Supercharger Network Delayed This Quarter?

Supercharger Network Delayed This Quarter?

I'm increasingly convinced the supercharger network that Tesla is deploying is likely not going to see any real traction this quarter. In talking to people at Tesla and reading through the public statements Tesla is making, I'm starting to believe the cost cutting is likely extending to the Supercharger network. As an owner of the car and an investor in the company, I'm a bit torn about what I perceive is the direction of the company. I'd love to hear some counterpoints --

GoTeslaChicago | March 12, 2013

Did anyone make a specific promise about supercharger installations by March 31st? If not how can you jump to the conclusion that cost cutting is spreading to the supercharger network?

Superchargers are a tremendous marketing tool. I'm sure they're working to bring them to us as fast as they can get leases, permits, etc. These things always seem to take longer than you expect. Anyone ever do a remodeling project? You know what I mean.

I think that by fall there will be dozens of new supercharger stations. Hang in there!

petero | March 12, 2013

I believe that the Supercharging Network is more a Solar City undertaking than a TM project. Of course, I could be wrong.

aliljet | March 12, 2013

I don't disagree with the idea that the company will deploy superchargers, but if the goal is to be profitable this quarter (who knows what happens in the coming quarters), wouldn't the company have a strong incentive to stop investments that aren't positively impact the bottom line?

And Musk did very clearly mention new supercharger announcements along the eastern seaboard were on the immediate horizon. Those have not yet materialized.

This may be good for the stock price, but I don't think this is good news for owners. (Which is why I'm torn, actually.)

mahesh.johari | March 12, 2013

I don't think superchargers affect profitability very much. They are considered capital expenditures I think, so investments not expenses. The amortization of a supercharger over its useful life would show up as an expense item on earnings, but that's probably 1/10th or 1/20th of the total cost of the supercharger. Probably some people who know the company's accounting very well would know the answer for sure.

Whity Whiteman | March 12, 2013

I heard, a SC costs about 250.000$. So, bringing up 20 for the east-west-corridor is just 5.mio.
Saying that, the eastchargers costs as much as the (25%-margin)- Profit of selling 20 cars.

Right or wrong?

aliljet | March 12, 2013

Where are the supercharger costs detailed? Are they? And does Tesla run these chargers at a loss?

pbrulott | March 12, 2013

You are right Mj, It doesn't impact EBITDA since it would qualify as Capital Expenditures for TM but it impacts Free Cash Flow which TM is trying to turn positive asap and would also impact TM ability to repay the DOA loan.

dbfish | March 12, 2013

The only concrete information out there on Supercharger expansion right now is at Harris Ranch. A sign has been posted (and folks have spoken with utility workers and electrician contractors) about an upgrade from the single Supercharger to a multi-bay station. The sign reads:

"Welcome to our first Supercharger site. This was built as a pilot station with only one charge connector, before we knew how popular Supercharging would become. We are working hard to build a new, larger station at Harris Ranch with a targeted completion date by the end of March, 2013."

GoTeslaChicago | March 12, 2013

Many have criticized modern corporations for focusing too much on beating the quarterly earnings estimates and not focusing on the long term. If you think Tesla is playing that game, you should sell your stock.

Of course delaying expenditures, like the supercharger network might help the bottom line for one quarter, but that kind of shortsighted mentality would doom Tesla to failure.

So which do you think it is? Getting leases and permits takes time, or Tesla will sacrifice the future for the short term?

I'm voting for Tesla's long term vision. Hang in there!

weeandthewads | March 12, 2013

As a stock holder profits and cash flow positive is a must by the end of March. If the Model X is delayed, or the Super Charging network additions then so be it. Ship cars.

Captain_Zap | March 12, 2013

At one point I heard that Tesla was considering the Supercharger expenses as advertizing expense.

I can't recall where I heard it. I don't know if it was second hand, third hand or just someone's speculation. Food for thought though.

aliljet | March 12, 2013

I wonder if Tesla will confirm they are still expending resources at their previous rate to build out the supercharger network. And perhaps importantly, whether they will hit their expected full-deployment target dates...

Brian H | March 12, 2013

Since there is a 10K+ backlog of reservations, neither deployment of SCs or anything else that does not affect deliveries will impact profitablility this quarter. Or next.

Brian H | March 12, 2013

typo: profitability

jackhub | March 12, 2013

Elon, in the 4Q conference call, said they expect to announce an order of magnitude increase in the super-charger charging rate in 'several months.' Why in the world would they put in a slew of super-chargers that would need to be upgraded in several months?

