Tesla Roadster Upgrade Is A Very Big Deal

| About: Tesla Motors (TSLA)

Summary

A Tesla Motors vehicle with 400 miles of range is a game changer.

Tesla Motors is currently the only company capable of producing an electric vehicle with 400 miles of range.

Investors should take note of the details of the announcement that will happen later today.

On Thursday evening, Tesla Motors (NASDAQ:TSLA) CEO Elon Musk announced on Twitter (NYSE:TWTR) that owners of the Tesla Roadster will be able to upgrade to a battery pack with 400 miles of range.

In my view, this reaffirms Tesla is well ahead of every other automobile manufacturer since Tesla is currently producing battery packs using existing technology that are superior to the battery packs its competitors are "expecting" to produce in 2017. Battery packs that are expected to rely on "next-generation battery chemistry" that doesn't currently exist and is not proven to be safe.

Prior to this upgrade, that according to Tesla will be available soon, Tesla's first vehicle, the Roadster, was able to go further on a single charge than all other electric vehicles that currently exist, aside from the Tesla Model S. The Tesla Roadster will now have range superior to electric vehicles that won't be produced for years.

Assuming the 400-plus mile range will become available with the Model S, Model X and Tesla's Gen 3 vehicles, Tesla won't need to rely on any "breakthrough" in battery chemistry to blow away electric vehicles from its competitors, Audi, General Motors (NYSE:GM), BMW and Volkswagen, who are expected to begin producing electric vehicles with 200-300 miles of range sometime between 2016 and 2020 (none of which exist today).

In the past month, BMW, a reputable conventional producer of luxury ICE vehicles automobiles, has attempted to downplay the value of Tesla's technology, making allegations about comments by Elon Musk that, as I explained in my article, Tesla Investors are Ignoring What Elon Musk Really Said about BMW, were taken completely out of context. Last week, Wolfgang Hatz, a board member for Development and Research at Porsche, confirmed that the company (Porsche) will not be manufacturing the electric variant of Panamera, which was speculated to be launched in 2015 in direct competition with Tesla's Model S"

"We are a sports car firm, and that brings with it certain expectations," he said. "A Tesla is a fine car, but you cannot drive it enthusiastically without losing range or performance too quickly. Until the technology offers a solution to those problems, we will not be looking at launching such a car." (Topspeed)

On Tuesday, Elon Musk in my view, clarified the concern mentioned by Porsche, without explicitly referring to the comment, by emphasizing that the difference in range between the Model S P85 and the Model SP85D will be significantly reduced by a software update that will be released soon.

In my view, the announcement of a Tesla with 400 miles of range changes everything about the electric vehicle competitive landscape. BMW, the only company currently producing a "competitor" to Tesla's vehicles with its i3 and i8 Models, has made it clear that it has underestimated the technology that currently exists in Tesla vehicles and Superchargers:

"We [BMW] do not need our own factory for battery cells," the sources said. Battery cells are not a unique feature, and as other car parts, they can be purchased from suppliers, the sources said. "The joining of the cells into a battery and the control of the battery," however, would be done by BMW, because that's "the actual innovative performance." (wolfstreet)

In my above-linked article, I explained why BMW is either mistaken or unaware of the advantages Tesla technology has over BMW's technology, such as superior range, charging time and performance.

If the Tesla Roadster is capable of going around 400 miles on a full charge, as Elon Musk states it soon will be, it is likely Tesla isn't far from achieving the 500-mile "milestone" for the Model S Musk mentioned a few months back when asked how far he thought a battery-powered car will be able to go in the future:

It will be possible to have a 500-mile range car. In fact we could do it quite soon, but it would increase the price. Over time you could expect to have that kind of range. (Insideevs)

With this upgrade, Elon Musk appears to have followed through with his promise of increasing the range of Tesla's vehicles. In another tweet on Thursday, Musk also confirmed that upgrades in the maximum range for the Model S will happen, but not in the immediate future.

Conclusion

Tesla's stock has fallen 30% from its all-time high of $293 due, in part, to comments from BMW denying the company has any interest in partnering with Tesla and a collapse in the price of crude oil. On Tuesday, Morgan Stanley made it clear it believes demand for Tesla vehicles may be challenged by a collapse in the price of oil, however, as I explained in my prior article, I'm not convinced this is the case. Any decline in the stock caused by this type of speculation should be viewed as a buying opportunity. In my view, the announcement of a Tesla Roadster with 400 miles of range, and the 400-500 mile Model S Elon has now confirmed will happen, should be viewed as very bullish new information that is not currently priced into Tesla's stock price.

Disclosure: The author is long TSLA.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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