What could the supercharging network be worth?

[teddyg]

Hi guys,
Apologies if this has already been discussed but I was wondering if someone a little more financially savvy could put together what the supercharging network could be worth to Tesla in the future.
What I mean by this is as follows:
If big auto does not start building out its own supercharging networks soon Tesla will have a huge advantage when the Gen III comes out.
By then it will take many years for big auto to similarly build out their own networks.
What I believe will happen is that big auto will licence Tesla supercharging technology for their EV's so that their cars will be able to charge on the Tesla network. "Can't beat em...join em" type of philosophy I guess.

Can anyone put a dollar figure on what this future licencing of technology might be worth to Tesla? And how this would affect the future share price..and by how much potentially?

Cheers!

 

[emupilot]

It's not just the supercharger infrastructure, but also the technology to charge that fast. The licensing scenario you describe would essentially make Tesla the Microsoft of cars, with every car carrying Tesla technology. I don't think that will happen, but the value of the supercharger network is massive regardless because it vastly expands the pool of potential Tesla buyers.

 

[RDoc]

I'm doubtful about the licensing. The difference between J1772 combo and Supercharging isn't really significant until you get to the large battery capacities only Tesla has. The battery powered car trend seems to be in the direction of plug in hybrids, not pure battery cars, so they'll likely be more like 10-12 kWh batteries than 60-100, and at that capacity, the difference between the combo charger and supercharging is only a few minutes. Given all that, unless companies start producing pure electric cars with much larger batteries, I don't see what the advantage to them would be.

It seems very unlikely to me that, at least in the US, government and non-proprietary funded charging networks would install exclusively proprietary charging system, for political and publicity reasons. As, or perhaps IF, such Level 3 chargers are installed, I expect they will be SAE combo compatible. The existing government sponsored/required CHAdeMO chargers are going to be modified to support SAE Combo in the next year or two.

Hopefully, Tesla will start providing SAE Combo adapters in place of the current J1772 adapters.

 

[CapitalistOppressor]

I'm not convinced that there is a lot of money to be made by licensing SuperCharger technology. I think that if there is real money to be made, it will come from huge amount of battery capacity that Tesla is going to need to install to support either SuperChargers or SuperSwappers.

That capacity will allow Tesla to do rate arbitrage, load leveling and any of a number of other valuable services. Tesla could potentially end up making money by selling energy to customers who are actually using the charging/swapping service.

They are already planning that on the SuperSwappers, and its not clear whether SuperCharging will be free to non-Model S drivers. At a minimum I'd expect non-Tesla customers to have to pay, and there is profit to be made in those transactions.

 

[sublimaze1]

When I was in training, a certain individual created an isotope that tagged cancer cells. He held the copyright to this isotope which, when it tagged cancer cells, could be coupled with another material that would heat up upon exposure to infrared light.

(hang in there - I am getting somewhere)

This individual sold the patent to a clinic that specialized in thoracic metastatic tumors of this type. He did so with the understanding (written, signed, lawyers, etc.) that the isotope would be used only at this hospital, at cost, and that the hospital would subsidize the use of the isotope and associated materials should it exceed the payments from third party carriers. Immediately after the signatures were done and the contract was executed, the hospital administration (who had witnessed the loophole developing in the contract) sold the cancer research protocol to a third party firm for $1.00, the prime shareholders of this third party being - the hospital board and chief of staff. They began selling the isotope to other hospitals, because the contract was between the hospital and the individual, not between the contracted group and the individual. This was many decades ago, and would never pass legal muster today

(I am somewhere now)

So, who is to say ... that one day, even though Elon says it will always be free, the SC network is sold to Dewey Cheetham and Howe corporation who turns around and sends all the Teslas and Gallileos and Copernicuses (Copernici) and all the other EV ventures who have adopted the proprietary service and says "congrats, here is your payment structure"

Then and only then will we have a true answer at how much the network is worth.

Thankfully, this will most likely never see fruition, as our independent capitalistic venture-driven market we live in is slowly churning downward as we subsidize more and more ....

(slaps self)

Anyway, maybe a few bucks, eh?

 

[marvinat0rz]

Ditto to CO's comment, there isn't any money to be made on licensing Supercharger technology.

The biggest risk when it comes to charging infrastructure, is fragmentation. The best possible thing that could happen for Tesla, is if the Supercharger technology becomes a de facto standard for high-range electric cars. This would cause a lock-in scenario which would allow Tesla to dictate the terms that all other manufacturers have to follow. But I think a much more likely scenario is that the other EV manufacturers will back some different standard, pitting Tesla's charging stations against the incompatible charging infrastructure of all other manufacturers. It's sort of a "VHS vs. Betamax" for cars. It follows from this reasoning that no manufacturer will be willing to pay to use Tesla's charging infrastructure. In the best case, they will adopt it free of charge.

