Tesla Stock Charges Upwards on Deal With GM
Tesla (TSLA) stock experienced a surge this week after General Motors (GM) announced that their electric vehicles would be compatible with Tesla’s charging network. This news followed a similar announcement made by Ford just two weeks prior. At the time of writing, Tesla’s stock had risen by approximately $12 per share or 5% for the day.
Currently, both Ford and GM EV drivers require special adapters to utilize Tesla chargers. However, both automakers have plans to develop new electric vehicles that will directly support Tesla-style chargers, eliminating the need for adapters. This move is expected to generate additional revenue for Tesla as users will likely pay for their charging sessions. Analyst Gary Silberg from KPMG estimates that Tesla could earn between $2 billion to $3 billion in annual revenue from these users alone.
Ford and GM EVs are currently designed to use the CCS fast chargers, which rely on different plugs and cables compared to Tesla’s chargers. Tesla’s charging system was previously proprietary and limited to its own vehicles, although Teslas could use CCS chargers with an adapter. However, in late 2022, CEO Elon Musk invited other automakers and charging companies to adopt Tesla’s charging system and design standards, referring to it as the “North American Charging Standard” (NACS). According to Tesla, the number of NACS chargers in the United States exceeds the number of CCS chargers by a factor of two to one.
GM CEO Mary Barra expressed her desire for NACS to become the standard. By having both Ford and GM adopt the NACS standard, it becomes a non-proprietary standard that is not limited to a single company. This makes it easier for Tesla to seek financial assistance for building EV chargers under federal infrastructure laws, as current rules restrict funding to chargers using the CCS standard. Analysts Sam Abuelsamid from Guidehouse Insights and Gary Silberg from KPMG expect that other automakers will likely follow suit in adopting the NACS standard, potentially leading to a shift away from the CCS type-1 connectors for new EVs sold in North America by 2026-27.
The GM announcement has already had a negative impact on the stock prices of other EV charger companies. Initially, it was uncertain if any automaker would take up Tesla’s offer following Musk’s 2022 announcement, despite Tesla’s well-regarded, robust, extensive, and reliable charging network. Tesla currently dominates the US electric vehicle market with nearly two-thirds of the market share, while GM’s Chevrolet holds a distant second place with its affordable Bolt EV, according to a Cox Automotive report. Ford holds a 4% market share in the first quarter of 2023 with its popular Mustang Mach-E electric SUV and F-150 Lightning pickup. GM has ambitious plans for new EV models in the coming years and has committed to selling only zero-emission vehicles by 2035. Other automakers such as Kia, Hyundai, BMW, Mercedes, and Volkswagen continue to use the CCS charging standard and have not announced any plans to switch.
GM has stated that once it transitions to building vehicles with NACS charging ports in 2025, it will provide adapters to enable drivers to continue using CCS chargers as well.
