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Tesla Secures Lithium Suppliers For GigaFactory, Trip Chowdhry Shares Insight

Tesla Secures Lithium Suppliers For GigaFactory, Trip Chowdhry Shares Insight
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Editor's note: A previous version of this article incorrectly stated that US Rare Earth Minerals Inc (OTC: USMN) was the company involved in the deal.

Tesla Motors Inc (NASDAQ: TSLA) is building a battery factory, called GigaFactory, in Nevada. The $5 billion investment is aimed at reducing battery costs by roughly 30 percent, “partly by bringing in in-house materials suppliers,” a Wall Street Journal article explained.

Early on Friday, the source informed that the automaker has secured long-term supplier agreements with North American companies Bacanora Minerals Ltd (which trades on the CVE exchange under the ticker BCN) and Rare Earth Minerals PLC, which manufacture lithium, the main raw material used in batteries.

Related Link: Tesla's Model S P85D Scores 103 Out Of 100 By Consumer Reports

The Research

In an email sent to investors, Global Equities Research’s Trip Chowdhry shared a few comments regarding this announcement. Below is a look at some highlights:

  • "Main Strategic Differentiator": The analyst assured that GigaFactory is the main strategic differentiator for the company, and this announcement indicates that in the first half of 2016, the facility may start with some limited production of batteries.
  • The Tesla Ecosystem: Tesla “is creating loosely coupled ‘ecosystems’ with strongly coupled ‘sub-systems,’ and GigaFactory is only one of the many instantiations of it,” the email explained. Sadly, the competition, which includes: General Motors Company (NYSE: GM), Audi, BMW, Mercedes Benz, Honda Motor Co Ltd (ADR) (NYSE: HMC) and Toyota Motor Corp (ADR) (NYSE: TM), among others, is quite clueless, the expert added.
  • Tesla, Strides Ahead: None of the principal automakers have “the intellectual capacity to build their own GigaFactories or TeraFactories,” the firm assured. And, without a GigaFactory, none of them stand a chance of against Tesla.
  • "Classical" Mistakes By Peers: Current automakers are making the classical incumbent mistake of assuming that its past successes will guide it into future.
  • Six-Part Thesis: Global Equities Research has a “durable multi-year investment thesis” for Tesla, based on: “(1) Multiple Auto Products - Model S and Model X; (2) Tesla Energy; (3) Tesla Pre Owned Vehicles (POV); (4) Tesla Services; (5) Tesla Power Trains (Currently Mercedes is the customer); (6) Speculative bet: Hyperloop, which we think is much closer to reality than was not that long ago, when many Industry Luminaries said that TSLA would only be able to sell 500 Model S cars .... and how wrong were they.”

The firm maintains an Overweight rating and $385.00 price target on shares of Tesla.

Disclosure: The author holds no positions in any of the securities mentioned in this article.

Latest Ratings for TSLA

Feb 2018Citic SecuritiesInitiates Coverage OnBuy
Oct 2017Evercore ISI GroupDowngradesOutperformIn-Line
Oct 2017Morgan StanleyMaintainsEqual-WeightEqual-Weight

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