Apple Has Its Ecosystem, Tesla Has Its Infrastructure

Imagine taking any road trip in the U.S. without spending a dime on gas.

Thanks to Tesla Motors (NASDAQ: TSLA  ) , this reality is just around the corner. And this is the primary reason I think that bears are underestimating Tesla.

If you build it, they will come
Superchargers put other charging stations to shame. They are the difference between a convenient electric vehicle, or EV, experience and an inconvenient EV experience. These Tesla-owned charging stations juice the Model S roughly 16 times faster than most public charging stations -- and they're free.

Source: Tesla Motors.

A 50% charge in 20 minutes or an 80% charge in 40 minutes (at Tesla's new 120 kW Superchargers), and Model S owners can be on their way. Even more, by the end of this year, Tesla will be taking some stations one step further, giving Model S owners the option to pay about $50-$80 for a 90-second battery swap without even having to get out of the car.

"Faster or free?" Tesla likes to ask.

The value proposition is very real. Especially when you take into consideration the extent of Tesla's Supercharger rollout. Earlier this year, Tesla had just 17 Supercharger stations. By 2014, the company plans to have 80% of the U.S. population and parts of Canada covered. By 2015, Tesla plans to have 98% of the U.S. population covered.

Tesla Superchargers planned for 2015. Gray and red dots both indicate Supercharger stations. Source: Tesla Motors website.

Currently, Supercharger stations are only accessible to Tesla Model S owners. Even more, the company hasn't publicly announced any plans or partnerships to share Supercharger stations with other EVs.

In other words, Tesla's fast-growing Supercharger network currently serves as a meaningful competitive advantage for the company.

Ecosystems matter
When Apple (NASDAQ: AAPL  ) introduced the iPhone, the company had already built the world's largest digital store. The digital store gave the new iPhone meaning. It gave it context.

Then, with millions of credit cards already on file, Apple was able to introduce the App Store to customers already buying digital products from Apple, further strengthening its ecosystem. Once just a music store, iTunes has now expanded to become the world's largest digital movie and app store too. The digital store reported a whopping $4 billion in revenue last quarter.

There's little doubt that Apple customers' intense loyalty stems at least partly from this powerful ecosystem.

Tesla is doing something similar. It's building an ecosystem of Superchargers and service centers. It's building the infrastructure needed to make EVs mainstream -- just on time, in fact, for Tesla's planned Model X launch.

Sure, competition will continue to force the company to step up its game. But investors should realize that Tesla's ambitious goals aren't just fluff. They're backed by aggressive infrastructure expansion.

And Superchargers will not just be a U.S. phenomenon. Already, Tesla has plans to cover 80% of Norway's population with Superchargers. Of course this is just the beginning of Tesla's international Supercharger rollout.

A catalyst for EVs
Sure, Tesla Motors may one day decide that the best move for the company will be to open up its Superchargers to other EVs. After all, their mission is to catalyze the entire EV market.

Though industry-wide access to Tesla's Superchargers would certainly encourage competition, it would also boost further outside investment in EV infrastructure. This, in turn, would strengthen the EV value proposition in general.

To confirm, I asked Tesla Motors about their plans to make Superchargers accessible and they assured me that they remain "open to the idea of making Superchargers accessible to others [at some point in the future]...".

In a way, Tesla is hedging its own success in four steps:

  1. Pioneer the EV revolution by building out infrastructure and top-notch EVs.
  2. Achieve scale with the help of an exclusive, superior Supercharger network.
  3. Open up the ecosystem to spur outside investment.
  4. Ride the wave of mass EV adoption.

Valuing Tesla's Superchargers
Analysts have had a blast playing with the numbers on Tesla's potential vehicle sales, but very few give the company credit for its fast-growing network of Superchargers.

What happens when Tesla Motors launches a $35,000, 200-mile-range, stylish EV in three to four years (as Tesla CEO Elon Musk has expressed to Bloomberg) with a massive network of Superchargers already in place? Likely the beginning of mainstream EV adoption.

Tesla's investment in Superchargers is what makes America's most closely followed growth stock an enduring business and not a high-flying fad.

Tesla isn't the only growth stock stunning investors. This incredible tech stock is growing twice as fast as Google and Facebook, and more than three times as fast as and Apple. Watch our jaw-dropping investor alert video today to find out why The Motley Fool's chief technology officer is putting $117,238 of his own money on the table, and why he's so confident this will be a huge winner in 2013 and beyond. Just click here to watch!


