2017 Investor Roundtable:General Discussion

[dennis]

In terms of credibility with suppliers...please. What about the seat supplier who produced a seat for Tesla that couldn't achieve a 5* rating? What about the supplier who couldn't produce the mechanism for the FWDs? What about the tire supplier who didn't get tires to Tesla on time? What about the chrome supplier that gave Tesla such angst? What about the USB supplier that caused Tesla to buy Frys out of all their stock? What about none of the Tier I or II suppliers getting on board with Tesla in the beginning because the orders were too small or Tesla probably won't survive? What about Elon putting it front and center to ALL suppliers that July 1, 2017 is the deadline date to have their Model 3 parts ready for mass production? That doesn't sound like a Tesla credibility issue with suppliers, but a supplier credibility issue with Tesla.

Touché

 

[SBenson]

for every Amazon there's 10000 companies in a graveyard. Just because Amazon exists, doesn't mean all high risk ventures will succeed.

Sure enough... Luckily for Tesla we have it's own track record to assess in terms of learning from failures and velocity of innovation. We have even more info with Musk's track record. Not everything in life is a "random walk", there are patterns. Why bet against a very visible pattern?

 

[anticitizen13.7]

for every Amazon there's 10000 companies in a graveyard. Just because Amazon exists, doesn't mean all high risk ventures will succeed.

This is true, but Amazon has Jeff Bezos.

People like Jobs, Bezos, and Musk are willing to do whatever it takes to win. They might not win today, or tomorrow, or a year from now, but they don't give up. Look, all of these high risk investments are essentially glorified gambling that guys like this will accomplish their goals. People who want safety and predictability should invest in U.S. Treasury bonds.

Maybe 9,999 times out of 10,000, a company like Tesla should fail. But Tesla hasn't failed, despite numerous dire situations over the past 13 years. That in of itself should scare the hell out of people who bet against the company. If I'm wrong, I'll be out a couple thousand bucks that I could afford to lose in the first place. If the long term short sellers are wrong, they stand to lose Billions.

 

[3Victoria]

The volume of a cylinder is pi x R squared which for the 2170's is pi x 10.5 squared.

You have a good point about cell packing not really being affected by format change, and onlt height makes a significant difference. Your formula is only for the bottom area, you need to multiply by length to get volume. Also, your thesis fails to account for: changes in cooling which allows closer packing, less cell casing, and changes to chemistry which can increase pack performance.

The Innovator's Dilemma - Wikipedia

Even the Wikipedia entry for that book is an interesting read and applicable to Tesla. Thanks.

 

[dennis]

Even the Wikipedia entry for that book is an interesting read and applicable to Tesla. Thanks.

If you haven't read them, there are a couple of classic business books that also apply to Tesla: Crossing the Chasm and Built to Last. (Although some of the companies like HP touted in the latter book aren't lasting too well right now...)

 

[racer26]

I just want to note that the 2170 form factor itself is not all that interesting. First, other companies already do this. Second, it's just form factor - the overwhelming emphasis on this is misplaced. Sure, there are a few less interconnects that might lead to slightly less cost. But if form factor was all that, then prismatics and pouch cells would rule, and they don't, at least not yet.
.

You've said this multiple times, but never showed any evidence to back it up.

I am unaware of any other battery manufacturer that manufactures a regularly available cell in a 21mm x 70mm form factor.

 

[EnzoXYZ]

CNBC and MBLY CTO taking a shot at TSLA's autonomous technology as having all sort of problems.

 

[30seconds]

The original bull thesis, as of 2013, was based on three tenets:

1) EVs will dominate the future
2) Tesla will dominate EVs. Thus it will make 100s of billions of revenue, say like Toyota today, or beyond
3) Owing to far fewer moving parts, EVs overtime will be lot more profitable than ICEs with very high margins (my view: maybe even Apple like margins, as a car effectively becomes a very expensive electronic device)

The problem is, over last one or two years, the third tenet has become very elusive.

What are you referring to? model S has a very high GM and the company has shown that they are close to hitting the predefined GM targets.

