Tesla is one of the most heavily shorted stocks in the US market. The stocks, which trades around $US278 a share, has fallen by almost 30 per cent from a peak in September last year. Mr Musk has previously defended on Twitter the shorting of his company, dismissing investor and bank concerns. Tesla has a market cap of $US46.2 billion ($61 billion), more than 20 times that of EV competitor Hyundai at $US2 billion, despite only selling 100,000 electric vehicles compared with Hyundai’s 8 million plus electric vehicle sales. Toyota, which holds nearly half the EV market, has a market cap of $US212 billion and has sold 11.47 million electric cars. “So if the incumbents are worth very little, why should the upstart that is carrying a lot of execution risk be highly rated?” Mr Mitchell asked.

He said the group has had early wins but is facing significant supply chain and production delay risk, so the company’s decision to add battery manufacturing further reduces its margin of safety. “You’ve got a great entrepreneur [in Tesla owner Elon Musk] who has had some favourable early wins to be able to get the business off the ground with the benefit of an ex-Toyota production line, funding from Uncle Sam [the US government], and getting the branding right by pitching an electric vehicle at the right time,” Mr Mitchell said. “But I think now, the decision to move into storage batteries and into a mass market vehicle is one we struggle with. “Tesla’s advantage isn’t in production scale. Tesla has to be careful to try and not do too many things.” Tesla is vastly over weighted compared to its peers, despite holding a much smaller market share. Credit:Jeff Chiu

He said Tesla was brave to internalise storage production but it will require heavy levels of capital investment outside of their principal areas of capability. An industry source familiar with Tesla said moving manufacturing of batteries in-house was a move to future-proof the company. "A lot of other car makers are saying they'll move more models to electric vehicles but what you need is a big factory to do so, so where are their factories?" he asked. "By having it in-house, battery technology also gets better as the manufacturer has a direct line of sight on its development." The world’s largest electric car battery maker, Chinese firm Contemporary Amperex Technology, has also faced headwinds this week, reining in the scale of its initial public offering to only half of its original plan.

“Tesla would need a strategic investor, they need a SoftBank Vision fund, a [Chinese tech investment firm] Tencent, or a very large-cap tech stock to bail them out,” Mr Mitchell said. “The [automotive industry] is out of favour – I don’t think it’s because investors think Tesla is going to disrupt the incumbents – I think it’s out of favour because investors are worried about where we are in the cycle. This is the industry that Tesla is entering. “Outside of China, we don’t see many regulators willing to subsidise the uptake of mass-market electric vehicles." He said Tesla’s success with the Hornsdale battery installation in South Australia is a landmark but that the industry needs government support. “The tech is on a pretty deliberate cost reduction line but we still see it as a five to 10-year story, and then it needs the money to actually be available.

“For grid-scale batteries, we don’t see any regulator [globally] willing to subsidise that." Tesla decline to comment. Batteries in Australia Tesla is also facing increasing competition as Australia’s grid-scale battery leader.

Lyon Australia announced on Tuesday that it is building three major batteries as storage for its solar farms. It is building a 20-megawatt battery at Cape York, Queensland, an 80-megawatt battery in Nowingi Victoria, and a 100-megawatt battery in Riversdale, South Australia, only 230 kilometres from Tesla’s 100-megawatt installation. More Australians are installing battery storage alongside their rooftop solar panels. Lyon has also signed a Memorandum of Understanding with the world’s largest gas buyer, JERA, and Fluence – a joint-venture between Siemens and AES – to build grid-scale batteries in Asia Pacific. “This collaboration agreement positions Lyon, JERA and Fluence to lead the world in the deployment and use of utility and industrial scale battery storage,” Lyon chairman David Green said.

Fluence vice president for global market, Jan Teichmann said this agreement will help Australia in its energy evolution. “Australia is working to solve difficult ‘grid-in-transition’ issues at scale as they usher in the next generation electricity network that is cleaner, lower cost, and more reliable,” he said. At the smaller scale, German home battery maker Sonnen has signed a 60 million Euro agreement with Shell to accelerate its growth in Australia and the US. This will be a boon for South Australia, after Sonnen announced earlier this year its intention to build a new battery manufacturing plant in Adelaide, building 50,000 new batteries over the next five years. There were approximately 20,800 battery storage system installed in Australian homes in 2017, a three-fold increase on the 6750 installed in 2016.