It is official. Elon Musk now owns the US auto industry. To explain, the two largest US based automakers, Ford (F) and General Motors (GM) will put Tesla’s charging connectors on their electric vehicles.
Hence, Ford and GM electric vehicle owners can use Tesla’s superchargers, the Associated Press reports. To explain, Ford (F) electrics will come with a North American Charging Standard (NACS) connector built-in, eliminating the need for an adapter to access Tesla Superchargers in 2025.
The NACS is Tesla’s standard charging connection. Ford and GM’s decision makes Tesla’s connector the industry standard in North America, Electrek speculates. Hence, Tesla has won the charging wars.
Tesla Wins the Charging Wars
Tesla has developed an adapter that will allow pre-2025 Ford F-150 Lightning, Mustang Mach-E, and E-Transit vans with the Combined Charging System (CCS) port to use Tesla V3 superchargers, Ford claims.
GM and Ford executives made the move because Tesla Motors (TSLA) has over 12,000 superchargers in the United States and Canada. In contrast, Ford’s Blue Oval network has 1,800 fast-chargers in the USA. Tellingly, GM CEO Mary Barra says her company adopted the NACS connector because of the robustness of Tesla’s charging network.
A map shows Tesla has superchargers along most of the major highways in the US and Canada and in most cities. Plus, there are Tesla superchargers in some parts of Mexico if want to take a trip to Mexico City. However, there are no superchargers in Baja California, sorry Tijuana residents.
I think Ford and GM’s actions will force other automakers such as Toyota, Stellantis N.V. (STLA), and Volkswagen to adopt the NACS standard, at least in North America. Moreover, smaller automakers such as Tata Motors (owner of Jaguar and Land Rover) will have no choice but to use NACS.
Tesla is an Energy Company
The Ford and GM decision proves my contention that Tesla Motors (NASDAQ: TSLA) is an energy company.
For example, Tesla claims to operate over 45,000 Superchargers worldwide and boasts that they are cheaper than gasoline. They also claim you charge a vehicle for a 200-mile trip in 15 minutes at the Superchargers.
Moreover, Tesla is building its Supercharger V3 at Gigafactory, New York, in Buffalo, and Shanghai. They have built a supercharger factory at Gigafactory Shanghai. Tesla executives hope to produce up to 10,000 supercharging stalls a year in Shanghai, Electrek reports.
I think the Supercharger construction shows Musk thinks of Tesla as an energy company. Moreover, Musk wants other companies’ vehicles using the Superchargers so Tesla can make more money.
This could be bad news for oil companies and gas station operators. Notably, Tesla is taking applications from business owners who want Superchargers at their properties. For example, in supermarket parking lots.
Tesla is in the Electricity Business
I think Tesla (TSLA) is actually in the electricity business. To explain, what Tesla sells are different ways to make, store, and use electricity.
For example, one of the first “solar peaker” power plants in the United States, the Vikings Energy Farm, will use Tesla Megapack battery storage, Electrek reports. A Megapack can store over three megawatt hours of electricity, or enough juice to power 3,600 homes for an hour.
The Vikings Solar Farm, built by Arevon Energy and San Diego Community Power, will generate electricity with First Solar Telluride PV solar modules and store the power in Megapacks. A solar peaker plant uses solar power to generate electricity during peak periods of demand. The hope is to reduce the use of fossil fuels and greenhouse gases that contribute to global warming.
Similarly, Apple Inc. (AAPL) will use Megapack for its California Flats solar farm. The $100 California Flats will use Megapacks to store 240 megawatt hours of electricity. I calculate that’s enough to power 864,000 homes if Tesla’s claims of a Megapack being able to over 3,600 homes for an hour are true. Interestingly, the California Solar Flats farm will power Apple HQ in Cupertino, California.
They claim Tesla’s Megafactory in Lathrop, California, can build 10,000 Megapacks a year. Tesla claims the Megapack factory can build enough Megapacks a year to store 40 gigawatt hours (40 billion megawatt hours) of electricity.
Is Tesla the Future of Electricity?
I think Tesla’s Megapacks could be more lucrative than the cars because I believe solar panels and battery storage are the future of electricity.
To elaborate, solar and batteries offer two enormous advantages over traditional power plants many people forget. First, solar farms do not require any outside fuel. This cuts costs because you can eliminate the infrastructure for moving fuel.
For example, a coal power plant needs a rail connection to deliver coal. Most coal plants also need dozens of front-end loaders and conveyor belts and a small army of men to operate them. Similarly, a natural gas power plant needs a pipeline. Solar is cheaper going in.
Hence, you can eliminate the costs of both the fuel (remember sunshine is free) and the delivery infrastructure. I think this is why investors such as Warren Buffett are making enormous investments in solar power. Buffett’s Berkshire Hathaway Energy (BRK.B) will soon get 45% of its power from renewables. In contrast, Berkshire Hathaway Energy gets 23% of its power from coal.