The only way Supercharging will become a de facto standard of charging, is if Tesla outsells all other EV manufacturers so completely that it seems silly to use any other option. And also if no other manufacturer is able to create a competing technology, while it at the same time becomes clear that >100kW charging is a requirement for large-scale EV adoption. So the way I see it, history will determine whether the Supercharger network has any value independent of the convenience for Tesla owners. But we will see which way history takes a long time before it becomes relevant, because the path is dictated by Tesla's market share among the next-generation EVs.

 

[Robert.Boston]

I would also keep in mind that many of the locations Teslow is choosing for supercharging are uniquely sited. For example, the rest stop in Dover, Delaware, is superbly located. How many different charging standards will that turnpike administration support? There is a real first mover advantage for Tesla. The question is whether they can capitalize on that.

If I were a car manufacturer thinking to build a long distance pre EV vehicle, I would seriously think about paying Tesla $2000 and providing unlimited free charging access to my customers, rather than trying to reproduce an already established network. As we can already see, access to high-speed charging is an important factor and selling cars. Few manufacturers however will want to go through the challenging and expensive process of building their own network.

 

[ModelS8794]

I think the supercharger network will have its value best realized via powertrain sales to third parties. I feel the fast charge infrastructure is going to be a competitive advantage and Tesla will be able to offer it as a valuable additional inducement to those manufacturers interested in incorporating Tesla tech in their EV offerings Mercedes B-class style. The next Intel Inside if you will.

On the other hand Tesla may conclude that their own market share ambitions are better met keeping the infrastructure proprietary.

 

[ToddRLockwood]

It would not surprise me to see Tesla license some other car companies to share the Supercharger network. Daimler seems like a likely candidate with their upcoming Mercedes B Class cars. Elon has already said that Tesla would be willing to share the system, provided that partner companies play by the same rules (i.e. Free Charging) and contribute to the network's expansion. With Daimler involved, we could eventually see 300-500 stations in North America, not to mention Europe.

 

[marvinat0rz]

Licensing/drivetrain sales would be the best thing that could happen to Tesla. It would give the company 100% control of who they would compete with. It would also, as you say, make the Supercharging stations brand-independent, which means that Tesla would have a de facto monopoly on charging infrastructure.

 

[mrdoubleb]

Licensing/drivetrain sales would be the best thing that could happen to Tesla. It would give the company 100% control of who they would compete with. It would also, as you say, make the Supercharging stations brand-independent, which means that Tesla would have a de facto monopoly on charging infrastructure.

Absolutley. If they move fast with building out the network and can sign some big names for licensing, they have the potential to become the de facto standard. This could ensure a longtrem revenue stream and a scenario where they win even if others start making millions of EVs.

This can be seen in technology over and over again. Microsoft makes more money on Android than Windows Phone (for now), because they hold some key patents. Whenever there is a format war in consumer electronics (think Video 2000 vs VHS, HDDVD vs Blu-Ray, etc.) it is not just for bragging rights. It is also for those cents per product sold for the next 10-15 years.

They could also license it for free to manufacturers, and charge a small amount when their customers... charge. Adding a credit card reader to the Supercharges would not be a huge investment. They could even offer 2 licensing models to manufacturers: pay us an amount upfront plus something per vehicle, or get it for free but your clients will pay. I can see Daimler going for the first option, someone like GM going for the second.

BTW, Toyota would be a natural candidate for the partnership as well.

 

[ToddRLockwood]

Absolutley. If they move fast with building out the network and can sign some big names for licensing, they have the potential to become the de facto standard. This could ensure a longtrem revenue stream and a scenario where they win even if others start making millions of EVs.

This can be seen in technology over and over again. Microsoft makes more money on Android than Windows Phone (for now), because they hold some key patents. Whenever there is a format war in consumer electronics (think Video 2000 vs VHS, HDDVD vs Blu-Ray, etc.) it is not just for bragging rights. It is also for those cents per product sold for the next 10-15 years.

They could also license it for free to manufacturers, and charge a small amount when their customers... charge. Adding a credit card reader to the Supercharges would not be a huge investment. They could even offer 2 licensing models to manufacturers: pay us an amount upfront plus something per vehicle, or get it for free but your clients will pay. I can see Daimler going for the first option, someone like GM going for the second.

