2017 Investor Roundtable:General Discussion

[racer26]

Wasn't there some shenanigans with Germany imposing a tarrif on cars costing more than $X, so Tesla just reduced the base price of the car below that amount, but had to increase cost of options to make up for it?

There was something like that in Germany.

Doesn't hold true for Canada though. In Ontario, our incentive program caps the incentive available to cars > $75,000 CAD to $3,000 and cars > $150,000 CAD to $0.

Other currencies are the same I hear. I think this is a sneaky currency adjustment. Darn clever.

Can you elaborate on what you think might be going on here?

The price tag of this option (90D->100D) is nearly double (7500/3000*1.33 = 188%) what currency exchange alone would suggest it should be.

A US 90D is 92.8k USD. A Canadian 90D is 123.9k CAD

92.8 * 1.33 = 123.4k - close enough I'm willing to chalk that up to currency fluctuation since the price was set.

 

[AudubonB]

MODERATOR FINAL WARNING:
Take ALL of your You-said/I said/Out-of-bed/Hit-your-head caterwauling over to NavelGazingRUs.com's website, or to Private Conversations. There's nothing amusing being posted here - it's 4th-grade patheticness.

 

[MitchJi]

Reading one of Yggdrassl's posts caused me to finally redo my TSLA valuation model and try to get more realistic long-term numbers for Tesla Energy.

Oh boy. If I'm right, it will be bigger than the car business. I don't know whether it shows up in Q4, or Q1, or later, but wow.

Elon said similar to cars in size and profit, but with quicker growth. Probably not much in Q4, but probably a substantial number for Q1.

36.67% gross margin (300-190)/300, assuming that flexible printed circuit interconnections and heat pipe cooling likely introduced with new pack architecture did not lead to reductions in cost.

Tesla's cost is less than $190.

 

[neroden]

Well, @Yggdrasill is very conservative IMHumbleO. Of course the whole TE business is a new industry and a bit of a black box so conservative is good. But still.

Well, I actually used more conservative assumptions on some things and less conservative assumptions on others. Yggdrasill just motivated me to go back and redo all my assumptions for each product line (sales per year, average selling price, gross margins, overhead), so now I have a properly tweakable spreadsheet which can run different models based on different assumptions.

The battery business really looks very good in any case, unless (a) Tesla is unable to get the hoped-for cost reductions, or (b) batteries are just unpopular. And I think (b) is not plausible given what I've been reading. (a) is a very definite risk.

In particular I'm assuming "pack level" costs of $190 * .70 (promised 30% reduction) and I'm assuming stability in inverter costs (they could increase) and relatively low installation costs. IF installation costs turn out way higher than I expect, that would pretty much screw up my estimates for the size and profitability of the market.

 

[W84M3]

Wasn't there some shenanigans with Germany imposing a tarrif on cars costing more than $X, so Tesla just reduced the base price of the car below that amount, but had to increase cost of options to make up for it?

Doesn't explain BE, NL or France gap of $7700.

Clever? Maybe if demand is high enough globally. As an investor, that's nice to hear. As a customer, not so much.

 

[neroden]

You talk about long-term numbers yet say it might become known last or this quarter, care to elaborate on the scenario? To me it looks like until the benefits of scale production kick in, we won't know exactly how it'll translate into profitability.

True!

I'll try to explain what I meant. We're going to get the first reports of sales and profits from Tesla battery installs in Q4, with more to come in Q1. At some point, possibly Q4, Q1, Q2, or later, it'll be possible for your typical lazy Wall Street analyst to estimate the current profit margins and volumes, although growth and improvement in margins will happen later.

At that point Powerwall/Powerpack income will start being priced into the stock price. Right now it is apparently valued at zero by the vast majority of analysts. So what I mean is, sometime after Q4 or Q1 earnings are reported, we may see TE being priced into the stock price.

 

[neroden]

I've tried to model it a bit, but honestly I was making so much assumptions that I haven't put it out there. Sincerely hoping for a report that cleanly separates the two.

Yeah, that would be nice. SolarCity had truly difficult-to-read financials. Although the new accounting standard changes -- if they are adopted (I believe Tesla has the option of adopting them already but isn't required to until the end of the year) -- should make things look better.

 

[neroden]

I'm afraid this is overly simplistic. The finishing voltage of an individual cell is determined by the electrochemical properties of the compounds involved.

OK, did you seriously not notice that Jeff Dahn's paper is about TWEAKING THE CHEMISTRY OF THE CELL? I thought that was obvious from the abstract. The rest of your comment is therefore irrelevant.

He changes the chemistry of the cell to allow a higher voltage, which means a higher charge rate, with no loss of battery life. Get it yet?

 

[3Victoria]

He changes the chemistry of the cell to allow a higher voltage, which means a higher charge rate, with no loss of battery life. Get it yet?

Yes, that is what I had thought. Higher voltages are more 'dangerous' from cell-lifetimes, but if they are clever, perhaps they can get higher voltage, higher current without detrimental effects.

 

[neroden]

I may be too conservative in my estimates. It's easy to assume 75 GWh production for Tesla Energy at the Gigafactory before 2020 at 400 USD/kWh and 30% margin, leading to the conclusion 30 billion revenue and 9 billion in gross profit. It may be accurate, I don't know.

