A collaboration between two automotive giants is the talk of the stock market Friday and has one analyst singing praises of the market opportunity. Here’s a look at what the news between Tesla Inc TSLA and General Motors Company GM could mean for investors.
What Happened: Automotive giant General Motors announced it will begin integrating the North American Charging Standard connector on future electric vehicles produced in 2025.
The new charger will help expand the access for General Motors drivers to a network of more than 12,000 Tesla Supercharger stations. GM owners will also get access to the existing network by using an adapter beginning in 2024.
“This collaboration is a key part of our strategy and an important next step in quickly expanding access to fast chargers for our customers. Not only will it help make the transition to electric vehicles more seamless for our customers, but it could help move the industry toward a single North American charging standard,” General Motors CEO Mary Barra said.
The news follows a similar collaboration for charging network access announced between Tesla and Ford Motor Company F recently.
The new deals signed with General Motors and Ford could be worth $3 billion by 2030, according to Piper Sandler analyst Alex Potter, as shared by Bloomberg.
The deals with Ford and General Motors will make the Tesla charging model the standard in North America and could put pressure on competitors to make the same move and stop using CCS chargers, according to Potter.
“Other brands will be forced to join this consortium, effectively establishing Tesla’s ‘North American Standard’ as the preferred approach for EV charging – at least in the United States,” Potter said.
Potter, who has an Overweight rating and price target of $280 on Tesla, said the additional revenue could help support Tesla’s aggressive growth against its competition. In a sense, the company’s competitors could help fund their own profitability struggles.
The analyst sees the potential of $3 billion in charging revenue from non-Tesla owners by the year 2030 and the total growing to $5.4 billion by 2032.
Related Link: The SuperCharger Revolution: 5 Takeaways From GM CEO Mary Barra, Tesla CEO Elon Musk On Twitter Spaces
Why It’s Important: Tesla has been the market leader in electric vehicles and has operating margins that its competitors would love to have.
General Motors and Ford both have existing electric vehicles on roads that have seen strong demand. The problem for the legacy automakers has been growing their scale and getting to profitability for their electric vehicle segments.
Ford’s Model e segment, which develops electric vehicles, saw revenue of $700 million in the first quarter. The company said it expects this unit to post a loss of $3 billion EBIT for the full fiscal year, compared to profits of $7 billion for Ford Blue and $6 billion for Ford Pro.
As Ford and General Motors lose money on their electric vehicles, they are now helping provide a revenue boost to Tesla, an electric vehicle leader that has been cutting the prices of its vehicles.
Wedbush analyst Dan Ives raised his price target from $215 to $300 on Tesla shares after news of the General Motors collaboration was announced.
“In a nutshell, Musk and Tesla are playing chess while other automakers are playing checkers in this broader EV green tidal wave,” Ives said.
The analyst, who has an Outperform rating, said the deals with GM and Ford help increase the value of the supercharger network owned by Tesla and any sum-of-the-parts valuation models.
“At the end of the day, Tesla essentially owns the charging network ecosystem domestically, and GM, as well as Ford, need access to it for success in their broader EV ambitions over the coming years.”
Ives also shared a target of $3 billion for charging revenue from rival companies, but didn’t give a specific year for the estimate.
TSLA Price Action: Tesla shares are up 4% to $244.29 on Friday and are up over 125% year-to-date in 2023.
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