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UBS (Basically): Tesla's Path To Profitability Now Dependent On Musk-Trump Bromance

All roads lead to leathery, ketchup-drenched steaks at Mar a Lago.
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This is just the appetizer.

This is just the appetizer.

At some point in one's understanding of Tesla, there comes the realization that Elon Musk plans it to be an actual car company with actual sales from Tampa to Fairbanks, with real Americans driving real Teslas every waking day. Model 3 owners will stop at the same small-town stoplights and nod to each other in silent fellowship. Mothers will entrust their children to the grace and care of Autopilot. Kids named Tesla won't be mocked.

Plenty of moving pieces will have to fall into place for all that to happen (Musk will literally get to the moon before Tesla accomplishes it). Perhaps the most critical prerequisite is the mammoth infrastructure investment necessary to get Teslas from A to B without becoming paperweights in between. These things need chargers, and those have to be built. Since Tesla is “not just an automotive company,” but “an energy innovation company” it's incumbent upon the company to make Tesla Superchargers as ubiquitous as gas stations.

The infrastructure challenge might not preoccupy Tesla investors, who drove the stock up 33 percent following November's election, despite the company most recently reporting falling revenue and nearly $1 billion in negative cash flow in Q4. But the power issue probably preoccupies Musk. And it certainly preoccupies UBS analysts, who recently the time to project just how much it money it'd take to make Tesla power stations a fixture coast-to-coast. That cost: $35 billion.

The math is this: There need to be 30,000 more Superchargers in the country – added to the existing 5,195 stations – to achieve the kind of coverage gas stations currently have, which is four minutes away from the average American. That means going from this:

UBS Evidence Lab

(UBS Evidence Lab)

To this:

(UBS Evidence Lab)

(UBS Evidence Lab)

At a cost of a quarter-mil per station, Tesla would need to spend around $8 billion to rival gas for convenience. With other capex and service costs, Tesla is looking at $35 billion in capex spending into 2026. Though we don't want to understate Musk's ability to separate optimists from their cash, that's still a tall order.

Luckily, Musk might have a way out of this bind, as long as he's ready to dine on a well-done hunk of beef slathered in ketchup, completely sober, with the leader of the free world. As UBS notes, “there has been discussion that Trump's infrastructure project may involve federal subsidies for a nationwide EV charging corridor, which could reduce the cost burden.” Yet again it's Trump ex machina.

As regards Oval Office brown-nosing, Musk won't have to innovate much. He simply needs to follow the path blazed so expertly by Carl Icahn in his recent bid to get Trump to sign some esoteric ethanol-related executive order that would reward one of Icahn's portfolio companies. It's an easy model: Speak well of Trump, give him a few new factories to brag about, and reap the rewards of your new friendship. Given that the duo has already been pronouncedabromance – with appropriate investor reaction – Elon could be one very classy gold-plated friendship bracelet away from achieving his electric dream.

OK, that and probably a fair amount of continued share issuance, which UBS sees as necessary to overcoming the “fundamental headwinds” facing Tesla. Also the Model 3 needs to make a profit, which UBS doubts. Also there's that SolarCity thing. Also this.

Time for Elon to start sharpening his steak knife.


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