3 More Catalysts That Could Send Tesla Higher

Shares of Tesla Motors (NASDAQ: TSLA  ) rose more than 20% Tuesday, after the German Federal Motor Transport Authority concluded an investigation clearing Tesla of any wrongdoing or manufacturing errors in two Model S fires. While this breaking news will soon be forgotten, there are three potential upcoming catalysts that could keep Tesla shares' momentum flowing.

First catalyst: the obvious
While the German investigation concluded the vehicles had "no manufacturer-related defects," that investigation isn't the only one making headlines, and it isn't even the most important one. In the United States, the National Highway Traffic Safety Administration is conducting its own investigation regarding similar Model S fires on U.S. roads. 

CEO Elon Musk has welcomed the U.S. investigation  with open arms. It's reasonable to expect the probe in the U.S. will also exonerate Tesla -- but these headlines may have brought new eyes and ears to the electric automaker, which could drive demand for both its vehicles and its stock.

Second catalyst: the less obvious
Many Fools are aware that Tesla's problem lies in production, not demand. For every vehicle, a buyer is waiting before production even begins. The No. 1 bottleneck is battery production, which Panasonic (NASDAQOTH: PCRFY  ) (NASDAQOTH: PCRFY  ) (NASDAQOTH: PCRFY  )  and Tesla are diligently working to correct. It's not for a lack of resources, since lithium is only 1% to 2% of the batteries, according to Musk.

The problem is simply time to build out the infrastructure to expand capacity. While the Panasonic expansion deal will help relieve production constraints in 2014, there are two other ways Tesla could expand production.

First, look for supply agreements with other companies in addition to Panasonic. In the latest conference call, Musk stated, "There needs to be other agreements with some combination of Panasonic, maybe with others." Musk referred to Panasonic as its "primary partner," but it may need others as well.

Second, Musk stated, "There is going to need to be some kind of giga factory built." This essentially means expanded battery production would be taken care of in-house. He went on in more detail: "We are not quite ready to make a big announcement on the cell and battery giga factory, but we are exploring a lot of these options right now. If I were to guess, I think that we would do that giga factory with the raw materials coming in all the way to finished packs with partners and that's probably my best guess, and that factory most likely would be in North America, but we are investigating other options as well."

Musk explains that the factory would be so large that it would be bigger than all the lithium-ion production in the world combined, only his would be in one "really giant facility."

Third catalyst: what the crowd isn't talking much about
Though the details were scarce in the most recent earnings release, Tesla mentioned that it made "dramatic improvements" to its service centers. The company said it is "pioneering a new approach to vehicle servicing that we believe will revolutionize the customer experience." No further details were given, except this dangling carrot: "An announcement about this will be forthcoming shortly."

It's interesting to note that in Tesla's filings with the SEC, its "service parts" inventory has been escalating since March 31. On that date it stood at $16.7 million, which was down a bit from the end of 2012. But this figure has shot up 76% to $29.4 million on June 30 and another 78% to $42.4 million on Sept. 30.

Could this 154% total increase in service part inventory have something to do with the forthcoming announcement? Obviously, you can't be sure just what will be in the announcement or how big it really is, but if it is significant, the market probably won't see it coming. A market shocked by good news tends to be rewarding. 

Foolish final words
Keep an eye on Tesla's press releases and SEC filings for any updates and details on these three catalysts. It's certainly possible that these catalysts could fail to materialize due to change of plans or an unexpected negative event. But if they come to pass, it could bode well for Tesla's fundamentals and shares.


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  • Report this Comment On December 04, 2013, at 1:07 PM, JIMMYLIMO wrote:

    Catalyst #4- Elon Musk's company SpaceX just launched its first satellite payload into geosynchronous orbit, a MASSIVE game changer for the private aerospace industry. This will only further Elon's reputation as a genius and will give extra credibility to any and all of his automotive ventures.

  • Report this Comment On December 04, 2013, at 1:25 PM, nickeyfriedman wrote:

    Great points, JIMMYLIMO

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