Ways To Indirectly Invest In Tesla’s Momentum

By Aaron Levitt | Updated September 02, 2014 AAA

There’s no denying that Elon Musk’s Tesla Motors (NASDAQ: TSLA) is a tour de force in the markets. Since going public in June of 2010 for only $19 per share, the electric vehicle manufacturer has gone straight up in a big way. Since its IPO, TSLA has managed an insane gain of nearly 1225% in roughly 3 ½ years.

Given how well the stock has performed since going public, investors may be a little gun shy about pulling the trigger and directly adding TSLA shares. Luckily, there’s a whole ecosystem of suppliers that can be used to play TSLA’s momentum.

The Batteries

Tesla made history when it announced plans to open a new world-class battery manufacturing facility. The so-called “Gigafactory” will handle everything from processing raw lithium to final assembly of the small lightweight batteries for Tesla’s products. The plant should be operational by 2020 and be able to create more lithium-ion batteries in a single year than were produced worldwide in 2013. It’ll also cost a staggering $5 billion. Aside from paying for the project with a new convertible bond, Tesla is planning on tapping its various current battery partners.

The biggest of these is Panasonic (OTCBB: PCRFY).

Already, Panasonic has cooperated with Tesla on supplying batteries for its electric vehicles since 2011. That partnership was recently ratified and extended back in October. PCRFY will supply nearly 2 billion cells over the course of four years. But Panasonic isn’t just resting on its laurels. The Japanese firm is already considering investing up to $1 billion in the new plant. That news alone sent shares up 7%.

As the partnership evolves, PCRFY could be one of the best winners from Tesla’s continued momentum. Other winners could be lithium-ion battery producers Hitachi (OTCBB: HTHIY) and NEC (OTCBB: NIPNF) as Panasonic has stated it will allow other Japanese firms to joint venture on the project. Hitachi already supplies Tesla vacuum brake hoses for its vehicles.

Another key component in the battery of TSLA’s cars is its chiller. This device controls the battery's temperature and prevents it from overheating and losing its charge. Currently, Modine Manufacturing (NYSE: MOD) provides Tesla with the product. While that is still a small part of Modine’s overall sales and product mix, as TSLA’s sales increase, it should help drive future earnings at the small-cap firm.

The Cars

While Tesla is as secretive as Apple when it comes to suppliers for its vehicles, a few are known. Magna International (NYSE: MGA) is already one of the largest parts suppliers for almost every car on the road today including some high tech features as well as things like cup-holders and upholstery. Magna provides similar functions on the Model S.

Tesla’s cars are just as much about performance as they are about being green. And that means some pretty hefty performance parts. Italian firm Freni Brembo’s (OTC: BRBOF) red disc brakes are a staple on many sports cars and high-end automobiles. Tesla’s Model S is no different and features Brembo’s caliber and disc brake systems. With performance and GT versions of the new vehicle models in the planning stages, the odds are pretty good that Tesla will tap Brembo for continued brake parts.

Considering that most investors think of Tesla as the “next” Apple (NASDAQ: AAPL), it’s no surprise that the two companies could be working together. The Cupertino-based tech firm has recently announced plans for its in-dash “CarPlay” system. Tesla confirmed it had spoken to AAPL, although Musk wouldn’t exactly say what the talks were about. While some have speculated that a buy-out could be in order, it most likely had to do with Tesla using Apple’s new CarPlay system in its vehicles. If that’s true, it could be a nice profit boost for Apple.

The Bottom Line

Electric vehicle maker Tesla has been one of the best performing stocks of the last few years. The firm continues to rack-up sales for its cars. However, given its crazy stock performance, some investors may be getting a bit nervous about its lofty share price. Luckily, there are ways to participate in TSLA’s growth without directly betting on its stock.

 

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