DouglasR | March 12, 2013

Are you sure he said an "order of magnitude" increase? That typically means tenfold, so I doubt it. Possibly and increase from 90 kW to 120 kW.

Salman | March 12, 2013

In the conference call he said, "step increase," as in significant, non-incremental. Not necessarily order of magnitude, though. | March 12, 2013

My take from the Oslo talk is they are looking at a possible Supercharging increase from 90KW to 120KW. This sounds like the current Superchargers were already designed for 120KW. If so, it's just a software change to allow up to 120 KW from the existing superchargers. No idea if this is a car update, a software update to the Superchargers or both.

aliljet | March 12, 2013

Yeah, I also assumed the change was an increase in the amperage on the order of ~33. At any rate, I doubt they'd be slowing the pace with which they deploy superchargers to allow for some kind of upgrade if this is indeed the upgrade.

I wish the company would attempt to be a bit more transparent about their supercharger deployments. That would definitely allow for easier planning both on the investing side and the actual model s usage side of the equation. Keeping the supercharger deployments under wraps for that long seems like a poor strategy....

craig.tesla | March 12, 2013

@pbrulott: It might not affect free cash flow that much, nor government loan repayment, if they're financing the SCs rollout some other debt.

Keith72 | March 12, 2013

I thought I read somewhere that the SC stations are also selling power into the grid. If this is the case, that would help somewhat with the cash flow impact. I haven't actually seen any information on how much cash they might receive from selling power into the grid and what type of payback the SC stations have.
Has anyone else seen any information on this?

aliljet | March 12, 2013

The amount of money they're making from these supercharger stations has to be negligible relative to the capital cost of installing them in the first place.

Is the company revealing anything about where they want to build out these superchargers outside of their theoretical map? It'd be interesting to go scout out the locations where these builds are supposed to happen to figure out if anything is actually happening...

ssuszka | March 12, 2013

I don't follow all this very closely but other than the fact Elon predicted it, why is a profit so important to have this quarter?

Nya | March 12, 2013

I do not claim to know how the accounting is being handled for this, but just suppose that 25% of the 2013 S class cars are sold with the SC option. That is 5000 vehicles at $2000 each. That would mean that Tesla would have $10,000,000 of cash available during the year to cover capital (construction) and operating costs for SC centers.

lph | March 12, 2013

I am also long on Tesla. All I can say is stop worrying about it. We will see the superchargers when they arrive, and I firmly believe that they will do their best to make the network grow comensurate to their ability. Just as important is for each one of us to do our bit and bug hotels etc to install decent overnight charging ability (10kw min). This will do more to make Tesla desireable than almost anything else we can do whining on this forum. In short, lets work as a team to help Tesla.
They are a small company for the tasks they have assigned for themselves and anything we can do to help is good.
Within reason I am not really concerned about the first quarter profitability numbers either provided it is moving in the right direction. That is less important than having satisfied customers at this stage. Tesla needs to build and maintain a quality reputation. That means improving customer PR. That is the best stratergy in the long run.

negarholger | March 13, 2013

Lph - love your post and couldn't agree more on most of it.

However every car manufacturer claims that they can not make a profit building EVs. Once TM demonstrates that you can build and sell EVs for profit then the excuses are no more, changing the whole discussion. So it is in my view extremely important for TM to show a profit in 1Q13.

Brian H | March 13, 2013

Cost for the h/w to TM is about ¼ million per. Thereafter, Solar City manages the power and cash, selling array output to the utilities, and buying the power used. Across the n/w and over the course of a year, it sizes the arrays to sell more than they buy, so make a profit. TM is not involved and makes no profit or loss on the stations.

So from TM's POV, they are a pure marketing play.

DFibRL8R | March 13, 2013

Is Tesla not cost-sharing with the host location? This seems like such a huge win for the outlet mall/rest-stop owner in terms of increased visits from high net worth individuals. Seems like Tesla could show an increase in sales (assuming there is one) after SC installed to woo other potential clients. I know each time I have stopped to charge whether it's a supercharger or a J 1772, I've made a purchase of some sort.

Ron5 | March 13, 2013

Actually, the owner of the land is usually not the owner of the business(es) that would benefit.

lph | March 13, 2013

True, however the land owner will still like it over the long term since he can charge higher rent because the businesses are making more.

Ron5 | March 13, 2013

If only everyone would think long term, it would be great!

Brian H | March 13, 2013

Only in the long term.

Oh, wait...

jackhub | March 13, 2013

@salman, right!

