2017 Investor Roundtable:General Discussion

[FredTMC]

My uninformed guess is that it's the automated final assembly line.

Thx

"Final assembly" is NOT automated for S/X. Most of the stations on final assembly have humans. Wiring, interior, carpets, subsystems AC, brakes, plumbing for AC, dash, steering system, seats, drive units, battery. These are all human stations with support equipment. No robots

I highly doubt it will be automated for Model3 either (initially).

 

[vgrinshpun]

Da Nile may not be just the rearranged letters on a conference room sign at the Fremont Factory. Your data source appears to be incomplete, unduly focused on the battery category of energy storage and possibly driven largely by: "California’s energy storage mandate (AB 2514) added a twist to existing demand for energy storage. Adopted in 2010, the bill required California’s three largest power generating utilities to contract for an additional 1.3 GW of energy storage power generation (meeting certain criteria) by 2020, coming online by 2024....
According to records available from the Department of Energy, the following California energy storage projects are announced or underway:

"
At the Halfway Point: The Effect of California’s Energy Storage Mandate

DOE has a searchable Global Energy Storage Data Base maintained by Sandia National Laboratory. Worldwide the database shows 1,630 projects with a rated power capacity of 193.2 GW.

I ran three quick searches for the USA-only; since, aside from American Samoa, I haven't notice announcements by TSLA, SCTY or AMS about projects outside of USA.

The first search was projects "under construction": DOE Global Energy Storage Database

Results were 6 projects with total rated power capacity of 78.5 MW, size and description (1 mistake --a 20 MW, Vanadium Redox Flow Battery in China) :

• Advanced Rail Energy Storage Nevada, 50MW, Gravitational Storage
• Marengo Project, Illinois, 20 MW, Li-ion Battery
  
• Redding Utilites, California, 6 MW Ice, Thermal Storage
  
• Green Omni Terminal Demonstration Project, California, 2.6 MW, Electro-Chemical
  
• University of St. Thomas, Minnesota, 0.25 MW, Electro-Chemical
  
• Whole Food, Hawaii, NA, Li-ion Battery

The second search was "contracted" projects: https://www.energystorageexchange.org/projects?utf8=✓&technology_type_sort_eqs=&technology_type_sort_eqs_category=&country_sort_eq=United+States&state_sort_eq=&kW=&kWh=&service_use_case_inf=&ownership_model_eq=&status_eq=Contracted&siting_eq=&order_by=&sort_order=&search_page=1&size_kw_ll=&size_kw_ul=&size_kwh_ll=&size_kwh_ul=&show_unapproved={}

Results were 47 projects with total rated power capacity of 2.2 GW.

Yes, many were in the Li-ion Battery Category (26 of the 47). The largest LI-ion provider appeared to be AES with 100 MW at Los Alimitos, 30 MW at Escondido and 7.5 MW at El Cajon, but I did not see AES' 20 MW in Kauai. Second place appeared to be TSLA in its various forms: 20 MW at Mira Loma, SCTY's 13MW in Kauai, and AMS' 50 MW for hybrid buildings (SCE), 3.5 for Inland Empire Utilities, and 0.75 MW for Cal State, but I did not see the 7 MW for Irving Ranch Water District.

There also multiple other Li-ion providers, including:

• Convergent's 35 MW for SCE
• Hecate had 3 projects, totaling 51 MW
• GE/Con Ed had at least one 2 MW project

Other solutions included:

• Two Pumped Hydro projects totaling 1.7 GW!
• Three Flywheel projects totaling 28.32 MW
• An Ice Thermal Storage project for 25.6 MW
  
• A Lithium Ion Titanate Battery and a Lithium Nickel Manganese Cobalt Battery project, each 10 MW
• Two Zinc Air projects totaling 13 MW
• Four Li-PO4 projects totaling 4.04 MW
• A Vanadium Redox Flow Battery 2 MW
• Miscellany: Zinc Iron Flow Battery and various Electo-Chemical projects including STEM's 85 MW which appears to be similar to AMS' hybrid buildings and likely Li-ion.

