achieve their targets for volume. They also say that Tesla Motors’ Model S has stood out as the only winning electric vehicle in the market so far. The company has been focusing on dominating the global electric vehicle market. In fact, Tesla has even partnered with Deutsche Bahn to build its Supercharger network in Germany, a country where some of the world’s best cars have been born.

The Morgan Stanley analysts note that Tesla Motors is far ahead of the world’s biggest automakers—despite the fact that they have more money and technical resources. They also say that none of the world’s major automakers have made any significant effort in building infrastructure for electric vehicles. They don’t expect any of them to do so in the near future either.

And without Tesla Motors, they note that the auto industry’s electric vehicle has stalled. While Cadillac sold only 52 units of its ELR electric car in May, Tesla sells twice as many in a single day. They believe Tesla has drawn a line in the sand with the aim of making itself the dominant electric car maker.

Tesla battles hydrogen cars

Jonas and his team said it’s no coincidence that Tesla Motors opened its patents during a time when competitors were pushing hydrogen-powered cars. They say the more traditional automakers try to push out electric cars, the more Tesla will probably “open up its expertise to those who are willing to use it.”

They remain just as bullish on Tesla Motors as ever, saying they expect Tesla, rather than hydrogen cars, to “corner the market” for zero-emission vehicles. Rules set forth by the California Air Resources Board target 30% of the U.S. automaker being zero-emission vehicles by 2025. Meanwhile Tesla keeps accumulating zero-emission credits in the states that follow the CARB rules, although it has not sold any of them in a year. They think competitors are just using hydrogen-powered cars to battle Tesla.

“We see the FCV [hydrogen fuel cell vehicles] push as a diversionary tactic to slow down, if not completely reset, a regulatory framework scripted to support mass adoption of EVs that don’t appear ready for prime time,” they wrote in their report.

The Morgan Stanley team reiterated their Overweight rating and $320 per share price target for Tesla Motors.

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Michelle Jones is editor-in-chief for ValueWalk.com and has been with the site since 2012. Previously, she was a television news producer for eight years. She produced the morning news programs for the NBC affiliates in Evansville, Indiana and Huntsville, Alabama and spent a short time at the CBS affiliate in Huntsville. She has experience as a writer and public relations expert for a wide variety of businesses. Email her at Mjones@valuewalk.com.
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7 COMMENTS

  1. Hydrogen cars are not yet profitable to build and sell, Plugin cars using batteries are.
    In fact the big money maker with a hydrogen car is selling the fuel. This is why Toyota wants to also become a fuel company. A BEV cost $500 a year to run, a Hydrogen car 6 times that ( $3,000 ).
    The Chevy Volt and Nissan Leaf have take the brunt of the dis-information campaign around EVs, as they are the first mainstream auto makers to make the leap and they are clearly not losing money doing it. Now BMW and others are following.

    The idea that Chevy is losing thousands with each volt sold has been forcefully denied by GM. yet Even after 70,000+ volts sold people are still repeating this bit of disinformation that was originally bought and paid for by a lobby group in a 2012 Reuters press release. EVs make money for the manufacturer, just not the dealers as their usually “service” profit center does not make money on an EVs, No oil changes, belts, hoses or other work needed!

    Clearly Tesla is making money with each EV sold. What it does with this money, report it as profit, reinvest it in the company or pay it as a dividend to share holders is up to its board of directors. No startups are going to be leaping onto the hydrogen bandwagon anytime soon, and that is all you need to know about why BEVs are going to beat hydrogen.

  2. Fuel cells make no sense for the automobile. Both electric battery and fuel cell vehicles send electric power to electric motors.

    The electric car battery is charged by power from the grid or if you’re lucky enough to have them, your own solar panels. But all you need is access to electricity. No new distribution system needed, albeit it would be nice to have high speed chargers around. For most people a battery electric car can fulfill their daily commute needs. Keep a gasoline powered vehicle for long distance, or even get a vehicle like the Chevy volt which nicely straddles the need for electric powered vehicles during the week, and longer distance gas powered vehicles for the weekend/vacations.

    The fuel cell vehicle needs hydrogen, and as others have pointed out it takes an enormous amount of energy largely electric to produce hydrogen. Then you have to transport it a yet to be built hydrogen gas stations, you need a car with a sophisticated hydrogen storage system and in the end, the hydrogen fuel creates electricity to drive the vehicle.