Smburke23 | March 13, 2013

Is supercharging free to use if you have that option? If so who is paying for the power and how is it being sold back to the grid?

dortor | March 13, 2013

supercharging is not "free" - it's "included" with the cost of the car…this is a pet peeve of my wife and myself, many many people confuse "free" with "included"…

but yes supercharging is "Included" for the life of the car.

dortor | March 13, 2013

Telsa website quote:

"Enable Supercharging in your Model S. Includes all hardware, software, testing, and unlimited free charging at all Supercharger Locations."

notice Tesla is also sloppy with their use of the term "free" - I consider having to buy a $90K + item to get the service to be included…

DouglasR | March 13, 2013

Actually the service costs $90k but the car is included. :)

negarholger | March 13, 2013

My $100k Benz comes included with a fuel tank and fuel delivery system. I am free to buy gasoline at multiple stations.

Are we splitting hair now ? Sure MS pays for the SC network and the electrons upfront. Who else ?

Brian H | March 14, 2013

@simburt, dortor;
Not true. $0 of the purchase price goes into the SC use. Elon also runs Solar City, and he decreed that it would establish solar arrays in association with stations, enough across the network that more power would be generated than the cars used. Solar City then buys/pays for all the grid power the cars need, and sells the array output to the utilities, for a net profit over the course of the year.

So it is not "included". It is FREE. Really. TM pays only for the initial hardware, and can treat it as a (dirt-cheap, very effective) marketing cost.

Brian H | March 14, 2013

typo: @SMBurke23 ...

Docrob | March 14, 2013

Do superchargers even appear anywhere on Tesla's balance sheets? I thought they were being bankrolled by Solar City so they could sell excess solar production back to the grid?

dortor | March 14, 2013

but you have to own a Tesla to use them…so they are included.

Brian H | March 14, 2013

The hardware is paid for by TM, probably as a marketing expense. That is "included" only in the sense that all corporate expense is "included". The whole network costs as much as a dozen or two prime-time TV ads, but is far more productive and valuable. Qvetching about it is witless.

Docrob | March 14, 2013

Agree with Brian, they could have bought a Superbowl add spot or built a nationwide ultra fast charging network, both would cost a similar amount. I think they made the smart choice. | March 14, 2013

I was reading the 2012 10K, and I seem to remember the odd way it stated Superchargers were currently free for Model S owners. The way it stated it left it open that they could have a fee for future vehicle purchasers. I didn't read that anything was going to change soon, and 10K's are always the most pessimistic to cover the company's legal ass.

I'm not worried about current Model S owners (since it's been stated it's free). It may be that if they want to expand faster or the costs are higher than expected, they could charge a flat fee. Remember the 60KW is currently charged a one-time $2K, or it might be a yearly fee for GEN III users if they can use the Superchargers (having no idea what will be in GEN III other than a lower price).

dbfish | March 14, 2013

Expansion photo of Harris Ranch today:

jackhub | March 14, 2013

@ dorfor, Many of us signed up for the Model S and made our down payments before supercharging was even announced! No one knew anything about supercharging. After supercharging was announced my price did not increase. I paid no incremental price for supercharging. To me, when I get something for nothing, I consider it to be free!

Joel N. Weber II | March 14, 2013

By the time Gen III is available, solar panels should be cheaper than they are today, and if Tesla elects to use fixed batteries instead of high amperage grid connections, the cost of those batteries should also be lower than what it is today. This all suggests that offering free Supercharging to Gen III owners should be cheaper for Tesla than offering free Supercharging for 2013 Model S owners.

Additionally, I'm not sure that having two parking spaces with Supercharger cables really brings a noticable number of customers to a business that would convince an otherwise apathetic business to pay their lawyer to review a contract where they'd get Supercharging for ``free''. On the other hand, by the time Gen III starts to become available, showing businesses pictures of the Harris Ranch Superchargers (or perhaps Superchargers at some other popular location) and asking businesses if they can really afford to let customers bypass them in favor of businesses that did agree to host Superchargers might even lead businesses to be willing to pay a bit towards the costs of the Supercharger installation.

Vern110 | March 14, 2013

Also, once the superchargers were up and running, wasn't there a plan to lease or allow other EVs to either use the network at a cost, not unlike the current charge point stations, only much faster.

Brian H | March 14, 2013

Never heard that. In any case, the connectors are completely incompatible. And no other car can handle the charge rate. Even if it ramped down for them, it would be no different than a J1772 at that point, and there are plenty of those (by comparison).