BTW, Toyota would be a natural candidate for the partnership as well.

Tesla's free charging approach will require some soul searching on the part of potential partners. I don't imagine any of them included this idea in their business model! They assumed that someone else would build the charging infrastructure. Mobil-Exxon might have even been eying the charging business, who knows. But free certainly throws a wrench in the works, doesn't it? Love it.

 

[Larry Chanin]

It would not surprise me to see Tesla license some other car companies to share the Supercharger network. Daimler seems like a likely candidate with their upcoming Mercedes B Class cars. Elon has already said that Tesla would be willing to share the system, provided that partner companies play by the same rules (i.e. Free Charging) and contribute to the network's expansion. With Daimler involved, we could eventually see 300-500 stations in North America, not to mention Europe.

I agree.

There's a lot of moving parts here. If Tesla can address the looming battery shortage and can produce Gen III cars in the 100's of thousands, as was pointed out by Marvin the Supercharger network will become the de facto standard for DC charging for large battery EVs. That will make the Supercharger network inherently more valuable.

However, if there are Tesla's backed up 10 deep at Supercharger stations, that first mover charging advantage may evaporate.

If others, such as Daimler, are willing pay an admission fee of a few thousand dollars per car and share in the Supercharger buildout, it may be possible to avoid Supercharger congestion thereby maintaining the value of the network.

Another, revenue producing solution to Supercharger congestion when the Gen IIIs hit the road of course is Battery Swapping. Here owners of licensed vehicles would be paying a fee to avoid congestion, and as CapitalistOppressor pointed out there are very interesting opportunities make big money in selling valuable services to utilities. So these new revenue streams could be used both to maintain profitability, and continue to fund infrastructure expansions avoiding congestion and maintaining the value of the network.

All this is predicated on somehow being able to ramp up battery production, first for car production and in the future for Battery Swapping and utility services.

Larry

 

[mrdoubleb]

I am not as worried about ramping battery production as i used to be. With the BYD and Samsung deals looming, you have companies who have the means to expand production until 2016-2017.

As much as i acknowledge Panasonic for their history and innovation in consumer electronics, from what i read they are not doing that incredibly well. But Samsung? Oh, boy, if there ever was a company that can rival Apple and MS on the resources side. They have money under their skin, and I imagine they would love to cement themselves as the leaders in this business at the dawn of the EV boom. IF it is true that LG and Samsung were duking it out over who would supply Tesla, I can imagine longterm commitments were made part of that deal and could even have been the deciding factor.

 

[Jack6591]

1. What could the supercharging network be worth?

In the words of Carl Sagan...........Billions and Billions.

 

[teddyg]

I'm not sure if you guys are thinking about this the same way I am.
I refer to this article:
http://www.dailytech.com/Tesla+Building+Tech+to+Fully+Charge+EVs+in+Just+5+Minutes/article31990.htm

If Tesla can eventually get supercharging times down to just 5 mins this will require, as J B Straubel states, a perfect marriage between battery pack and supercharger technology.
When transferring that type of power things have to communicate perfectly at all times or something will go up in smoke! Therefore no GM or Ford EV will be rolling up to a Tesla supercharging station without licencing Tesla technology on their cars.

Think of it like this: Tesla builds out supercharging network now and in 2017 (just in time when Gen III hits the market and Tesla Supercharging stations already cover 98% of North America, Western Europe, Japan, Australia, and most of China) they also announce that 5 minute supercharging is now possible.
Would this not reduce congestion on the network by some 400% (since cars now take at least 20 minutes)? Granted more superchargers will be necessary when there are millions of EV's on the road but, as someone here already said, if big auto want in then they need to cough up some cash to expand the network.

Point is that if big auto doesn't start building a supercharging network of their own right now then they will be caught flat footed here...big time...as it will take them at least 3-4 years to cover 98% of the above mentioned countries. At that point I say they raise the white flag and join Tesla in licencing their technology so that their vehicles can access this revolutionary network that is already set up!

Won't Tesla then have the only affordable long distance EV on the market (thanks to the supercharging network they can keep battery sizes/range down to just 200-250 miles)? Without a network big auto will have to make a 300-500 mile range EV to claim it offers long distance capability. More batteries onboard = more expensive, heavier, less efficient EV.

Won't the other auto makers be forced to licence Tesla technology on their vehicles if they want access to this network?

What might Tesla charge per vehicle? Or does Elon just want to give it away to accelerate the transition to EV as fast as possible?

Can we put a hypothetical value on this here? In terms of stock price?