The 3rd search was "announced" projects (obviously the most tenuous): DOE Global Energy Storage Database

Results were 112 projects with total rated power capacity of 5.3 GW.
I downloaded the file and sorted it by size. The largest Li-ion project was No. 13 at 15 MW.
Nine of the eleven biggest were pumped hydro, totaling 4.53 GW.
The other two in the top ten were in-ground compressed air with 317 MW and 300 MW each.
Axion Power made the top 20 with two lead carbon battery projects at 12.5 MW and 9.1 MW.

Those you have convinced that saying energy storage is "a crowded field with lots of competitors and solutions" is an exaggeration and misleading might benefit from running a few searches on DOE's database site and not just limit them to the USA. Take a look at what's going on in the rest of the world and who all the players are. Tesla's business plan is to leverage its auto sales and service locations to market solar and battery storage products. That may be fine for residential buyers; but utility-scale and behind-the-meter industrial and commercial customers expect well engineered proposals adapted to their individual situations with convincing economics.

Wow! What a mess!

I need little more time to put together back up information, but suffice it to say for now that no new pumped storage facility was built in US since 1995 and will not be as BES offers overall cheaper, functionally better solution that does not require construction of the new transmission lines to boot.

Construction of existing pumped storage facilities took many years, in some cases more than a decade, and this process was preceded by years of engineering, which in turn was preceded by many years, in some cases in excess of a decade, of various environmental reviews and permits. (Compare this with the months it took TE to engineer, construct and commission Mira Loma Substation BES installation). This is the reason that these facilities dominate the lists you were referring to - they are "in process" for a decade or more.

The article you sited is misleading and in some cases includes information that is just plain inaccurate.

 

[neroden]

I'd be curious to read about about what folks think about the risks associated Tesla's debt load; if any. Haven't seen too much in this thread over the past weeks and months relative to other risks. I know a former WS trader who touches on this from time to time as part of his bear thesis (if he has one) and it's not an area that I can confidently speak to. One specific angle could obviously be: what would happen in the event of an economic downturn, etc.? Thanks.

It's not bad at all. I've discussed the maturity mismatch issue at SolarCity extensively previously, but they're cleaning that up. The main debt is really relatively low and at very low interest rates (I wish I could borrow at those rates!). The recent capital raise should handle all the 2017 refinancing needs. There are some larger 2018 refinancing needs, but if Model 3 is selling successfully, that should be trivial.

 

[neroden]

Thx

"Final assembly" is NOT automated for S/X. Most of the stations on final assembly have humans. Wiring, interior, carpets, subsystems AC, brakes, plumbing for AC, dash, steering system, seats, drive units, battery. These are all human stations with support equipment. No robots

I highly doubt it will be automated for Model3 either (initially).

I doubt it will be fully automated for Model 3, but I strongly STRONGLY suspect that it'll be partially automated. I mean, think of everything Musk has said for the last couple of years about automating the production line, "designing for manufacturability", the Hochlinger comment about designing wiring that robots can install, etc. etc. Remember that they originally bolted in the battery packs by hand and eventually started doing it by machine.

I think they will have automated all the bits they know they can automate, and I'm sure this includes parts of the final assembly.

 

[FredTMC]

I doubt it will be fully automated for Model 3, but I strongly STRONGLY suspect that it'll be partially automated. I mean, think of everything Musk has said for the last couple of years about automating the production line, "designing for manufacturability", the Hochlinger comment about designing wiring that robots can install, etc. etc. Remember that they originally bolted in the battery packs by hand and eventually started doing it by machine.

I think they will have automated all the bits they know they can automate, and I'm sure this includes parts of the final assembly.

I agree. More and more over time.

 

[Zhelko Dimic]

I doubt it will be fully automated for Model 3, but I strongly STRONGLY suspect that it'll be partially automated. I mean, think of everything Musk has said for the last couple of years about automating the production line, "designing for manufacturability", the Hochlinger comment about designing wiring that robots can install, etc. etc. Remember that they originally bolted in the battery packs by hand and eventually started doing it by machine.

I think they will have automated all the bits they know they can automate, and I'm sure this includes parts of the final assembly.

