Here is the thing. First, battery swapping isn’t going to be free of charge; drivers will have to pay at least $50, unlike the supercharging that would be offered free. This would invariably increase Tesla’s revenue and profit quite significantly, although the company insisted that the system isn’t aimed at driving profits. The payoff for Tesla might not be immediate, considering that Tesla’s investing about $500,000 to install each swapping station. Let’s not forget that the number of Tesla autos currently in existence is not enormous. But, we’re not investing only for the present (assuming you’re a Fool like me); we’re investing for the future.
Second, as I stated above, this move goes further to deal with the range anxiety problem, which in my opinion, is the number one stumbling block to the adoption of EVs. I call it number one because more complaints have ensued because of the range an EV can cover than any other EV-related issue – including the high price tags of EVs.
Having followed the EV market closely, I’ve seen increased adoption of EVs once drivers can be assured that they’d reach their destinations with an EV. Therefore, I see this as a strategic move to drive sales. Here is the logic. If I were to buy an EV, I’d consider which maker cares the most if my car gets me to my destination. This would make me research battery capabilities and charging infrastructures. And with this new service, the scale would tip in Tesla’s favor in just about any situation. Long story short, Tesla would see its sales head north owing to this development. As usual, increasing sales are a good indicator that a company is worth an investment.
Third, we know that announcements like this, especially when implemented, go a long way to change the status of a stock positively. As such, I expect that when Tesla launches this system, auto enthusiasts would become more comfortable owning and driving its cars, which could help the company’s stock gain more traction.
But there are some challenges
The latest challenge is that which threatens Tesla’s sales in New York. This has to do with auto dealers who aren’t cool with the idea of Tesla sidestepping the dealers and selling its autos by itself. They want to be in the picture. As a result, a court injunction that would ban Tesla from selling its auto directly to consumers in the state is looming.
As per the idea of battery swapping, there is a risk that the system might fail, considering that it was the same thing Better Place tried and landed itself in bankruptcy. Business analysts, like this one in Forbes, have begun to give their verdicts on this approach with many of them believing that Tesla is going to be like Better Place. But, Better Place never manufactured an EV. It only offered its services to autos made by other companies. But Tesla makes EVs and I believe the company has the vision to make it work. The worst-case scenario would be that the system fails. But Tesla still makes EVs, so that won’t put it out of business like Better Place.
Foolish bottom line
Many auto investors would find it hard to invest in Tesla because it’s a growth company. In addition, unlike General Motors Company (NYSE:GM), Ford Motor Company (NYSE:F) and Nissan that make autos other than EVs, Tesla relies solely on EVs for its revenues. So there is a fear that Tesla has nothing to fall back to in an event that the EV vision fails. But I’d like to remind you that more of Tesla’s Model S were sold during the first quarter than any other auto – the well-established ones – that costs in the range of Model S. And again, investing is generally a risk – a calculated risk. Drawing from my arguments, I see investing in Tesla a calculated risk that’s worth taking.
Criag Adeyanju has no position in any stocks mentioned. The Motley Fool recommends General Motors and Tesla Motors (NASDAQ:TSLA) . The Motley Fool owns shares of Tesla Motors . Criag is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Here Is One Less Excuse Not to Invest in Tesla originally appeared on Fool.com is written by Criag Adeyanju.
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