Ongoing debates regarding the future of automobiles have propelled Tesla (NASDAQ:TSLA) into celebrity status overnight. The company, led by its visionary CEO Elon Musk, is attempting to eliminate objections that arise when a revolutionary technology is on the verge of breakthrough status. Investors, who have enjoyed a 140% gain in the last 3 months, are on board with Tesla's vision of an EV future. As are the early ambassadors that have dished out $65,000+ for the sleek Model S, yet continue to publicize its superiority after the fact. Tesla's publicity has stretched beyond its own reach and into surprising beneficiaries such as The Car Charging Group (OTCPK:CCGI), which will be crucial in developing the electric vehicle into a nationwide acceptance of transportation.
Tesla's drive on leader status
Tesla's Model S is leading the transitional automotive change towards a new way of thinking. As Tesla's chief designer, Franz von Holzhausen raves, "It's like the leap of faith Apple took with the iPhone". The company is utilizing advanced technology with its all touch-screen central control unit interior display that is exclusive in the electric vehicle leader. Its Silicon Valley roots combine the best of West Coast technology and Detroit's automotive features, making the Model S an aspiring benchmark for other vehicles (electric and internal combustion).
To induce critics that question its vision, Tesla has aggressively tackled the main concerns of electric vehicles. The range anxiety that surrounds the majority of EVs does not apply to the same extent with Tesla, which offers drivers greater than 200 miles before a recharge. Nevertheless, to assure any remaining doubters, Tesla offers drivers free solar powered Supercharger stations that provide half a battery charge in about 20 minutes.
Tesla continues to up its production to 500 vehicles a week en route for its growing demand domestically and internationally, with European deliveries underway and Asia shortly after towards the end of the year. It isn't hard to see why Tesla has been on a tear recently with the advances it has made in the EV sector. Single-handedly, Tesla has made this industry relevant and added the necessary credibility to be discussed as something more than a fantasy. While Tesla is in the driver seat of this revolution, the momentum it has produced is stretching onto other segments that are also reaping the rewards.
Benefiting from Tesla momentum
Car Charging Group, a leading provider of EV charging services, looks to support the exponentially growing outlook of EVs by developing a sustainable network of stations using the most advanced technology. Working off the momentum that Tesla has created, infrastructure companies are attempting to realize the US nationwide demonstration project of deploying over 22,000 chargers by 2014. This 50% increase in charging stations will provide an opportunity for CCGI to prop the public portion of EV infrastructure. Tesla's recent success has shed light on the need for nationwide infrastructure while also acting as a supportive measure for the widespread adoption of electric vehicles.
The Car Charging Group, proving to be an indirect investment into the fast growing EV industry, has taken advantage of the publicity Tesla has generated for the sector through its strategic expansion. The momentum from Tesla, since the beginning of May, seems to have spilled over into infrastructure companies with CCGI showing a near 15% increase in price (below). While Tesla continues to be the focal point of the EV phenomena, companies involved in building the public portion of infrastructure will directly benefit from greater exposure in the media and recognition by the financial world. Demand for commercial charging stations will spike as more drivers require alternative charging in places other than their home. Using this to its advantage, CarCharging has spread nationwide to become the largest independent public EV charging station network. The company has strategically engaged in acquisitions and partnerships with the intent to increase its presence at a time when there is sufficient demand for their service. The gradual shift towards EVs can only be favourable for smaller names like CCGI who can continue to piggyback on the exposure generated by leaders like Tesla.
Level 2 chargers, also the most commonly installed, take about 3-5 hours to fully charge an EV (using the Leaf's 24kwh battery). Due to this limitation, CCGI is focusing their business on installing stations in public domains such as grocery stores, workplace garages, malls etc to allow consumers to charge their vehicle while occupied with other activities. This way, drivers are not solely going out to charge their car, instead they have the opportunity to do so while carrying out everyday actions. CarCharging envisions the future of EV infrastructure to be in its commercial parking spots that offer a complementing service while out.
The marketing ploy initiated by Tesla's Supercharger Network can be utilized by infrastructure companies to promote their own models while illustrating how they complement one another. CCGI chargers, manufactured by ChargePoint, are adaptable with most EV models on the road (including Model S), unlike the SuperCharger which only supports Tesla's. Additionally, the commercial locations of CCGI chargers offer greater convenience, since Tesla's chargers are positioned along major highways across the country. In public domains, where the majority of stations are installed, smaller infrastructure companies will not be facing competition from Tesla's network. This essentially removes Tesla's charging network as a competitor to CCGI, yet allows the smaller infrastructure leader to utilize the marketing deployed by the Supercharger. Most importantly, however, CCGI offers a solution to the misconception of range anxiety by allowing charging to occur at common destinations visited daily. This is especially beneficial for the majority of EV fleets on the roads now, and in the coming future, which cannot operate on range of 200+ miles like the Model S due to battery restrictions.
Greater EV competition: an opportunity for infrastructure companies
Car makers initially eased into the electric vehicle market, through small fleets, to gather a better understanding of consumer preference and develop the necessary acceptance required to make EV a form of transportation. The success and profits of Tesla and other pioneers (GM/Nissan) have driven opposing car manufacturers to enter the field that was once ignored. Going forward, the majority of automakers have either released an electric model or have a concept developed for future launch. Within the next four years, the EV sector is expected to become a lot more congested. Greater competition is an inevitable risk for current leader Tesla who will need to display that much more innovation to remain on top. However, for infrastructure companies this presents an even bigger opportunity for growth. The more EVs there are on the road, the greater potential revenues for charging stations installed by CCGI.
International preparation for an industry that's on the rise
EV infrastructure is ahead of the curve by developing technology that can sustain an up and coming industry. As EV sales increase and the growth of the industry is realized, charging stations will have laid out a foundation to generate greater revenues. CarCharging is looking to gain from the rapid international adoptions of governments in the EU and Asia (primarily China) to develop the electric vehicle sector. With increased international exposure, through partnerships, infrastructure companies are expecting international sales to continue an upward trend with the new overseas arrival of Tesla. This will undoubtedly have an endorsing effect on the overall EV market, similar to the hype Tesla created in the US. To boot, CCGI confirmed interest in international expansion by bidding on bankrupt Israeli EV firm Better Place. Though CarCharging Group was ultimately outbid for the pioneering EV firm, its interest in the strategic assets of Better Place, along with its acquisition spree in 2013, validate the aspiration to create a global brand.
Tesla's recent publicity has drawn awareness to the EV market as a whole, including the ever important infrastructure needed to sustain the technology. The Car Charging Group is a prime example of a company that has implicitly utilized this momentum to expand their own business model. In addition to these benefits, CCGI offers a diversified investment opportunity that works in their favour when the market for EVs becomes congested, which would otherwise be a limitation for current leaders like Tesla.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.