2017 Investor Roundtable:General Discussion

[neroden]

South Australia to announce Tesla as backer of world's largest battery

Tesla wins giant battery contract in Australia, has 100-day deadline
Another article on the topic. Of course, the stock isn't even reacting, because whatever.

It's a bit of a gamble, obviously, and hope Musk will put a condition in the contract that delays due to land acquisition (i.e. local government has to provide the land), permitting (i.e. local utility has to agree to connect it), or shipments being held up at the border by Australian customs, don't count towards the 100 days. All three of those could be delayed as deliberate sabotage. Everything else is under Tesla's control, but those really need to be excluded.

 

[Fallenone]

Tesla wins giant battery contract in Australia, has 100-day deadline
Another article on the topic. Of course, the stock isn't even reacting, because whatever.

It's a bit of a gamble, obviously, and hope Musk will put a condition in the contract that delays due to land acquisition (i.e. local government has to provide the land), permitting (i.e. local utility has to agree to connect it), or shipments being held up at the border by Australian customs, don't count towards the 100 days. All three of those could be delayed as deliberate sabotage. Everything else is under Tesla's control, but those really need to be excluded.

The deal says completion by Dec. So these factors should have been taken in.

 

[TrendTrader007]

Has anyone seen a post from @TrendTrader007 recently?

I am curious about his charting as to where he sees TSLA going, and frankly, to make sure he is OK.

Lol. I'm only down $3m in the last 10 days so I'm okay
I've seen worse

 

[Reciprocity]

Tesla wins giant battery contract in Australia, has 100-day deadline
Another article on the topic. Of course, the stock isn't even reacting, because whatever.

It's a bit of a gamble, obviously, and hope Musk will put a condition in the contract that delays due to land acquisition (i.e. local government has to provide the land), permitting (i.e. local utility has to agree to connect it), or shipments being held up at the border by Australian customs, don't count towards the 100 days. All three of those could be delayed as deliberate sabotage. Everything else is under Tesla's control, but those really need to be excluded.

Yeah there are a lot of moving parts, but they way that Elon made it seem, its Tesla's mandate that it be free if they are late and SA was not going to hold them to that until Tesla insisted. My guess is that its something that they can easily get out of if there is an issue outside of Tesla's control and delays are minor. My question is how much margin is there going to be on these packs. Looking at the information that is available and knowing roughly how much a car pack costs which should be at most 30% less then $190/KWh. I would imagine the pack setup for stationary storage is a bit simpler and cheaper because they do not have to worry about weight and space. Even if the powerpack2s are discount for bulk purchases there could be as much as 50% GM for PP2s. I think we are highly underestimating the margins from TE. There could be a very high level of automation in building out packs because they are similar to the packs in the car in that they require cooling, but they are not as concerned about weight and space they take up so there is more room for machines to do the work and not as tight of tolerances.

 

[neroden]

I am amazed by the combined media attack. All timed together across multiple media outlets. Very interesting.

Yeah, it's an honest-to-goodness "bear raid". I've read about them in history books -- they were a common thing back in the 19th century -- but I've never seen one in action before. At least not one where it was really clear that it was a bear raid.

Bear Raid

 

[JRP3]

I also expect the majority of Model 3/Y's to include the smallest batteries.

That really depends on the price differential. I think most people will want the extra range if they can afford it. That's certainly what we saw with the S.

 

[elasalle]

Thank you. This somewhat eases my concern about increasing Cobalt prices. I wonder if a new chemistry will be one of the Gigafactory-related news later this year.

It would be a smart strategic move to diversify chemistries to protect against price surges in any specific metal.

The Australian project uses the same battery format as the model 3 just different chemistry SO.
How many model three base batteries (60) is this equal to?

129000/60 = 2150
This project will eat up enough batteries to equal 2150 model three cars. Coming so shortly after initial production of the model three it may force Tesla to offer the smaller battery (60) with the initial availability of the model three.

IE I was worried that the base model battery would not be available until 2018.

If EM guaranteed a 100 day installation, I think this project has basically been planned for rapid deployment. So I think the batteries required for this project are ready to be shipped at GF1.

 

[ValueAnalyst]

That really depends on the price differential. I think most people will want the extra range if they can afford it. That's certainly what we saw with the S.

Model S buyers are significantly different from Model 3 buyers. The latter group will be relatively more cost conscious.

Also, I expect the base model Model 3 to have significantly more range than the advertised "at least 215 miles," which should be plenty for vast majority of Model 3 buyers.

Of course if Tesla prices the larger battery size at or slightly more than difference in cost, then I would agree with you, but I doubt that will be the case.

 

[racer26]

If EM guaranteed a 100 day installation, I think this project has basically been planned for rapid deployment. So I think the batteries required for this project are ready to be shipped at GF1.

Its entirely plausible that Tesla started building them back when EM was tweeting with MCB and JW months ago.

 

[WarpedOne]

If they are still at GF1, they have already missed the dead line.
Those PPs are already on the boat in the high seas if not in AUS already.

 

[Reciprocity]

That really depends on the price differential. I think most people will want the extra range if they can afford it. That's certainly what we saw with the S.

If Autonomy is going to be a real thing the larger battery will mean more profits. Less time charging during prime travel times and the car will have a longer useful life as the battery degrades. Typical degradation is about 2.5% in the firs year and another 2.5% over the next 5 years. Makes me want to get the aero wheels which could be good for 5-10% improvement in range depending on use and duel motor for an additional 10-12 miles of range if for no other reason then to offset the 5-10% lost range over 10 years and a million miles. Autonomy is also why you need million mile drive trains, not for the average customer who might not drive a million miles in their entire lives.

