Tesla May Have A Plan To Do What No One Expects

| About: Tesla Motors (TSLA)

Summary

The demand of Model 3 is overwhelming.

Gigafactory will be a great success.

An investment in Europe may be crucial at this stage.

Tesla (NASDAQ:TSLA) is advancing in strength in its innovative business model in a fast and effective way. Increasing production and drastically reducing the costs of battery cells are the key objectives.

With a production of 83,922 vehicles in total 2016 (an increase of 64% Y-o-Y), deliveries were 76,230 due to understandable problems from the transition to new Autopilot hardware in the last quarter. These production challenges were solved and the company could hit its production goal but not a portion of the deliveries which will be counted in Q1 2017. To meet the extraordinary demand that Model 3 is causing, the company already is preparing to expand its production capacity globally, not only in the United States. While Nevada's Gigafactory began mass production of lithium-ion battery cells which will be included in Model 3, its 1.9 million square feet are being built in phases and are still less than 30 percent completed.

The production of electric vehicles is moving forward and the large-scale production of cheap batteries is a fundamental requirement. To become a global company given the confidence in its technology and to meet an avalanche of customer orders, Tesla plans to build a first large factory in Europe for the production of EV and lithium batteries. Naturally, the fight will be strong among the countries that are most likely to host this project. Of course there are several candidate countries but the most credible are Portugal or Spain attending to the very high number of hours of sun daily. This would allow the installation of photovoltaic panels at the top of the facility, similar to what the company plans to do in the factory it is building in Nevada.

Portugal especially has been lobbying for several years with the American company and has much to offer: wage costs 50% lower than the sector average in Spain, a very low labor absenteeism rate, virtually zero land costs, high tax benefits and extensive support for investment costs according to the size of the investment. There is another aspect of the utmost importance. Portugal is the largest producer of lithium in Europe although it only goes by now until the concentrate phase. Appropriate partnerships would provide for the construction of a lithium smelting plant.

Tesla aims to produce 500,000 vehicles by 2018, an investment of extraordinary magnitude. There are indications that Tesla and the Portuguese government have had meetings at the highest level, and I have the conviction that it will be a process that can really move forward.

Conclusion

For a company with this type of investment of an extremely relevant global dimension, it is very positive to present such a sound financial situation at this point and to have the possibility of making profits in the short term. With the potential that the whole project demonstrates, an investment in Europe can be decisive as stated above in order to increasingly globalize a company such as Tesla.

Disclosure: I/we 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.

Additional disclosure: The author of this article is not an investment adviser and gives only his personal view and opinion, never making any investment advice or recommendation to buy or sell specific securities. Investors in financial assets must do so at their own responsibility and with due caution as they involve a significant degree of risk. Before investing in financial assets, investors should do their own research and consult a professional investment adviser.

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