The fact that much of new vehicle development, GF investment, plant expansion, global sales expansion and supercharger network is financed by current sales is a pretty evident that Tesla's business model is working and can scale

 

[Zhelko Dimic]

View attachment 209191
(rough numbers in for Tesla... precision here isn't the point)

This is why I will most likely not change my general short position on TSLA in the near future. When will Tesla Auto ever substantially contribute to the $100B to $1T market cap claims by longs or even the $36B it currently holds? TSLA is currently priced at levels that the company doesn't even have medium term goals for... 1m/yr M3 by 2020 is the last stated goal which doesn't even justify the current position in the list above.

I understand CAGR... but when I look at this... and consider risk of execution combined with how many years out this stock is priced... and in those years the competition will only increase... I just don't get it... Unless everyone expects Tesla to just drop auto and just become Tesla Energy... go ahead and rail me... what am I missing here?

How do you feel about analog few years back, when Porsche was independent, most profitable car manufacturer, making less than 100K cars yearly, and almost succeeded in buying VW?

There is a precedent for making tons of profit with moderate production, should Tesla chose to do so. And once it kickstarts industry and hurt enough of other players to move them, it may choose to focus elsewhere, and on car side decide to be what BMW was 10 years ago.

Fact is, Tesla has the best electric car, which is a product in growing industry, where costs are bound to fall. This market long term competes against ICE market, where costs at best will stay flat, and may increase due to emission regulations. I find this enviable position,except for the short term dangers in terms of execution/money. There are many ways to skin the cat, i.e.what kind of car company Tesla wants to be when it grows up. Further, Tesla has its hands in so many pies (solar, storage, autonomy), that it may stay BMW-like and redirect efforts elsewhere, and create more values in such segment(s).

Would love to hear your thoughts on this, am I making a mistake with the logic/assumptions here? This was/is my thesis couple years back when I sunk all my money in Tesla.

 

[dennis]

New research note this morning from Goldman Sachs. Likes the sizzle, wants more steak.

Gigafactory progress, but a lack of a quantitative update

What's changed

We attended Tesla's gigafactory tour held in Nevada and saw firsthand the
progress made on its battery cell and pack manufacturing facility (where
cell manufacturing just commenced). Overall we found the tour helpful in
illustrating the layout and process for manufacturing lithium ion battery
cells and packs for its automotive and energy products. However, there
was a lack of quantitative updates for 2017 and the ramp expectations.

Implications

We believe the most important words spoken were "on track" with regard
to the gigafactory and achieving 35GWh of cell production and 50GWh of
pack capacity in 2018. However, the commentary on the Model 3 was more
guarded with Tesla’s expected 2H17 production ramp seemingly hinging
on stamping and seating, whereas the company is performing significant
reconfiguration work on its end at the Fremont facility. That said, Tesla
was confident it “could sell every Model 3 that it makes.” Further, the
company continued to focus on manufacturing gains that it believes it can
achieve by "making the machine that makes the machine," but details on
timing, capex requirements, and vehicle cost reductions remain sparse.
Lastly, Tesla announced a size change to its battery cells to 2170 (21mm
diameter and 70mm height) used for the Powerwall 2.0 and Model 3
versus the 18650 cells used for the Model S and X, given improved cell
optimization leading to the lowest cost for the highest performance.

Valuation

Our 6-month price target (probability weighted automotive scenarios)
remains $190 and presently implies 16% downside to shares.

 

[Alketi]

What you're missing is there will be an inflection point where EVs are so much more attractive to buyers then ICE cars (I give this 3-5 years) that the traditional ICE manufacturers enter death spirals with lower sales year after year.
The Innovator's Dilemma - Wikipedia

100% agree Kenriko.

I foresee sentiment rapidly shifting once the Model 3 arrives and imagine the ICE death spiral beginning anywhere from 2018-2022. And, the Innovator's Dilemma is exactly why the Model 3 will have a virtual monopoly until perhaps Volkswagen releases their offerings, since they're the only company that has been freed (by scandal) to self-disrupt.