I've visited Porsche factory last summer and couple of things stuck with me. Final assembly was the same line for all sport cars boxsters/caymans/911, and line was sequential; speed of the line was equal to slowest operation on the line (2 minutes something) and there were many stations were people were quicker and just waiting for line to move. Also, line had 123 stops (~), only one model needing them all, 911 Turbo Cab model. Simpler model apparently needed only 90 something operations. So tremendous waste...

Couple of conclusions from that experience. Improving some of the operations to be much quicker is not necessarily helping a whole lot. You eliminate few steps, you automate few operations, your bottleneck is still the slowest work station.

Can you create few parallel stations for the slowest operations? Maybe, I don't know if anyone is doing it. I don't know if Tesla wants to handle this complexity, as your cars can change the sequence of arriving(or could they not?), and your supply line software need to understand it. You want to avoid just in time parts delivery system bringing you red parts for the blue car, just because blue car overtook red car at the previous station.

Can you attack 10-15 most complex stations and optimize/automate them, so that other 90 stations are all sub 1 min? I don't know, but only then we'll start seeing 2x improvements. Road to 10x is mind boggingly complex, unless you have almost full automation and few tasks that people need to do, you parallelize to the highest extent possible.

Ok, to summarize, partial automation probably brings only incremental, maybe even only marginal improvements. To capture true benefits, the whole line needs to be considered at the same time. So scaling the line is probably step change, but considering Tesla has been thinking about this for awhile, they're probably starting with the line that is proper subsystem of the final solution (0.5 solution though), i.e. part that is built first will be forward compatible

 

[MP3Mike]

Also, line had 123 stops (~), only one model needing them all, 911 Turbo Cab model. Simpler model apparently needed only 90 something operations. So tremendous waste...

Couple of conclusions from that experience. Improving some of the operations to be much quicker is not necessarily helping a whole lot. You eliminate few steps, you automate few operations, your bottleneck is still the slowest work station.

Can you create few parallel stations for the slowest operations?

I think here is where Tesla currently has an advantage they are building the line for the Model 3 that won't build any other models, so every car should be hitting every stop. And if you have one stop that takes three times as long you just build multiple copies of the stop. The cars should never get out of order as it is still FIFO.

The question is can they build the line to be optimal and build both the 3 and Y at the same time? Or will they make entirely separate line(s) for each model to make them more efficient/faster? (They do have experience with S and X on one line so they could have prepared in advance.

 

[Gerardf]

I'm very good confused by these photos of 476 robots getting installed for M3 production line.

We already have a number of Release Candidate Model 3s driving around.
These cars were "roduced/assembled on "Production Hardware" according to Tesla. This is why tesla calls them RC cars and not Beta cars.

Ok, well WHAT Production Hardware?!

These 476 robots aren't even installed yet at the factory. Happening over next 8 weeks.

So, here's some questions:

1). Stamping is obviously working, but we dont know if tesla is using Production Dies yet, or Temporary dies. Probably temporary Dies is my guess

2). Is there a Body-in-white weld line already running? Will tesla have more than one BIW line for Model 3?

3). Maybe subassembly lines are getting robots installed. Similar to Fred Lamberts video of a rear quarter panel getting robotically assembled for MX

2). Guessing the final assembly line isn't up yet. I assume RC cars were assembled by hand after paint shop.

Thoughts?

Ref 1. I interpret this snippet (first paragraph) as Tesla ordered production dies :
Tesla Makes Risky Moves in Model 3 Production

Would be nice to know his sources. Maybe author is just guessing himself.

Edit: also this statement from Elon :
"Elon said the release candidates were built "almost entirely with production tooling."

 

[Gerardf]

I'd be curious to read about about what folks think about the risks associated Tesla's debt load; if any. Haven't seen too much in this thread over the past weeks and months relative to other risks. I know a former WS trader who touches on this from time to time as part of his bear thesis (if he has one) and it's not an area that I can confidently speak to. One specific angle could obviously be: what would happen in the event of an economic downturn, etc.? Thanks.