    The hydrogen fuel cell makes no sense, except to the oil industry who wants to find the next big commodity to keep us paying through the nose. Fuel cells, aka hydrogen cells, will have wild price swings just like gasoline. The best thing we can do for the environment and ourselves is to get off the manipulated price swings of gasoline.

    No other business in the world would be able to get away with ramping up costs because they have to switch blends twice a year. They should have two sets of equipment just like every other manufacturer and when shut down one to change out parts or reset the line to build a different model vehicle, dishwasher, etc you start up the other equipment and production never stops. The oil industry spikes the cost of gasoline twice a year because they switch from summer to winter blends. They have been doing this for decades.

    We all know that natural resources are finite, and crushing the innards of the earth to eek out a little more makes no sense when you consider poisoning the water table, shifting plates causing earthquakes, and the massive waste of energy and water (which we already have precious little of) to garner natural gas or a little more oil to keep the addiction going.

    The sun will eventually burn out in millions of years, but it will far outlast Earth’s natural resources. Let’s make the switch now, let’s commit ourselves to solar power and battery electric vehicles. Battery technology and chemistry has made huge technological gains in just the last 10 years, imagine what we can do with another 5-10 years. Tesla has proved that electric cars can drive as far and outperform gasoline powered vehicles. Now we just have to improve the technology and bring it to scale so that prices come down. Just like the first IBM PC cost 5-10 thousand dollars and you can now buy a smartphone that is hundreds of times more powerful/faster for a hundred bucks, so too will battery powered electric vehicles drop in price. And there is like zero maintenance.

    Yes the auto industry will have to rethink itself, service departments will have to reinvent themselves, as did the blacksmiths when automobiles came on the scene in the late 1800s, early 1900s. We can do this and we should do this, for ourselves, and for those who come after us.

  3. I believe Tesla is trying to achieve at 24% margin, but has not yet done so. Motley Fool predicted in February that they may achieve that by Q4, but has it already happened? Good for them if it has. In any case, while margins will eventually show who makes the most money selling EVs, I have a feeling, perhaps incorrectly, that unit sales are what the focus is on today. Butts in seats, as it were. I’m not an investor, and don’t have much interest in what makes sense to an investor. I am only interested in what makes sense to me as a car buyer. When I get one, people I know ask me about it, get interested, and then they buy one. “One” being an EV which, regardless of brand or margin, is widely misunderstood and needs to gain user acceptance. I know of at least two other families that now drive EVs after checking ours out.

  4. hydrogen has a future that for sure but the problem is hydrogen cars is not feasible till a network is built and hydrogen cars can come to 30k prices which maybe is 20 years down the road

  5. I was disappointed with the article because it made no mention of the production of hydrogen. You don’t wave large sacks around in the air to gather it. It either comes from cracking water – which takes enormous energy – or from natural gas or petro derivitives – with all the problems of refining and production.
    Not to mention the problems of storing and transporting hydrogen under high pressure.
    As long as hydrogen is used on a small scale, its production can be subsidized and its usage competitive. On a large scale that cannot be sustained. BEVs will win.

  6. It is not just units sold. Anybody,even Fiat Chrysler, can sell a decent BEV at a loss.

    It is profits margins and total profits.

    Tesla has 25% margins and an Average Selling Price of $105,981.

    Who is making the most money selling electric vehicles?

    It is not Chevrolet or Nissan.

    Yes, Tesla is spending more than it takes in because it is expanding aggressively and it won’t show GAAP profits while it builds its Gigafactory but it still makes the most money selling BEVs. That is winning.

  7. More nonsense from a source that has to mis-state facts to back up it’s bias. You quote Adam Jonas, Ravi Shanker and Paresh Jain as saying that without Tesla Motors, the auto industry’s electric vehicle has stalled, while in fact, Nissan Leaf sales alone are fully one-third higher than the same period last year. Apparently, these Tesla bulls also think that Tesla Motors’ Model S has stood out as the only winning electric vehicle in the market. Interesting since, from January to May, Leaf alone has sold over 10,000 units. Volt sold nearly 7,000. Tesla: 5,600. Totals for all of 2013 saw over 23,000 Volts and over 22,000 Leafs sold. Tesla: 17,650. So tell me which car is the only winning EV in the market again??

    Tesla is a great company with a great car. I’m a big fan too. But we have our second Volt and our first Spark EV in the driveway. Both cars together were considerably less than one base Model S to buy and to insure. Seems pretty “winning” to me.

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