2017 Investor Roundtable:General Discussion

[Mike Smith]

Having exposed my bias thusly, it will be no surprise to any who have followed the SNAP IPO to discern where I stand on that situation. But that takes my predilections and fears to the ultimate nether end. Back to Tesla Inc., capital raises are a normal and quite honorable means of ensuring the future health and growth of a corporation. Therefore, ===>to the extent it is true<===, were Tesla never to return to the equity capital markets it would present an astonishing White Swan Event to all who hold shares.

But as of this morning I've not yet seen any corroboration of that trenchant statement.

What I said in my post to which you are referring was:

"One very important thing Musk told investors yesterday is that if there is a future capital raise it will be all debt. This means anyone wanting to buy a large number of shares now has to buy them on the open market."

I was referring to the Fred Lamber post on Mar 16 in which he conveys an account of an attendee to the Musk investor conference as:

"Musk however thinks tht the raise will be sufficient to bring the vehicle to "reasonable production levels", but he also left the door open for raising more money this year. He sees an 80% chance of them not needing to raise any more debt or equity this year and if they end up needing more capital, they plan "a revolver or asset-backed line or warehouse line".

Both this (somewhat confusing) account and my comment are vague as to whether this would apply solely to the possible year-end raise, but let's consider Tesla's actions and position and consider whether it may in fact be true that Tesla won't be issuing any more equity:

I'm guessing we both agree, since we're in agreement that equity raises are in fact dilutive, that a fast growing company like Tesla which is becoming increasingly confident in its ability to safely make debt payments would much rather issue debt than equity. Any company expecting an increasing share price does not want to issue equity. Note that Tesla's current raise heavily favored debt.

By the time Model 3 is brought to reasonable production levels, the concerns about Telsa's ability to bring new models to volume production will have been satisfied. This, along with the Gigafactory reaching reliable high volume production will give lenders all the confidence they need going forward to buy debt from Tesla without the need for the added incentive of equity. I predict that the next time Tesla does something with equity it will be a buyback, not a capital raise.

 

[CanadaEV]

What is your evidence for that?

This video states a measured comparison showing roughly 100% increase in energy density for about 50% increase in cell volume. 1:24 in the video. I realize this is not fully authoritative, but it looks credible to me.

But yes, I see that this is not 'at least 50% in crease in energy density'. It is 33.3% increase in density.

 

[techmaven]

This video states a measured comparison showing roughly 100% increase in energy density for about 50% increase in cell volume. 1:24 in the video. I realize this is not fully authoritative, but it looks credible to me.

But yes, I see that this is not 'at least 50% in crease in density'. It is 33.3% increase in density.

So much wrong in this video.

 

[SwTslaGrl]

A bit off topic - Positive SpaceX news: SpaceX nabs GPS launch contract as Air Force opens more missions for bidding – Spaceflight Now

 

[CanadaEV]

So much wrong in this video.

Ok, here is JB Straubel saying the same thing at 40' in the video. Change your speaker balance to the left to get rid of the Spanish translation.

 

[JRP3]

So much wrong in this video.

Yup. You don't increase energy density just by putting the same stuff in a larger container.

 

[CanadaEV]

Yup. You don't increase energy density just by putting the same stuff in a larger container.

So you mean to imply that Tesla is going backward toward less density. That would be odd.

Did you notice that the test was done for energy capacity, increased by about 100% in a 50% larger container? That increased density. JB Straubel said the same thing.

 

[scaesare]

Elon was talking about 100 kWh made from 18650 cells.

Elon was talking about a Model 3 pack not having a footprint to allow a 100KWh capacity. The Model 3 packs are known to be using 2170 cells.

What is your source for claiming Elon was referring to 18650's?

Everything that fits within a Model 3 platform pack can also be standard within the S/X platform pack.

But not the other way around. The S has a 100KWh pack already. As per Elon the Model 3 , pack cannot hold 100KWh worth of 2170 cells.

How will the 2 platforms share a common pack and still be able to offer a 100KWh Model S?

That will probably go at least to 100 kWh, and probably larger.

Again, Elon has already said Model 3 can't do 100. The S already does.

What are you speculating about here?

There is a significant increase in density with the new cell - at least 50% and possibly (eventually) up to 100%.

Tesla has said ~30% increase from original Model S cells.

Where is your source for at least 50%?

 

[Zhelko Dimic]

Original calc was for ~70,000 85 kWh packs per year - from 2014 to 2017. That is 1.8x Billion cells give or take. Since car sales were much lower in the first two years, they need to do as much as possible now to catch up in the last year including doing deals on TE products (Australia and others), and the 100 pack using more cells, to fulfill the original contract. The Model 3 will be lower numbers per-vehicle but hopefully move more cars per month after production starts than 7200/mo now.

Panasonic to Supply Tesla With 2 Billion Lithium-Ion Battery Cells From 2014 to 2017 | Inside EVs

Why anyone assumes that original contract is still effective? With everything else Tesla and Panasonic are cooking together, I can't imagine that contract is not supplanted with something new if that made sense to both parties.

 

[AcesDealt]

So you mean to imply that Tesla is going backward toward less density. That would be odd.

Did you notice that the test was done for energy capacity, increased by about 100% in a 50% larger container? That increased density. JB Straubel said the same thing.

My notes have the model S 85kwH battery at 3400mAh so a move to 5750-6000mAh considering larger cell and presuming similar voltage would be 15-20% higher density, but they may (?) have upped voltage curves as well to get to Straubel's 30% estimate in video.

 

[techmaven]

Ok, here is JB Straubel saying the same thing at 40' in the video. Change your speaker balance to the left to get rid of the Spanish translation.