 

[Ichabod]

How did you calculate $392/kWh for Powerwall?! Please include "$800 to $2,000" of installation cost in your calculation. My estimate using one Powerwall 2 is $500/kWh to $585/kWh ($5,500 + $700 hardware + $800 to $2,000 installation for 14 kWh). See this: Tesla Powerwall

Also, you're assuming Tesla will price Powerpack with the same gross margin as Powerwall. It seems to me that Tesla is facing more competition on the Powerwall side than Powerpack due its scale advantage with the latter. So Powerpack may command a higher margin than Powerwall.

Given Tesla's capacity limitation, I expect Tesla to use gross profits from the Powerpack business with "super-exponential growth" to fund future Gigafactories for the foreseeable future. Note that Tesla can now produce battery packs at Gigafactory 1 at a cost lower than $140/kWh so its gross margin with Powerpacks, if priced at ~$500/kWh, may be much higher than my estimate of 30%.

All of this reinforces my prediction that Tesla will not need another equity secondary.

I know this is a small thing, but it's being so overused, it's really getting annoying. Despite a rich and famous person using the term, "super-exponential growth" is a dumb term. Using a decent sized number for the exponent, plain old exponential growth can approximate a vertical line, so there is really no need to keep adding the "super". Frankly, it makes the whole post sound silly, especially since the rate so far has generally not been all that overwhelming. Nothing personal.

 

[techmaven]

So... someone leaked an image of the Model 3 production line:

A peek inside Tesla’s secretive Model 3 production line

It seems that those of us under NDA can talk about the contents of that photo, since we didn't leak it.

 

[elasalle]

Its entirely plausible that Tesla started building them back when EM was tweeting with MCB and JW months ago.

Yes, and that is because as we saw on Twitter, EM was willing to accept the bet at the drop of a hat.

 

[ValueAnalyst]

If EM guaranteed a 100 day installation, I think this project has basically been planned for rapid deployment. So I think the batteries required for this project are ready to be shipped at GF1.

I agree with you. In the posted video, Elon makes it clear he is WELL aware that the world will be watching this project, so his "100 days within signing" may already incorporate some cushion. It's also clear to me, having watched the video, that the Tesla team was in contact with the Australian government even before the tweet exchange. So the real timeline to December is way more than 100 days, maybe even more than six months.

 

[jbcarioca]

Model S buyers are significantly different from Model 3 buyers. The latter group will be relatively more cost conscious.

Also, I expect the base model Model 3 to have significantly more range than the advertised "at least 215 miles," which should be plenty for vast majority of Model 3 buyers.

Of course if Tesla prices the larger battery size at or slightly more than difference in cost, then I would agree with you, but I doubt that will be the case.

A quick look at relative sales volumes for competitive classed vehicles (BMW 3-Series in particular) might be instructive. I haven't looked at that data recently. When I last did, about a decade ago, the largest mode, then about 50%, were the upper middle within the 3-Series range. The base actually sold less than did the highest (M3) in many large markets. IIRC, Elon estimated average $42,000 sales price a few months back. I'll speculate the actual average sales rice will be around $47,000 or so. Later, when we have the Design Studion, it will be far easier to estimate. The biggest question in average sales price might well be how high the high end goes. if they do it as BMW and Mercedes do, they might well see a much higher price for M3 on average, while many of the aspiration S buyers disappear. The question is whether S will be cannibalized significantly. The recent speculation suggests an effect, but I rather suspect it is a timing influence rather than a real drop. S buyers right ow may be simply waiting for the inevitable next big improvement.

We'll soon know.

 

[Dennisj00]

The SA project should be on the fast track since typical US delays like siting (NIMBY), permits, planning budgets should be done.

It's going to be a great project for TE and the world to examine. Prepare for liftoff!

 

[ValueAnalyst]

I know this is a small thing, but it's being so overused, it's really getting annoying. Despite a rich and famous person using the term, "super-exponential growth" is a dumb term. Using a decent sized number for the exponent, plain old exponential growth can approximate a vertical line, so there is really no need to keep adding the "super". Frankly, it makes the whole post sound silly, especially since the rate so far has generally not been all that overwhelming. Nothing personal.

"Super-exponential growth" is an actual mathematical term. Please consider doing research before publicly criticizing. Nothing personal.

Growth Models, Part 4

Having said that, I assumed exponential growth in 2018 followed by linear growth in 2019 in my DCF, so significantly more conservative than Elon's guidance, which is probably why the SA project alone may exceed my revenue estimate for 4Q17.

 

[ValueAnalyst]

A quick look at relative sales volumes for competitive classed vehicles (BMW 3-Series in particular) might be instructive. I haven't looked at that data recently. When I last did, about a decade ago, the largest mode, then about 50%, were the upper middle within the 3-Series range. The base actually sold less than did the highest (M3) in many large markets. IIRC, Elon estimated average $42,000 sales price a few months back. I'll speculate the actual average sales rice will be around $47,000 or so. Later, when we have the Design Studion, it will be far easier to estimate. The biggest question in average sales price might well be how high the high end goes. if they do it as BMW and Mercedes do, they might well see a much higher price for M3 on average, while many of the aspiration S buyers disappear. The question is whether S will be cannibalized significantly. The recent speculation suggests an effect, but I rather suspect it is a timing influence rather than a real drop. S buyers right ow may be simply waiting for the inevitable next big improvement.

We'll soon know.

Does your ~$47,000 ASP estimate include average EAD/FSD option uptake? If so, we agree.

 

[neroden]

If they are still at GF1, they have already missed the dead line.
Those PPs are already on the boat in the high seas if not in AUS already.

Well, he could be sending them by air freight. That would account for the higher-than-$250 cost as-installed.