How to Profit from Electric Vehicle Infrastructure

If you’ve been following the headlines lately, you would think Tesla Motors (NASDAQ: TSLA) is the only electric car company on the market. leaf charger

And judging by its one-year return of almost 300%, you would think Tesla is going to completely take over the automobile industry.

But while that could definitely end up being the case, there are far too many “ifs” and “maybes” to justify buying a stock trading at 52-week highs with negative profit margins and a forward P/E of 142.

The fact is, Tesla shareholders have made a killing this year, but many recent investors are throwing caution to the wind – the company is a major risk for the time being.

Tesla Motors

Tesla Motors recently received a wave of positive press in response to its expansion of the Tesla Supercharger network. The company has tripled the number of Supercharger stations in a month and released graphics indicating the installation of a few hundred stations within a year

The company’s refueling model will allow Tesla Model S drivers to travel long distances and recharge for free. An official statement from Tesla claims that by 2014, this new infrastructure will cover almost the entire population of the United States and Canada.

And while infrastructure is a necessary component for the electric vehicle (EV) market, operational costs are definitely a bit of a concern here – it will cost Tesla an estimated $300,000 to install each Supercharger station.

In other words, just 100 of these stations will cost Tesla $30 million. To put this in perspective, that is over 5 times the company’s operating loss in the most recent quarter. And just to be clear, this figure ignores continuous expenses associated with property taxes, property management, and utilities.

Tesla saw its first quarter of net income in March 2013, with a net profit of $11 million. If Tesla does not boost revenue, the cost of this infrastructure will mostly offset potential earnings figures and scare away investors.

Simply put, Tesla has been a great ride, but the risk is currently too high.

Nissan (OTC: NSANY)

While Tesla is throwing its money at infrastructure, Nissan is expanding its quick-charger program in 21 markets by adding chargers to 100 dealerships across the United States.

These charging stations can charge a LEAF EV to 80 percent capacity in 30 minutes (just slightly slower than Tesla’s Superchargers). Nissan has already run a successful pilot program at 24 dealerships on the West Coast and is now putting efforts mainly into key East Coast markets.

It’s undeniable that Tesla produces a better product – the company’s Model S offers a range close to triple that of the Nissan Leaf. However, there are few things to keep in mind.

First, the LEAF is focused on the entry level EV market and is over 4 times cheaper than the Model S. Comparing the range of the two models is a moot point. Furthermore, Nissan has a significant advantage when it comes to infrastructure development.

Because Nissan is installing chargers at its dealerships, the company does not have to acquire additional property, which significantly reduces cost. And most of these dealerships are already near major highways, so there are no issues about location convenience.

Nissan LEAF sales reached a record this past June, with over 3,000 units sold in the U.S. and Japan despite Japan’s struggling automobile market.

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Back Door Play

Of course, Nissan is far from an EV pure play, which is likely why so many investors have dumped their money into Tesla recently. Tesla is the only clearly visible option to playing this industry, and it has received a ton of market attention as a result.

However, there are plenty of back doors to the EV industry, ranging from graphene plays to battery companies.

Nissan has already partnered with AeroVironment (NASDAQ: AVAV) to provide its quick-charge stations, which opens a huge opportunity for the latter company now that Nissan is investing in new infrastructure.

AeroVironment also offers home chargers for personal use and its own network of charging stations. Furthermore, Ford (NYSE: F) recently switched from Best Buy to AeroVironment as its next charging unit provider.

Ultimately, it will be outside companies like AeroVironment, not automobile manufacturers, that provide the infrastructure for the EV market. Just think about it: how many times have you pumped your gas at a General Motors (NYSE: GM) gas station?

The only reason Nissan and Tesla are investing in this infrastructure is because it will increase the attractiveness of electric vehicles. When EVs eventually flood the market, charging will become profitable, and outside companies will offer the solution to charge any make or model.

Already being a partner of two major auto dealers, AeroVironment’s upside is absolutely huge.

Turning progress to profits,