Read/Post Comments (11) | Recommend This Article (5)

Comments from our Foolish Readers

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  • Report this Comment On August 20, 2013, at 7:04 PM, makelvin wrote:

    There is a huge difference between Apple's ecosystem and Tesla's proposed infrastructure. Apple's ecosystem like the Appstore and iTune media contents are supplied by thousands and thousands of other third party developers and media companies; what Tesla is proposing to do is to build their Super Charging stations completely on their own.

    It is way too grandiose of an idea for such an infrastructure to be able to succeed without supports from others. If Tesla is planning to build out the infrastructure throughout US and part of Canada. And they plan to allow their customers to be able to charge for free, how can they possible pay for the up keep and maintenance of each of these stations everywhere.

    Apple's ecosystem is actually profitable and continue to be supported by thousands. They can easily continue their ecosystem indefinitely. Tesla on the other hand does not seem economically feasible to be able to sustain their infrastructure for very long assuming they can actually succeed in building out their infrastructure to cover 95% of the US population and part of Canada.

    I hope Tesla has a better plan in mind than the one this article is laying out; otherwise, this is doom to fail.

  • Report this Comment On August 20, 2013, at 7:19 PM, merechino wrote:

    What do you mean by "population"? do you know what are the statistics of Tela owners' annual mileage?

  • Report this Comment On August 20, 2013, at 7:26 PM, TMFDanielSparks wrote:

    @merechino Tesla refers to Supercharges as of covering a percentage of the population to illustrate that 98% of the population in the U.S. will have access to a Supercharging station...

  • Report this Comment On August 20, 2013, at 7:29 PM, PaulPhoenix wrote:

    The cost of the electricity to Tesla is an issue as is the fact that the country's electrical grid is already strained. In CA of which has the majority of Teslas, there are rolling blackouts in the summer. Too many people charging and too few power plants (thanks CA regulation and taxes) and all it will be is a $100,000 paperweight.

  • Report this Comment On August 20, 2013, at 10:35 PM, ashaskevich wrote:

    Finally an article about Tesla that I can agree with the analysis. I would not say it is an ecosystem that Tesla is building out, but Tesla is solving the classic "chicken or egg" problem. What came first, the chicken or the egg? There needs to be a charging infrastructure for the demand to "REALLY" take off. If Elon Musk wants to break the record for car sales of a new car model ( 1965 Ford Mustang) then build out the infrastructure and then roll out the Gen III model.

    From what I can see, I think Tesla is doing that. If Elon Musk wants to achieve "Immortality", then break the 1965 Ford Mustang record.

    At that point, the stock price will be through the roof. Possibly $3K/share.

    So buy now, hold till the end of the decade, then sell and retire nicely.

  • Report this Comment On August 21, 2013, at 12:51 AM, ckraider118 wrote:

    I imagine JV partnership with SBUX or some of the major restaurants for TSLA can be considered in the near future for the Superchargers. Could easily turn into another revenue source for the company.

  • Report this Comment On August 21, 2013, at 3:28 AM, Petronilus wrote:

    People tend to forget that the need for out of home charging is dramatically lower than the need for going to a gas station when you drive a Tesla Model S and can charge it at home. Reality for most people is that only on rare occasions the trip will require charging on the way.

    The number of charging stations will grow as demand will grow. Tesla is securing a working solution by their super charging stations and some of them are solar powered making it quite a green alternative also.

  • Report this Comment On August 21, 2013, at 8:04 AM, JRP3 wrote:

    PaulPhoenix doesn't understand the supercharger model at all. Tesla superchargers have solar panels to support the electrical demand plus they have battery systems to store energy during low demand times and supply it during high demand times. This not only supports the grid rather than straining it but also allows Tesla to store electricity cheaply at night or for free during the day and then sell it back to utilities during peak times when it's more valuable. The cost of the superchargers come from Tesla's marketing budget, since they don't need to do conventional advertising, each one is a giant billboard for Tesla, and the "free" charging is built into the price of each car. Once again Musk proves he's a marketing genius.

  • Report this Comment On August 21, 2013, at 8:38 AM, damilkman wrote:

    The Apple model sounds like a profit center. The Tesla model sounds like a cost center. That might explain the impact on the bottom line.

  • Report this Comment On August 22, 2013, at 7:35 PM, Jason87467 wrote:

    What Tesla really has is an egotistical CEO (Elon Musk) who likes to put down the competition and thinks he's smarter than anyone else. That's what Tesla has.

  • Report this Comment On August 24, 2013, at 5:31 PM, RussellL wrote:

    The cost of Superchargers come from the marketing budget.

    Instead of spending money on billboards and commercials, Tesla spends it on something tangible and beneficial to their customers.

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