No, he said about 30% improvement from the Model S to the 3. There was already a step change with silicon in the anode that represents about a 9% gain. It also isn't clear if he is talking at the cell level or the pack level. We expect a chemistry change in the Model 3 cells, and the redesign of the 100 kWh pack already increases the pack density somewhat. Changing to 2170 form factor from 18650 form factor alone is going to have a much smaller impact on density.

 

[CanadaEV]

Tesla has said ~30% increase from original Model S cells.

Where is your source for at least 50%?

Yes, I recalculated and corrected the 'at least 50%' to 33%, and posted a video from JB Straubel to support it. The first was a calculation error.

 

[MitchJi]

Would any of that info be considered inside information? Obviously the bartender wouldn't be but if it was a source inside giving out none pupulic information that one traded on... I don't know my better judgement feels like it could.

First of all I don't believe that factory workers have access to more information than is obtainable on a factory tour., and I don't intend to try to obtain that or get that. They certainly don't have access to the information provided to analysts on their special tours.

Now individuals who go on tours have information that the rest of us don't have access to, and analysts get special tours gaining access to even more information (color).


YMMV, but I don't believe that it's wrong to attempt to level the playing field.

 

[CanadaEV]

No, he said about 30% improvement from the Model S to the 3. There was already a step change with silicon in the anode that represents about a 9% gain. It also isn't clear if he is talking at the cell level or the pack level. We expect a chemistry change in the Model 3 cells, and the redesign of the 100 kWh pack already increases the pack density somewhat. Changing to 2170 form factor from 18650 form factor alone is going to have a much smaller impact on density.

Yes, I already corrected my earlier post to 33%. In 2016 JB said it would be 30%. It may have improved by 3% since then.

We'll see if Tesla decides to standardize modules and 'inner' packs across platforms to fit in different outer shells. I believe it will make sense to do so, at least for some kWh pack levels.

 

[MitchJi]

A bit off topic - Positive SpaceX news: SpaceX nabs GPS launch contract as Air Force opens more missions for bidding – Spaceflight Now

But United Launch Alliance, operator of the Atlas and Delta rocket fleets, did not submit a bid for the earlier GPS launch contract, citing legislation in Congress threatening to restrict the use of Russian-made engines on the Atlas 5 rocket for U.S. military launches, and the Air Force’s decision to favor price over other factors in its selection criteria.

The Air Force signed an $82.7 million contract with SpaceX, the sole bidder, for the GPS 3-2 satellite after the company met minimum qualifying criteria on technical grounds. That represented a 40 percent reduction in launch cost from the Air Force’s estimated based on previous ULA flights, Lt. Gen. Samuel Greaves, commander of the Space and Missile Systems Center, said last year.

ULA is believed to have competed for the GPS launch contract awarded to SpaceX on Tuesday.

Claire Leon, director of the launch enterprise directorate at the Air Force’s Space and Missile Systems Center, said Wednesday that price was the determining factor in the military’s decision to give the latest GPS launch contract to SpaceX.

 

[mrdoubleb]

Why anyone assumes that original contract is still effective? With everything else Tesla and Panasonic are cooking together, I can't imagine that contract is not supplanted with something new if that made sense to both parties.

This!

Sure, Tesla and Pana signed a contract way back when and then updated it in 2014, but who is to say they didn't amend it since? Just because they haven't issued a PR on it?

By now, they have sold almost 200k cars using Panasonic cells and have an order book for 500-600k more, a market cap eclipsing some big-name car brands and close to a decade long (?) partnership with Panasonic, plus 2 multi billion dollar joint factories/programs with them. I am sure the two have thought about when and how to move over the entire model portfolio to the new cells well in advance.

If the cost savings and technical parameters of the new cells are what they projected, keeping S/X on the old format does not make sense, once they have enough capacity of 2170s (at GF1 or in Japan) to make the switch.

 

[jhm]

Maybe the plan is to move the S up market and make it 85, with a software limited 70 version. With cheaper cells from the Gigafactory they might be able to keep the price close to the current 60/75 points. If they did this, anyone with a 60 in the build pipeline would definitely want to change their order, which would be a pain in the neck. For people who had 75's in the build pipeline, they could just deliver the new batteries software limited to 75, with a fair option for further upgrade to 85kwh.

Bring back the 85! It's classic. Need the nosecone too.

 

[MitchJi]

Yes, I already corrected my earlier post to 33%. In 2016 JB said it would be 30%. It may have improved by 3% since then.

That's 30% more energy per cell. But at the pack level the cells bigger size exactly offsets the bigger diameter. You have more energy per cell, but you lose the exact number of cells to compensate for the added size. What you gain is the added length, which is about 7%.

 

[CanadaEV]

But not the other way around. The S has a 100KWh pack already. As per Elon the Model 3 , pack cannot hold 100KWh worth of 2170 cells.

No, for sure. I said everything that can fit in the 3 battery shell can fit in the S shell - not the other way around.

As for the 100kWh in the Model 3, we'll just have to wait and see. It may show up after full production ramp and more steps in energy density. It is probably possible now.

Tesla will want to limit the power of the Model 3 for the first 18 months or so - Elon always keeps exciting items quiet, like he did for the first Superchargers, the real schedule for Model 3, and many others. He won't be increasing battery power for the Model 3 until the competition is fully committed to more conservative levels. There will be many surprising new developments after the first 500K production or so. In all cases, you will know at the time they appear that they had already been planned and designed far in advance.

 

[jhm]

Battery *oversupply* in 2018?? Interesting article.

Enel Green Power CEO: Watch Out for Battery Oversupply in Early 2018

I refuse to believe the market is oversupplied. We may actually have too many overpriced suppliers.

BTW, GTM is a Woods Mackenzie company, which swings toward the fossil energy industry it serves.