This is also brought up on SA. I feel Tesla should be agile enough to lower its costs and delay investments and survive. As I wrote there :

One also has to consider what will happen to the other car manufacturers in case of a recession and less car sales. Virtually all Tesla competitors in the car industry have much higher debts and much bigger fixed costs than Tesla. It will be many times more problematic for them to adapt to (say 15%) lower sales than for Tesla. I predict their risk for going BK in such economic situation is higher than Tesla's (basically they will have to rely on government bailouts).

Actually, such situation might even happen for them without a recession. Already I hear people around me considering to delay buying their next new car as they learn about the advantages of and anticipated industry switch to EV's and see the very quick developments in Autonomous driving. Such a 'buyers strike" is certainly a possibility. What will happen to Ford, GM, Toyota etc, etc if indeed 15% of their customers decide to hold of buying a new car in 2017 / 2018 / 2019 to keep open the option to buy a long range EV ? Even more of their customers might be considering delaying the purchase to make sure their next car can be upgraded to level 4/5 autonomous driving.

Tesla will not have that problem, if anything it will benefit from that situation.

And as someone else replied with a quote :
"Peter Thiel: When the Next Bubble Bursts, "Risky" Stocks Like Tesla Could be the Best Bet"

If some of the big investors think the same as Mr. Thiel, Tesla will not have a problem to find money and come out even stronger.

 

[mmd]

Wow! What a mess!

I need little more time to put together back up information, but suffice it to say for now that no new pumped storage facility was built in US since 1995 and will not be as BES offers overall cheaper, functionally better solution that does not require construction of the new transmission lines to boot.

Construction of existing pumped storage facilities took many years, in some cases more than a decade, and this process was preceded by years of engineering, which in turn was preceded by many years, in some cases in excess of a decade, of various environmental reviews and permits. (Compare this with the months it took TE to engineer, construct and commission Mira Loma Substation BES installation). This is the reason that these facilities dominate the lists you were referring to - they are "in process" for a decade or more.

The article you sited is misleading and in some cases includes information that is just plain inaccurate.

You are almost right, but here is 40 MW Lake Hodges pumped storage in San Diego, completed in 2012. I don't know if there are more that got approval or completed after this one.
Lake Hodges Pumped Storage Project | San Diego County Water Authority Annual Report

Some good history on pumped storage projects in US:
A (Potentially) Bright Future for Pumped Storage in the U.S.

The Energy Storage Association reports that the 40 total pumped-storage facilities operating in the U.S. provide more than 20,000 GW of capacity, or nearly 2% of the country's electrical supply system. While these numbers may sound good, compare the shares in Europe (nearly 5%) and Japan (about 10%). It is clear we have a long way to go in the U.S.

These do take a long time to get approvals and construct. Several seem to have been canceled. Many are also hydro generation, causing more environmental concern. Probably the closed loop systems will get faster approval.

But they last for many decades, and have much larger capacities with many hours of storage (some with virtually unlimited storage). These are also measured in GW generation capacity, but their storage capacity can easily be more than 10 times the generation capacity. Here is Kauai hydro project under consideration, with 25 MW and 250 MWh of daily storage capacity. Another advantage is long term cost. Once paid off, they store energy at pennies per MWh. But if there is no suitable location, initial cost can be high sometimes.
http://kiuc.coopwebbuilder2.com/sites/kiuc/files/PDF/presentations/2015-0429-pumped_storage.pdf

http://www.bizjournals.com/pacific/...utilitys-55m-energy-storage-project-gets.html

The cost of electricity generated by the system would be about 35 percent less than the cost of oil and once paid off, would fall to only a few pennies per megawatt-hour.

 

[WarpedOne]

These producion line steps and stops and supply lines etc do look awully like cpu piplenes.
i bet that ex amd cpu designer is on this alien dreadnought thing 2days per week, 3days being spnt on tesla custom ai chip.

