Analyst: Tesla Is Creating A New Industry With Effectively Zero Dollars

Electric car maker Tesla Motors Inc TSLA is creating a new industry with its "Gigafactory," which is effectively being built with zero dollars, according to Trip Chowdhry of Global Equities Research.

Chowdhry said Tesla's Gigafactory (a $5 billion investment) has the potential to change multiple­ sub-­industries, and he said Lithium could be available at the cost of salt in the "not too distant future." This could jumpstart a completely new industry, which would supplant the whole of the existing utility industry.

Going a step forward, Chowdhry said, "TSLA GigaFactory, by itself, may be valued at $600 billion.­ Imagine a world with $0.99 a box of Lithium, similar to Sodium, the common salt we get at Safeway."

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The analyst said current global automakers are burning more than $8 billion per year, in advertising, while Tesla is spending $0 on advertising, the money saved on advertisement is being invested in creating a completely new industry with Gigafactory "battery production at scale."

"In ­spite of this huge auto industry spend of more than $8 billion in advertisements per year, the brand­ loyalty is non-­existent. TSLA spends zero dollars in advertising, and in­ spite of this, has the most aspirational possession value, not only in USA, Canada and Europe, but even in countries like Thailand, Malaysia, South Africa and India, where TSLA has not even sold a single car," Chowdhry said in a note to clients.

Tesla's biggest sales persons are its own customers. The company's referral program has been a "super hit." In 2016, a new referral program was put in ­place, which gives the new buyer $1,000 off the invoice, the current owner gets $1,200 credit toward the power installation, chance to win Powerwall (Tesla Energy), Model X P85DL, trip to SpaceX, invite to inauguration of Gigafactory, etc.

"The net effect of these self ­driven and engaging customer actions is ­ exceedingly high Tesla's amplification rate and applause rate ­ hence there is no need for TSLA to spend even $0.01 on advertisements," Chowdhry noted.