Everyone else's Powerpoint vehicles are either $70K+ halo cars intended for CARB states, or boxy hatchbacks being sold at a loss. [I'm in the process of writing a longer form version of this theory and will see if Seeking Alpha will publish -- they've historically been reluctant to publish bullish articles on Tesla.]

 

[Yggdrasill]

Using timer to measure speed of the machine that advances in steps one cell at a time, I am getting 2 cells per second. For a 7/24 operation, this is equivalent to 365 x 24 x 3600 x 2 = 63 million cells per year.

Further assuming that capacity of 90kWh pack cell is 12.514Wh (88,900 / 7104 = 12.514), that new chemistry in the 2170 cells cancels out reduction of the capacity in TE vs. TA cells, and that capacity of 2170 cell is approximately 49.3% higher than in 18650 cell, 63 million cells per year are equivalent to 1.177 GWh/year per the machine: 63 x 12.514 x 1.493 = 1.177

Paging @Yggdrasill to check napkin math/assumptions above.

I think the chemistry probably isn't as good as you are assuming. I arrive at around 0.75 GWh/year with current chemistry, running 24/7. This may be a realistic estimate, if we assume maybe ~20% improvement in chemistry and ~20% downtime.

My understanding is that there are four production lines, so the question is how many of these machines there are per line - maybe four? That would work out to the first phase being 12 GWh/year. (I think these machines were in the Panasonic section of the factory not covered by the Gigafactory tour, so I don't think we can reliably say how many machines they actually have.)

 

[winfield100]

100% agree Kenriko.
Everyone else's Powerpoint vehicles are either $70K+ halo cars intended for CARB states, or boxy hatchbacks being sold at a loss. [I'm in the process of writing a longer form version of this theory and will see if Seeking Alpha will publish -- they've historically been reluctant to publish bullish articles on Tesla.]

what is your Seeking Alpha name? I will follow you there. There have been a few recent positive SA articles on Tesla
"islands in the sun" for one http://seekingalpha.com/article/4034297-teslas-islands-sun?v=1483625605&commenter=1&comments=show
about TE and Ta'u and Kauai grids and a mention of Island off North Carolina. "stealth" projects so to speak

 

[jhm]

Using timer to measure speed of the machine that advances in steps one cell at a time, I am getting 2 cells per second. For a 7/24 operation, this is equivalent to 365 x 24 x 3600 x 2 = 63 million cells per year.

Further assuming that capacity of 90kWh pack cell is 12.514Wh (88,900 / 7104 = 12.514), that new chemistry in the 2170 cells cancels out reduction of the capacity in TE vs. TA cells, and that capacity of 2170 cell is approximately 49.3% higher than in 18650 cell, 63 million cells per year are equivalent to 1.177 GWh/year per the machine: 63 x 12.514 x 1.493 = 1.177

Paging @Yggdrasill to check napkin math/assumptions above.

Paging @AudubonB to verify how many machines per line and how many lines are currently in operation, how many lines are planned for a completed Phase I (ostensibly being ramped up throught this year), Phase II (building sections currently under construction)

Hopefully we can come up with the estimate of the GWh output of each Phase.

Fun math. Something in me make me want to abuse units to say that this is 134 kW machine (= 1.177 GWh/year), about as much power as a Supercharger! I do wonder what capacity factor to put on this, 85% gets us to an even 1 GWh/year or 114 kW average.

 

[vgrinshpun]

I think the chemistry probably isn't as good as you are assuming. I arrive at around 0.75 GWh/year with current chemistry, running 24/7. This may be a realistic estimate, if we assume maybe ~20% improvement in chemistry and ~20% downtime.

My understanding is that there are four production lines, so the question is how many of these machines there are per line - maybe four? That would work out to the first phase being 12 GWh/year. (I think these machines were in the Panasonic section of the factory not covered by the Gigafactory tour, so I don't think we can reliably say how many machines they actually have.)

Do you have an estimate on how many 2170 are in each pod in Powerpack 2? We can calculate Wh per 2170 TE cell this way as well.

20% downtime seem to be very high - this is 1 day of downtime for 4 days of operation. I think it is way too high. In my mind 10% would be a conservative estimate.

