I spend a lot of time reading about Tesla, electric cars, etc. My wife things I’m obsessed with the topic. I think she’s right. Anyway, today I came acrsoss a typical bearish comment where a person wrote, “What I want know is where are the generating stations going to be built to supply the power for millions of electric cars. Does anybody have the answer to this question. The whole concept is nonsense.”

This is very typical of people who have not done any math to back up their argument. They usually just feel that the electric demand would be too enormous. The kinesthetic (feeling) representational system is not a very effective way to judge these things.

So let’s do the math.

According to Ontario Ministry of Energy the average 4-person home uses 800 kilowatt hours (kWh) of electricity per month. If that same average family owned a Tesla Model S and drove the typical 20,000 km per year (1,667 km per month) this would require an additional 337 kWh. To calculate this I’m using my real-world experience where an 85 kWh battery takes me 420 km.

So here’s the bottom line. If every average home owned an electric car our society would consume about 42% more electricity than we do today, and this considers only the residential demand. I’m totally ignoring whatever percent of total demand comes from commercial and industrial buildings, which has no correlation to electric car use. Almost all of this additional residential demand would happen at night while we’re sleeping and very little electricity is being used by other appliances.

Now consider that Tesla would have to increase their capacity by almost 30-fold just to control a single percent (yes, one percent) of the automobile market. If that were to happen, and BMW, Daimler, Ford and Nissan were all successful in competing at the same level as Tesla (measured by # of cars sold), our residential demand for electricity would rise a whopping 2%.

Is that enough math for you? Supply of electricity is not in any way, shape or form an issue.

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Tesla probably should do another financing

by Chris on August 11, 2014

This week I’m up at the cottage in vacation. Like any good tech investor my leisure reading included the latest Tesla 10Q filing. I know. I should expand my sources of literature :)

I’m aware some bears think that Tesla is burning cash and therefore must raise more money through an issue. This view is justified, in part, because the company is actually using a lot of cash and does say in its filing that it may seek more cash if markets are favorable.

I agree on the idea of an issue, but the bears have it backwards.

The way the market works is simple. Great growth companies are rewarded with a lofty multiple ahead of
delivering the growth. If these companies have capital projects to invest in they can safely do so,  knowing the market has already rewarded them with a multiple that allows them to tap into it and raise more cash.

image

My Model S parked at the cottage

Tesla is one such company. They have a ton of projects they can be investing in. Several of them involve hundreds of millions of dollars if not billions, such as the gigafactory. 

For Tesla to accelerate investment (which is what this is not “spending” which implies no return) is smart. The market has identified Tesla as a winner. The result of this is cheap capital which results in more winning investments by the company. 

A lot of amateurs don’t understand this. They see Tesla spending a lot of money which results in the (bad result of) having to raise money.

Wrong. They get to raise money. This is a good thing. They get to because of their track record and growth profile.

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Getting Fired: 3.5 years later

by Chris July 17, 2014

Three and a half years ago I was working at TD Securities as an equity analyst. I had been working on Bay Street as an equity analyst covering tech stocks for almost 11 years at that point. I enjoyed it tremendously for most of those years. But when I had my first daughter in 2004 […]

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Tesla: The Self-Marketing Car

by Chris July 4, 2014

After driving the Tesla Model S for about 3 weeks I’ve noticed that it attracts a lot of attention, and mostly when I’m parked. I’ve gotten used to the idea that when I get in or out of the car there are likley to be people staring at it, walking up close to it, commenting […]

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Cars are going electric. There is no stopping it.

by Chris June 24, 2014

Last week I picked up my Tesla Model S. I’m the first to admit this is an expensive car, and most people aren’t going to buy one. And I realize that it will be at least a couple of years before their Gen 3 car (expected at $35k) is going to arrive.  In the mean […]

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Is it wrong that Morgan Stanley upgraded Tesla Motors in advance of underwriting their convertible debt offering?

by Chris February 27, 2014

Ever since Tesla Motors announced its $1.6 billion convertible debt offering yesterday afternoon, market watchers have been crying foul. Why?  Because Morgan Stanley is one of the underwriters on the deal. Their analyst, Adam Jonas, put out a very bullish report and raised his target price on Tesla just a few days before the deal […]

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Long Term: Can Microsoft Stay in the Consumer Business?

by Chris January 27, 2014

I admit that I was wrong about Microsoft … at least in the short term. In late 2012 I was very bearish on Microsoft just as I started participating in the Globe and Mail’s “Strategy Lab” project. I wrote a few articles explaining why I preferred to own Google and Apple rather than Microsoft. Turns […]

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Should you bother to read analyst reports?

by Chris January 16, 2014

If you invest in stocks you probably read analyst reports. Or at least you probably read summaries pulled from these reports in the financial press, right? So the question is … should you pay any attention to any of these reports? I answer that question in this week’s Strategy Lab column for the Globe and […]

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Apple is heading to $1000

by Chris December 11, 2013

Yup. That’s what I think. Just don’t ask me when it will happen or what the path will look like as it gets from here ($560ish) to there. This is the subject of the article I published for iMore.com yesterday, which you can read here. I was a sell side analyst for almost 11 years. […]

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Here’s what people think about the end of the PC

by Chris November 26, 2013

About 6 weeks ago I published one of my weekly columns in the Globe and Mail as part of the Strategy Lab project. The topic was how Apple may turn iOS into a PC replacement. You can read my column here. I firmly believe that PC sales are now in a long term decline. Many […]

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