Second solar powers and batteries are nonmechanical devices, which means fewer moving parts that can break. That means less maintenance, and lower operating costs.
Solar is Cheaper than Coal
Hence, I suspect solar will slowly drive competing energy sources such as nuclear, coal, natural gas, hydro, and wind out of business as costs fall. Notably, the International Energy Agency (IEA) claimed solar power was 20% to 50% cheaper than previously thought in 2020.
It costs a coal-burning plant $36 to generate a megawatt hour of electricity, Energy Innovation estimates. In contrast, it costs a solar farm $24 to generate a megawatt hour of electricity. If these claims are true solar is more profitable than coal which is good news for Tesla. Hence, it is easy to see why companies such as Berkshire Hathaway Energy are building solar farms.
Tesla vs. Ford
Although Musk has won a technological victory with the North American Charging Standard (NACS). Tesla (TSLA) still lags far behind Ford and GM in terms of profit.
For example, Tesla reported quarterly revenues of $23.329 billion on 31 March 2023. In contrast, Ford (F) reported revenues of $41.474 on 31 March 2023.
Interestingly, Ford’s growth rivals Tesla’s. Stockrow estimates Ford’s revenues grew by 20.3% in the quarter ending on 31 March 2023. In contrsat, Tesla’s revenues grew by 24.38% in the same quarter.
Yet Ford generates more profit and makes less money than Tesla. Ford reported a quarterly gross profit of $6.805 billion on 31 March 2023. Meanwhile Tesla reported a quarterly gross profit of $5.511 billion on 31 March 2023. In comparison, Tesla reported a quarterly operating income of $2.664 billion on 31 March 2023 and Ford reported a quarterly operating income of $2.113 billion on 31 March 2023.
Who has more cash Ford or Tesla?
Ford (F) is generating more cash, but Tesla is catching up with Ford in the cash race. For example, Ford reported an ending cash flow of $22.359 billion on 31 March 2023. Tesla reported an ending cash flow of $16.77 billion on the same day.
In contrast, Ford reported a quarterly operating cash flow of $2.8 billion on 31 March 2023 and Ford Tesla reported a quarterly operating cash flow of $2.513 billion on 31 March 2023. Hence, Tesla’s cash numbers resemble the older and larger Ford.
However, Ford still has more cash. It had $39.513 billion in cash and short-term reserves on 31 March 2023. In contrast, Tesla had $22.402 billion in cash and short-term reserves on 31 March 2023.
Both Ford and Tesla are cash rich companies. Yet Ford is still far larger it had $256.8 billion in Total Assets on 31 March 2023. In contrsat, Tesla, had $86.33 billion in Total Assets on 31 March 2023.
Yet Mr. Market paid $258.71 for Tesla and $14.13 for Ford on 13 June 2023. Therefore, many people will consider Ford a value investment. A value investment made more appealing by its alliance with Tesla.
Tesla vs. General Motors (GM)
Adding General Motors (GM) to the mix is interesting. Notably, GM generates less revenue than Ford. It reported quarterly revenues of $39.985 billion on 31 March 2023.
GM is generating less profit but more income than Ford. It reported a $5.126 billion quarterly gross profit and a $2.579 billion quarterly operating income on 31 March 2023. General Motors offers less growth than either Ford or Tesla. It reported a quarterly revenue growth rate of 11.13% on 31 March 2023.
Yet, GM is a cash-rich company. For example, GM reported a quarterly operating cash flow of $3.086 billion and a quarterly ending cash flow of $21.141 billion on 31 March 2023. Comparatively, GM had $30.675 billion in cash and short-term investments on 31 March 2023. Value investors will say the North American Charging Standard (NACS) makes Ford and GM bigger values because they are leveraging Tesla’s infrastructure for growth.
General Motors is still the largest US automaker. It had $267.004 billion in total assets on 31 March 2023. Yet Mr. Market paid $37.65 for GM stock on 13 June 2023. Thus, both Ford and GM are value investments in comparison to Tesla.
Tesla owns Detroit
I conclude Tesla is now part of the US auto establishment. In particular, Tesla is the third-largest US automaker. The Dutch based Stellantis N.V. (STLA) owns Chrysler, the third member of Detroit’s historic Big Three.
Moreover, I think Tesla can dominate the auto industry because it can supply the electricity for EVs, such as the Ford F-150 Lightning through the superchargers. I think Ford and GM have surrendered the charging business to Tesla. That could give Musk a lucrative monopoly if the Federal Trade Commission (FTC) tolerates it.
Thus, Elon Musk and Tesla could dominate the US auto industry for the foreseeable future by supplying the support infrastructure for electric vehicles. Musk’s decision to make Tesla an energy company is paying off.
