Range anxiety is perhaps the biggest problem facing makers of electric vehicles today, and it’s not a problem that’s going to be taken care of overnight. In fact, it’s going to take massive stacks of cash to fix the issue, and Tesla has been trying to convince investors and drivers that it can fight the battle all alone. But just how much would it take to make a network vast enough to convince U.S. drivers that they don’t need a gas-powered vehicle? One analyst pegs the value at about $8 billion.
Analysis of Tesla’s Supercharger network
UBS analyst Colin Langan is one of the biggest bears when it comes to Tesla, and he offered up the results of his firm’s Supercharger network analysis in a research note dated March 2. The UBS Evidence Lab estimates that it takes about 31 minutes on average for a driver to reach the nearest Tesla Supercharger station. However, it takes only four minutes, on average, to reach a gas station.
Langan adds that just to ensure that no driver in the U.S. has to drive more than 31 minutes to reach a Supercharger, Tesla would have to add at least 7,503 more stations. For the company to build out a Supercharger network that’s on par with the gas station infrastructure in the country, it would have to add 30,160 Superchargers.
ValueWalk's Raul Panganiban interviews Kirk Du Plessis, Founder and CEO of Option Alpha, and discuss Option Alpha and his general approach to investing. Q1 2021 hedge fund letters, conferences and more The following is a computer generated transcript and may contain some errors. Interview with Option Alpha's Kirk Du Plessis
EV charging standards are needed
The analyst estimates that the average cost per Supercharger station is about $250,000, which means that just to build out the U.S. charging infrastructure, the company would have to spend between $1.9 billion and $7.5 billion. It would be much easier if Tesla would work together with other automakers to share this cost, but that seems unlikely, given that the luxury automaker’s cars are not compatible with other EV chargers.
Langan notes that President Donald Trump’s massive infrastructure spending project might include federal subsidies to build an EV charging corridor throughout the nation, which also might cut the burden of costs. CEO Elon Musk’s position as an advisor to Trump may help ensure that subsidies are offered for this, and Musk is very well aware of how much Tesla has benefited from other federal subsidies over the years.
Tesla’s capital expenditures to soar
The UBS analyst said his firm’s analysis suggests that Tesla’s capital expenditures could reach $35 billion through 2025. He estimates that the three planned Gigafactories and associated plants will surpass $8 billion. The Model 3 ramp and launch is sure to involve heavy expenditures as well because the company wants to be delivering 500,000 cars annually by next year. Then building out the Supercharger infrastructure will add $2 billion to $8 billion just in the U.S. He believes similar investments will be needed to build out the infrastructure in Europe and Asia as well.
And the more cars Tesla sells, the bigger its servicing network will need to be so that it can support its customers. Langan estimates that building out the network to service all those Teslas on the road will add another $18 billion in capital expenditures, and the network and servicing costs will probably speed up after the Model 3 launches. He warns that investors might be disappointed because they’ll be expecting stronger cash flow after the mass-market vehicle is released.
Shares of Tesla stock closed up 0.44% at $251.57 on Friday.