 

[vgrinshpun]

Fun math. Something in me make me want to abuse units to say that this is 134 kW machine (= 1.177 GWh/year), about as much power as a Supercharger! I do wonder what capacity factor to put on this, 85% gets us to an even 1 GWh/year or 114 kW average.

Ha, this is a good one. This type of abuse is done by journalists almost in every article - makes me chuckle. It is not that complicated...

 

[larmor]

what is your Seeking Alpha name? I will follow you there. There have been a few recent positive SA articles on Tesla
"islands in the sun" for one http://seekingalpha.com/article/4034297-teslas-islands-sun?v=1483625605&commenter=1&comments=show
about TE and Ta'u and Kauai grids and a mention of Island off North Carolina. "stealth" projects so to speak

If no analyst reports on TE, TE capital cost for customer is depreciated, and if the sun continues to provide free sunlight-- did the TE project really exist? (much like the tree falling in the forest)

 

[EinSV]

It sounds like both Goldman and Jonas want to hear more numbers and details before upgrading. Fine. I am very happy that Tesla is keeping TE projections and M3 rollout details close to the vest at this stage.

Sets it up so that every positive development "feels like a win," and minimizes the occasions when Tesla performs brilliantly but falls short of predicted timelines, which should help build credibility with the market.

And imagine being a short and never knowing when the next shoe will drop. Very, very risky position to be in.

When Tesla is ready to start providing more numbers and details for TE ramp and M3 production I hope they continue to build credibility by guiding conservatively. They get zero points for aggressive guidance but will get a huge boost from outperforming.

 

[mickificki]

from electrek:

Following the event at the Gigafactory yesterday, Jonas reiterated an ‘equal-weight’ rating on Tesla’s stock with a price target of $242.00. He issued the following note:

Model 3 milestones should dominate 2017. We currently expect a later launch than consensus, but we also expect a better car. Elon Musk was asked to provide any update on the Model 3 ramp and timing. According to Mr. Musk, they feel ‘pretty good’ about the pace of progress at the Gigafactory which manufactures the Model 3 battery pack, electric motor, drivetrain and power electronics. He did highlight the riskiest components as some of the long lead items such as stamping dies for the body panels and the seats. Mr. Musk didn’t want to comment much more on Model 3 saying “let’s keep our Model 3 powder dry on announcements,” alluding to a fair number of surprises and developments in the capabilities of the car that they will update the market on in due time. In our opinion, we believe Elon Musk is referring to step function improvements in autonomy, further unveiling of additional body styles and new business models for transportation both within and between cities in an expansion of their mobility network infrastructure.


Elon Musk on Tesla Model 3: ‘Let’s keep our Model 3 powder dry on announcements’

 

[techmaven]

You've said this multiple times, but never showed any evidence to back it up.

I am unaware of any other battery manufacturer that manufactures a regularly available cell in a 21mm x 70mm form factor.

Samsung SDI:
Samsung SDI Unveils E-Bike Battery Pack That Runs 100km with Single Charge at Eurobike 2015 | Business Wire
I believe the Samsung INR21700-30T is in volume production:
Shmuel De-Leon Energy - World leader in Energy Storage knowledge (batteries, Fuel-Cells, Super Capacitors, Electric vehicles) - [email protected] , Batteries/Cells purchasing Services

Sony/BMZ:
BMZ – Europas führender Systemlieferant für wiederaufladbare Akkupacks
(see PDF link on the right)

If you expand the universe to include cells that are bigger than 18650, you get things like the LG 20650's:
Endless-sphere.com • View topic - LG HG6 20650 cell

Basically, the 20650 to 21700 formats are expected to supplant the 18650, with 20700 and 21700 probably the dominating form factors:
PDF LEVs and EVs Applications? - datei

Note about the PDF I linked... you do have to be careful about their claims on volume/weight gains. It incorporate both volume and weight gains as well as chemistry changes. On long distance BEVs, the primary limiting factor is weight, not volume. For PHEVs, volume and power density are the big concerns.