My base (conservative) case is actually assuming 50 GWh, $300 USD/kWh and 25% gross margin. (It took a while to convince myself that 25% gross margin was likely on that pricing.)
But I'm assuming significantly worse margins on the cars than you are -- so it comes out to more than the Model 3 income.

- 400 USD/kWh is fine for the current volume, but going from a few hundred MWh per year to tens of GWh per year, I think Tesla needs to offer more compelling pricing.

Absolutely agreed. I tried to figure out what pricing would be compelling based on competing with the distribution costs from a utility company. I figure if Tesla can manage to get the warranty up to 5000 cycles (plausible), $300 would probably be compelling enough, and the profit margin should still be high. $250 would be more compelling but I don't see a good profit margin there...

- In the short term (~2 years), I think the vehicles will absorb most of the Gigafactory output.

I don't think so. With 400K Model 3 at 70 kwh batteries, it's only using 28 GWh of batteries. If they double it to 800K (very unlikely by 2019-2020), that's only 56 GWh of batteries. Model S/X will only occupy about 11 GWh of batteries. The full Gigafactory is supposed to have 150 GWh capacity.

I would like to see Tesla start up Gigafactory phase three construction this year.

Ah. There's the difference in our estimates. I outright expect this. If not this year, then early 2018. Gigafactory construction appears to go quite fast once they get started, especially now that it's a matter of duplicating lines rather than experimenting, so I figure they can have it up and running by late 2019, if they can get the raw materials.

This should bring a lot of TE revenue closer than my estimated 2019-2020 time frame.

 

[EinSV]

Doesn't explain BE, NL or France gap of $7700.

Clever? Maybe if demand is high enough globally. As an investor, that's nice to hear. As a customer, not so much.

I think the adjustment is to make up for recent currency effects on the entire price of the car, not just on the increased cost of the 100D battery.

For example, Euro/Dollar today is about $1.068; Euro/Dollar average for 2016 was about $1.107 -- so about a 4 percent difference. Average Exchange Rates | OANDA.

So $7K-$8K increase (using your numbers -- I haven't looked) could be $3K for the battery and roughly $4-5K for currency adjustment on the whole package.

 

[W84M3]

We already saw price increases, as I said in first post, for all models in 2016 reflecting currency swings.

 

[ggr]

OK, did you seriously not notice that Jeff Dahn's paper is about TWEAKING THE CHEMISTRY OF THE CELL? I thought that was obvious from the abstract. The rest of your comment is therefore irrelevant.

He changes the chemistry of the cell to allow a higher voltage, which means a higher charge rate, with no loss of battery life. Get it yet?

My apologies, I had lost track of the context.

 

[kenliles]

US electric power plants are doing something they haven't done since the 1970s

 

[sunhelm]

Part of Trump's inaugural speech stood out for me:

We stand at the birth of a new millennium, ready to unlock the mysteries of space, to free the earth from the miseries of disease and to harness the energies, industries and technologies of tomorrow.

Seems to be in perfect alignment with Musk industries.

 

[Drax7]

Wondering what can go wrong.

4th qtr deliveries were below expectations, thats know.
Solarcity might pollute matters, thats know.

Hence forward guidance might be the most important component in the report.

1. Model s and x guidance.
2. Storage guidance.
3. Model 3 production start and production guidance.

Have a nice cushion to withstand some turbulence.

 

[MitchJi]

OK, did you seriously not notice that Jeff Dahn's paper is about TWEAKING THE CHEMISTRY OF THE CELL? I thought that was obvious from the abstract. The rest of your comment is therefore irrelevant.

He changes the chemistry of the cell to allow a higher voltage, which means a higher charge rate, with no loss of battery life. Get it yet?

They will need to modify the cell chemistry to work at a higher nominal voltage which means more energy storage. What makes you think that that necessarily means that they can charge at a higher rate? If the characteristics of the cells are unchanged except for the higher voltage that means a little higher charge rate. Example 5v vs 4v might mean a 25% higher charge rate. Not guaranteed and not sufficient by itself to guarantee very high charge rates. And you mentioned something else that I don't remember now that I thought was equally questionable.

 

[Green Pete]

Part of Trump's inaugural speech stood out for me:


Seems to be in perfect alignment with Musk industries.

I feel like Elon has gotten very close with trump

 

[techmaven]

OK, did you seriously not notice that Jeff Dahn's paper is about TWEAKING THE CHEMISTRY OF THE CELL? I thought that was obvious from the abstract. The rest of your comment is therefore irrelevant.

He changes the chemistry of the cell to allow a higher voltage, which means a higher charge rate, with no loss of battery life. Get it yet?

This isn't the right thread to debate this, but it simply just isn't that simple. For example, read up on the ongoing failure on high voltage NMC chemistry. There are papers on this, including status reports with DoE and ARPA-E. Should take this over to the right thread.

 

[MitchJi]

We stand at the birth of a new millennium, ready to unlock the mysteries of space, to free the earth from the miseries of disease and to harness the energies, industries and technologies of tomorrow.
Anybody who believes that trump will do anything to "free the earth from the miseries of disease is really delusional! More pollution will not lead to disease reduction. Less healthcare coverage probably won't help either.