Tesla’s record 13-day streak of gains came to an end on Wednesday when the shares dipped 0.74%, snapping a run that added $US240 billion to its market value and more than $US26 billion to Elon Musk’s fortune.
The shares dipped another 0.35% on Thursday when the wider market jumped sharply as investors realised the Federal Reserve thinks it has positioned the US economy to land softly later this year.
Up to Wednesday, Tesla shares had soared more than 50% in the past month, boosting its market value to roughly $US801 billion.
In fact the gain in market value was more than the entire value of Japan’s Toyota, the second-most valuable automaker worldwide – which this week finally threw in the towel and committed itself to a full EV future instead of trying to avoid making such a decisive break with its past.
Driving the rally has been the growing realisation that Elon Musk and Tesla have managed to gazump the entire US and Norther American EV industry with two agreements with rivals Ford and then GM to share charging technology.
Ford and GM will adopt Tesla’s charging system which effectively puts 60% of the US EV market on the North America Charging Standard (NACS) used by Tesla, even though there are other competing charging systems on use around the world.
“What has changed for the Street over the last month is the recognition with the Ford and GM supercharger partnerships that Tesla’s sum-of-the-parts valuation is now finally starting to get tapped into,” Wedbush Securities analysts wrote in a note.
With this latest rally, the company’s stratospheric price-to-earnings ratio far surpasses other automakers. Tesla’s forward price-to-earnings ratio is a huge 62, just below the 63.7 level enjoyed by Amazon.
Wedbush compared Tesla’s share gains to Amazon, which for years defied many investor expectations that its stock would eventually fall. Tesla shares slumped in 2022, losing 65% of their value, and helping the shorts make a mint.
Reuters pointed out that the 13-day rally cost short sellers more than $US7 billion in mark-to-market losses, taking year-to-date losses to nearly $US12.7 billion.
But questions remain about how any interoperability would work (it has to, if the EV sector is to achieve the rapid growth government, industry and consumers are expecting).
The partnerships ensures that more than 60% of the US EV market will now be on Tesla’s North American Charging Standard, which is expected to put pressure on other companies to ditch the current industry-standard CCS (Combined Charging System) and build out their networks using Tesla’s system.
The White House told Reuters that Tesla model chargers would be eligible for billions of dollars in federal subsidies as long as they included the CCS (Combined Charging System) connection.
“Earlier this year, we developed minimum standards to ensure publicly funded EV charging is accessible, reliable, and affordable for all drivers, and we required interoperability to promote competition. Those standards give flexibility for adding both CCS and NACS, as long as drivers can count on a minimum of CCS,” White House spokesperson Robyn Patterson said in statement to Reuters.
The US government has set aside $US7.5 billion in federal funds to push companies to adopt CCS as part of Biden’s plan to tackle climate change by converting 50% of all new US vehicle sales to EVs by 2030. That will also now flow to Tesla if the current standard is kept.
Ford and GM EVs currently use CCS fast chargers which rely on differently shaped plugs and thicker cables than Tesla’s chargers.
While Tesla’s charging system had been proprietary and only usable by Teslas, its vehicles can use CCS chargers with an adapter.
Musk announced in late 2022 that he was inviting other automakers and charging companies to use Tesla’s charging system and design standards and that’s what Ford and GM have now done.
With 17,000 charging plugs, Tesla has the largest network in the US. Its stations can charge faster than most others, they’re often more reliable, too, and exist in safer locations closer to prime travel corridors.
Charger makers and operators noted several concerns about interoperability: whether Tesla Superchargers can adequately charge higher-voltage vehicles with fast charging and whether the design of its charging cables will suit the ports on some cars.
Tesla’s Superchargers are integrated with its vehicles and payment is tied to accounts of users, who can charge and pay through a Tesla app seamlessly. It offers adapters that can be used to charge its cars at non-Tesla charging stations and is opening up its Superchargers for use by non-Tesla vehicles.
“We estimate Ford and GM combined could add another $3 billion to services EV charging revenue for Tesla over the next few years in another accretive poker move by Musk analysts at Wedbush Securities wrote on Friday.
Wedbush added that the move will also “aid GM’s objective to expand charging access to more than 134,000 chargers available to GM EV drivers today through the company’s Ultium Charge 360 initiative and mobile apps”.
Reuters said the deal has blindsided the charging sector in the US which is now coming to terms with the fact that they will have go down the Tesla system route, while keeping CCS technology available for existing clients.
That puts companies, including ChargePoint, EVgo Inc and Blink Charging Co, in danger of losing out on customers if they offer only Combined Charging System (CCS),
Charger maker ABB E-mobility North America, a unit of Swiss industrial firm ABB, told Reuters it will be offering a NACS connector option that it is now designing and testing.
“The last thing we want is to rush a solution to the market that is not seamless,” said Nagler, adding, “we still don’t fully know all the limitations of the (Tesla) charger itself.”
Ashley Horvat, a senior executive at Schneider Electric unit in the U.S. that supplies EV charging hardware and software, also told Reuters that interest in NACS adoption had been on the rise since the announcement by Ford and GM.
