Possible Tesla Supercharging Partner In Europe

Summary

• Elon Musk was interviewed on Thursday by the German Ministry for Economy and Energy at a conference entitled: Economy for Tomorrow.
• During this conference, Mr. Musk said that Tesla was recently approached by a European carmaker about a Supercharging partnership.
• With recent news of the Audi E-tron Quattro and Porsche Mission E, it's possible that Volkswagen Group is considering a partnership with Tesla on its Supercharging technology.

Elon Musk's interview in Germany on Thursday has shed light on a new opportunity for Tesla Motors (NASDAQ:TSLA). Mr. Musk said that Tesla Motors was recently approached by a European carmaker about a partnership on Supercharging technology. As Tesla's mission is "to accelerate the advent of sustainable transport by bringing compelling mass market electric cars to market as soon as possible," Mr. Musk said that Tesla is open to any company using its Supercharging network. He went on to explain that TSLA's charging network was never meant to be an exclusive system that kept others out and that Tesla is committed to helping speed the transition to EVs in any way possible. However, he did state two requirements for any company that wants to use Tesla's Supercharging network:

1. All vehicles must accept a high rate of charge to reduce charge times (The Model S has the capacity to charge at up to 120-135 kW).
2. Any company using Tesla's network must pay a proportionate share of costs based on vehicle usage (a fair system as Tesla has already invested heavily into Supercharger deployment).

These seem like reasonable requests as Tesla currently holds all the cards in this scenario. In addition, Musk added that he's also open to other car companies adding charging stations to the network which could then be used by all parties involved. This type of partnership would drastically speed the deployment of DC charging technology worldwide, and Tesla, along with its customers, would be the main beneficiary as it is closing in on 100,000 total Tesla vehicles on the road.

I also suspect that any Supercharging partnership would boost consumer confidence in Tesla and increase long-term demand. Tesla would also benefit from increased resources in developing a robust charging network. Volkswagen (VLKAY), for example, would bring much needed capital into the equation and the support of the world's largest automaker would verify Tesla as a legitimate competitor in the automotive industry (if there aren't considered so already). While Volkswagen's involvement in the recent emissions scandal has rocked the automotive industry, any EV partnership announcement with Tesla Motors would be good news for both parties.

A recent Seeking Alpha article by Anton Wahlman investigating how Audi [NSU:ETR] (OTC:AUDVF) will meet its EV charging needs lays out four possible scenarios for infrastructure deployment. I will now reassess each option in light of Musk's recent comments:

• The government will build the charging network - I agree that this scenario seems unlikely to occur now or in the future as many will argue that it's not the government's place. - 1%
• Audi builds its own network - This scenario is possible as Tesla has already accomplished this feat. However, relatively high upfront costs, long installation times and having to choose a slower EV charging technology (CHAdeMO or SAE combo) or its own proprietary technology will be detriments to this occurring. - 20%
• Partner with other automakers - Audi could definitely partner with other automakers to build an EV charging network, but it's unknown how willing or committed other companies would be to this idea. Other automakers definitely have the resources to make this happen. - 25%
• Partner with Tesla - This seems like the logical option especially in light of Musk's recent comments. The infrastructure is already quite robust in the US, Europe and China with more Superchargers coming online every week. Also, if time is of the essence (which it always is), partnering with Tesla would offer the quickest solution. Speaking of time, Tesla's Superchargers are also the fastest EV chargers in the world. - 54%

Conclusion

Now that we know at least one European automaker is interested in partnering with Tesla on its Supercharging technology, it shouldn't be a surprise to hear other automakers express interest as well. Tesla has the most robust and capable EV fast-charging network available in the world today, and for this reason, it is the logical choice for VW to partner with. Time will tell if this partnership ever comes to fruition, but Tesla and VW would both benefit long term from such an agreement.

Disclosure: I am/we are 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.