Tesla Is an Energy Company, Not a Car Company

Tesla (Nasdaq: TSLA) investors have a lot riding on a successful Model 3 rollout. But Loup Ventures analyst Gene Munster says long-term investors that consider Tesla an auto company are missing out on the big picture.

According to Munster, Tesla is CEO Elon Musk’s tool for changing the global energy industry for the better. Tesla’s electric vehicles, including the Model 3, are just the first steps in Musk’s long-term plan for the company.

“Though the company has garnered a powerful media presence, primarily based on its work in the electric vehicle space, we think the bulk of this attention is misguided, focusing on too narrow a scope and too short a time frame,” Munster writes.

Musk outlined his master plan for Tesla in a blog post in 2006. Based on Musk’s plan, Munster believes the final destination for Tesla is to serve as a large-scale global renewable energy company rather than just an auto company.

For now, Munster says Tesla’s biggest hurdle to clear is scaling its business to keep costs down. In order to enact true global change, Tesla will need to establish a massive energy infrastructure. To pay for building that infrastructure, it will need to execute each step of Musk’s plan along the way.

Tesla’s first Gigafactory in Nevada isn’t complete and it has already cost the company more than $1 billion to build. Musk plans to build up to 20 Gigafactories in time and says it would take 100 of them to power the entire world.

While a long-range, affordable electric vehicle is only a tiny part of Musk’s long-term vision, a Model 3 flop could stop the master plan in its tracks and leave Tesla without the resources to move forward. No matter how Tesla bulls see the company, the Model 3 is critically important for the future.

Jefferies analyst Philippe Houchois set a $280 price target for Tesla stock and said the Model 3 rollout won’t be a smooth ride for investors.

“Achievements to date and vision are impressive, but we don’t think Tesla’s vertically integrated business model can be scaled up as profitably and quickly as consensus thinks and valuation multiples imply,” Houchois write, according to CNBC.

So far, Musk has executed…

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