Merrill Lynch (ML) has turned a cold shoulder towards the battery storage initiative of Tesla Motors. The management of the financial institution believes that the manufacturer’s potential to succeed is quite limited, as it would encounter a number of industrial and challenges in the highly competitive market.
Tesla news reported that the financial analysts believe the growth potential of the storage device market is quite restricted. This experts’ perspective indicates that the electric vehicle producer would not reap its profits easily from the market. An analyst of the company has referred to the performance of the Japanese company, Panasonic Corporation, which is currently working in the industry of storage devices.
Tesla motors news affirmed that the company has spent a huge time in the battery-manufacturing industry but it has failed to deliver very good results. Tesla news today informed that its stationery storage department has operating margins of 1 to 2 percent, which depict its failure to grow in the battery development industry. The analysts also believe that the revenues of the energy storage industry would always be lesser than the earnings of its electric vehicle-manufacturing business. This belief tells about the pessimistic evaluation of the expert.
ML believes that the organization’s battery plans have been disclosed to shift the investor’s attention from its inefficient electronic vehicle business. Moreover, the research expert believes that Tesla would report a negative cash flow and massive operational loss at its first quarter 2015 results. Experts stated the view that it needs to measure the consumer’s ability to directly supply surplus energy back to the grid. This capability could help in reducing electricity bills.
The Chief Executive Officer of Tesla, Elon Musk, intends to employ lithium-ion batteries for its power storage division. ML believes these batteries have not been equipped to maintain a higher life cycle, as these storing devices have not impressed it. The management should take immediate steps to solve the problem mentioned by the expert, or it would suffer.
It is most likely that the entrance into the power storage market would increase the company’s competitors, as a number of companies would threaten it, such as flow batteries and flywheels. The company should devise production strategies and efficient market strategies for encountering these tough rivals prevailing in the market.
The views of the aforementioned banking institution would affect the opinions of Tesla’s investors and shareholders. They could demand amendments in the plans of the company, as they want to maximize their returns. However, its performance in the electricity storage industry has to be witnessed. Now it is yet to be seen that to what extent this evaluation is able to affect the policies of the American automaker.