Just How Profitable Can Tesla's Supercharging Be?

| About: Tesla, Inc. (TSLA)
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I have attempted to show before that Tesla (NASDAQ:TSLA) Superchargers can be profitable. I am also of the opinion that even if the Superchargers are profit neutral, they are what make and will keep Teslas the most viable EVs in industry.

Until now we did not have a good picture of Tesla's growth, but the Gigafactory information provided enough details to be able to estimate their growth all the way to 2020.

I will use these sales estimates and make these assumptions about the Supercharger adoption rate:

Year Supercharger Option Adoption Rate
2012 100%
2013-2015 90%
2016-2018 80%
2019 Onwards 75%

I will also assume 25 Supercharger visits per year per supercharger enabled car, much higher than I anticipate, but this high rate should satisfy critics who believe that superchargers will be used by a majority for more than just long distance travel. I will also assume that each charge costs Tesla $10 in electricity.

I assume a Supercharger construction cost of $225,000 (the midpoint of $150,000 and $300,000 for Superchargers with and without solar power). I will also ignore the impact of Solar on the electricity cost. In addition, I will assume an annual cost of $22,500 for maintenance and rent per Supercharger.

In 2013 Tesla built 65 Superchargers and I will assume that beginning this year, Tesla will build 200 Superchargers per year for the foreseeable future. I will ignore inflation in both cost of Superchargers and the amount that Tesla will charge for them. I will also ignore international variance in cost of Superchargers, electricity and cost of the Supercharger option.

With the above assumptions, here is a chart of Supercharger revenues vs. costs:

Here is a chart showing Supercharger profit per Supercharger enabled car sold:

This is far better than I had previously calculated at about $500/car. Let's look at this in terms of margins. Here is how the ASP of Tesla cars will drop as the mix gravitates towards cheaper models:

Here is what the margin improvement will look like from Supercharging as ASP drops:

Longer term, the slowdown of Supercharging expansion and even lower ASPs will cause a much more significant addition to Tesla's margins.

In conclusion, I reiterate that Tesla can make more money per car from Supercharging, than GM can make overall. GM delivered 9.7 million vehicles in 2013 and had net income of $3.8 billion giving us a profit of $391 per car. This, in addition to the absence of a dealer network, is likely to make Tesla have the highest margins in the industry and makes Tesla a great long-term investment.

Disclosure: I am long TSLA. 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.

Additional disclosure: I might trim my Tesla position if it hits $280 in the next few weeks.