Tesla Superchargers: The Charging Chicken And Egg Problem

| About: Tesla Motors (TSLA)

I have previously covered how Tesla (NASDAQ:TSLA) can make profits from Supercharging. In that analysis, I used my own estimates for usage of the Superchargers and energy consumption per charge. Since that article, there has been was a discussion thread at Tesla forums about actual supercharger usage numbers. Commenters have also presented me with numbers of the actual energy consumption by the Supercharger network from a Tesla dashboard. With this article, I hope to present a more accurate picture of Supercharger profits and I will also discuss their technical and deployment planning superiority to other charging networks.

At last count, the average supercharger uses were 2 per month or 24/year. Also up until December 21 2013, Tesla had delivered about 2.2 million kWh. Since a lot of Teslas were not on the road for the whole year, I will assume double this usage for about 24,000 cars being on the road for a whole year. In this case, annual consumption would be 4.4 million kWh. In the discussion thread, some Tesla owners said they hadn't used a Supercharger because there wasn't one near them. Others said they hadn't used one because they didn't need to. After nationwide deployment, if we assume that supercharger usage will double as more people start using the network, we have annual consumption of 8.8 million kWh.

Using a national average of 10.3c/kWh for commercial electricity rates, we have $906,400$ worth of electricity used annually for 24,000 cars on the road. So for every Tesla on the road, we have a cost of $38/year. For simplicity and a margin of safety, I'll round this up to $50/year/car. Over a lifetime of 20 years, this would cost Tesla about $1000.

I will assume maintenance to be about 10% of the cost of a Supercharger station every year. So about $22,500. If Tesla deploys 1000 stations nationwide, that is $22.5 million in annual maintenance. So Tesla can pay for the annual maintenance of a 1000 stations by just selling 22,500 cars a year.

These numbers don't account for inflation. But on the flip side, these numbers assume that half of Tesla Superchargers have Solar Panels, but ignore the electricity provided by Solar. These numbers also assume that Tesla will not raise prices for access to the Supercharger network in the future when it is widely deployed or have alternate payment plans in addition to the upfront lifetime access payment.

Tesla Superchargers use their own proprietary charging protocol and connector. One reason for this is that neither of the existing charging standards provide for charging as fast as the Superchargers.

The most popular DC Fast charge standard is CHAdeMO. This standard originated in Japan, and as of now they have 306 chargers deployed in the US (pdf). From their website photos, this looks like individual chargers, not charging stations like the Superchargers. The other competing standard is the SAE J1772 Combo charger. This is a North American standard and so far there are zero deployed DC fast chargers. The DC fast charging on the SAE charger is called combo because it actually just adds DC fast charging to the existing AC charger. The first SAE Combo DC fast chargers are expected to show up in 2014. Considering that Superchargers have 4-6 charging bays, and if we assume an average of 5, there are over 250 chargers deployed in the US already. Supercharger numbers will soon easily cross CHAdeMO numbers with a wider geographic deployment as shown by the images in the linked discussion.

Tesla also has an adapter for the SAE charger and an upcoming adapter for the CHAdeMo chargers.

Charger Max. Power US EV Users
SuperCharger 120kW Tesla
CHAdeMO 50kW Nissan (OTCPK:NSANY), Mitsubishi (OTCPK:MMTOF)

On most EVs, DC fast charging is an optional extra. Considering the very limited deployment of CHAdeMO to a few cities/states in the US, the still to be started deployment of SAE Combo chargers and no vision about DC fast charging deployment plans from any major car maker, car shoppers are reluctant to pay extra for DC fast charging. Ford (NYSE:F) doesn't even offer it on their Focus Electric.

In addition, Europe plans to stop supporting CHAdeMO, in favor of the SAE Combo charger.

Hence the chicken and the egg charging problem. Nobody will pay for the DC fast charging option until there are DC fast chargers and who will build out a DC fast charging network if nobody is going to use it?

Tesla is the only company that seems to have thought of this problem and is solving it by deploying their own SuperCharger network. Tesla has presented a clear vision about numbers and locations of chargers to enable nationwide road trips. So it is likely that if you buy a Tesla, there will soon be a fast charging network that you can use. And this network, as I have analyzed, can very well be profitable for Tesla.

So not only does Tesla have a technological lead in charging, it offers the ability to charge from even the other kinds of chargers. For other manufacturers to catch up with Tesla in providing long range EVs, charging standards need to evolve faster, deployments need to happen faster and they need to be better planned. Maybe once someone else actually offers a long range EV, these things will be considered. However, by that time, Tesla will have a significant lead in both sales of long range EVs and the deployment of a practical charging infrastructure.

Commenters on my previous articles have often argued that other manufacturers will compete with Tesla in the time frame of the Gen III launch. However with no other long range EVs in sight and the dismal state of fast charging, that is quite unlikely.

Disclosure: I am long TSLA, NSANY. 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.

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