Yahoo Finance Tesla Inc (TSLA) Stock Can Weather the Storm
Tesla Inc (NASDAQ:TSLA) helped out during the hurricane and perhaps investors are cheering what they saw. No, Tesla didn’t send in emergency electric vehicles to aid in Florida’s evacuation process as Hurricane Irma came bearing down on the Sunshine State. However, it did make a savvy move that helped its current customers escape the storm.
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While the broader markets performed well — with the PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ:QQQ) climbing as well — Tesla stock casually popped 5.91% on Sept. 11, the first day after the storm.
Throughout the week, Tesla stock jumped nearly 10%, but TSLA has since pulled back from those highs. So what exactly did Tesla do to justify this potent spark?
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Tesla and Hurricane Irma
The only way you’re not aware of Hurricane Harvey or Hurricane Irma at this point is if you actually live under a rock. The storms have packed crushing power, first as Harvey ravaged Houston and other parts of Texas, followed up by the category 5 Hurricane Irma aimed at Florida.
It’s hard to say Floridians “got lucky” with Irma, considering it’s still likely to do massive damage (possibly up to $100 billion in insured losses). It could have been worse, though. Irma died down to a tropical storm by the time it was midway through the state and it spared Miami somewhat by passing through the west side of Florida. That said, it left tens of thousands fleeing and evacuating ahead of the massive storm.
As it stands, Tesla Inc makes 75 kWh or 100 kWh batteries. The larger the battery, the more expensive it is. However, before making these batteries, TSLA also used to sell cheaper alternatives, such as the 60 or 70 kWh battery. Rather than making major assembly changes though, the company simply put the 75 kWh product in these vehicles, used software to limit the driver’s range to a smaller amount than the 75 kWh offering, and charged the customer less money.
Customers actually had the option to pay to have the full capacity unlocked at a later stage, should they change their mind. Keep in mind, a Tesla Model S doesn’t sell for chump change, (starting at $69,500 before incentives). As it stands, the lower models get roughly 80% of the range that the 75 kWh gets.
One customer asked Tesla if they could unlock his vehicle for the evacuation. Tesla responded with a quick over-the-air update, unlocking all the vehicles that were under range restriction within the path of Hurricane Irma.
Why Does This Matter for Tesla?
The move added roughly 30 to 40 miles to the vehicles that were able to receive the update. That may not seem like much. But in stop-and-go traffic, it’s a well-appreciated boost that may have prevented some drivers from becoming stranded on the side of the highway. If anything, it provided some relief to the range anxiety that some drivers had to be feeling.
But why would this give such a boost to Tesla stock? How did it make it worth roughly $3 billion more in market cap in one day? I don’t know that it was a $3 billion revelation. But Tesla showed two unique potentials.
The first? Over-the-air updates. Owning a technology-heavy vehicle like a Tesla means customers can receive nearly instant changes to their vehicles. With a growing number of Teslas on the road, the automaker has access to a growing set of data. Data that allows TSLA to make better decisions in a more timely fashion. Be it around driving range or Autopilot features. The fact is, Tesla can make near-instant upgrades to its vehicles, which provides value to customers.
OTA updates are nothing new, but what we’re learning Tesla can do with them is new.
Second, it shows that perhaps range anxiety can be eased in the future. If consumers know that during emergencies their car’s range can be extended by about 25%, that’s one more reason to own the car.
Tesla can make beneficial tweaks at a moments notice, not something my Jeep is capable of. Knowing that Tesla has the ability to do it and will actually do it is also attractive from a customer point of view. Tesla has its customers’ backs.
As consumers start to turn to electric vehicles, there’s only one clear leader. Perhaps BMW, Mercedes, Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM) will catch up to Tesla in functionality and style. But until then, consumers will likely continue to go with TSLA.
The Bottom Line for Tesla Stock
For all the Hurricane Irma coverage, I doubt Tesla will get much. Maybe it doesn’t deserve front-page reporting, but its decision is a noteworthy one. It may not jumpstart sales in a meaningful way. But what Tesla showed is a remarkable feat, technologically speaking.
That will inevitably push some consumers into wanting the cars and shows investors what it’s capable of down the road. As the company gets better at self-driving technology, over-the-air updates will become even more valuable.
As for the share price, TSLA stock began with a big bullish move. It ran up to new 52-week highs and has since pulled back. It would have been good for TSLA to hold support at $370. However, should it hold around $350, the uptrend remains intact.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell did not hold a position in any of the aforementioned securities.
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