 

[mmd]

This is also brought up on SA. I feel Tesla should be agile enough to lower its costs and delay investments and survive. As I wrote there :

One also has to consider what will happen to the other car manufacturers in case of a recession and less car sales. Virtually all Tesla competitors in the car industry have much higher debts and much bigger fixed costs than Tesla. It will be many times more problematic for them to adapt to (say 15%) lower sales than for Tesla. I predict their risk for going BK in such economic situation is higher than Tesla's (basically they will have to rely on government bailouts).

Actually, such situation might even happen for them without a recession. Already I hear people around me considering to delay buying their next new car as they learn about the advantages of and anticipated industry switch to EV's and see the very quick developments in Autonomous driving. Such a 'buyers strike" is certainly a possibility. What will happen to Ford, GM, Toyota etc, etc if indeed 15% of their customers decide to hold of buying a new car in 2017 / 2018 / 2019 to keep open the option to buy a long range EV ? Even more of their customers might be considering delaying the purchase to make sure their next car can be upgraded to level 4/5 autonomous driving.

Tesla will not have that problem, if anything it will benefit from that situation.

And as someone else replied with a quote :
"Peter Thiel: When the Next Bubble Bursts, "Risky" Stocks Like Tesla Could be the Best Bet"

If some of the big investors think the same as Mr. Thiel, Tesla will not have a problem to find money and come out even stronger.

Your comment has a lot of wishful thinking But I would just want to understand, why you think GM , F and FCA have higher risk. They don't own the dealerships; so they have much lower risk. They have survived many recessions except the 2008 deep recession. if there is excess inventory, at some point they will just cut back on production. Tesla will need to keep paying for the stores and service centers with low sales volume in this scenario. It seems F, GM and FCA have lower risk

 

[erthquake]

Your comment has a lot of wishful thinking But I would just want to understand, why you think GM , F and FCA have higher risk. They don't own the dealerships; so they have much lower risk. They have survived many recessions except the 2008 deep recession. if there is excess inventory, at some point they will just cut back on production. Tesla will need to keep paying for the stores and service centers with low sales volume in this scenario. It seems F, GM and FCA have lower risk

Unlike big auto dealerships, however, Tesla stores are able to drive sales of Tesla Energy products. And Since Tesla manufacturing will be more automated, they can flip the off switch during bad times and have much fewer factory workers twiddling their thumbs.

GM and Ford are also vulnerable to their subprime auto loans.

 

[mmd]

Unlike big auto dealerships, however, Tesla stores are able to drive sales of Tesla Energy products. And Since Tesla manufacturing will be more automated, they can flip the off switch during bad times and have much fewer factory workers twiddling their thumbs.

GM and Ford are also vulnerable to their subprime auto loans.

You seem to imply that GM and F will have to keep paying their workers. That is wrong. They routinely cut productions in some plants and lay off workers to adjust to market demands. Here is one from Q1 of 2017. SUV demand is up, passenger car demand is down. So, they laid off 2000 workers.
GM to Cut Production Shifts at Michigan, Ohio Plants

General Motors Co. will cut production shifts and lay off 2,000 workers at car assembly plants in Ohio and Michigan during the first quarter amid falling demand for passenger cars, the latest in a series of auto makers taking steps to deal with softer retail sales and avoid deeper incentive spending

BTW, I believe Tesla also shuts down factory routinely for the same reason, but always gives some different excuse. Last quarter was the clearest proof. Had they not shut down the factory for 1-2 weeks, more newly produced cars would have gone into the inventory/marketing/loaner pool (aka depreciation chamber). So, this aspect of managing number of workers/work hours seems to be the same as other auto makers.

Selling TE (a discretionary item) in a recessions? Good luck with that.
Auto loans: This could be a point. I don't know enough about Tesla's loans to comment on this. But Tesla has RVG, which others don't.

 

[Mike Smith]

Ron Baron's Baron Partners Fund 1st Quarter Shareholder Letter - GuruFocus.com

"I have recently been asked by CNBC among other media to take a victory lap about our investment in Tesla. I have uniformly told everyone who asked that it is too early for us to claim victory for that investment. In fact, we think it will still be too early in 2020 or 2021 when we think Tesla could sell one million cars per year, produce $70 billion in revenue and more than $7 billion in operating profits before reinvesting in its business to grow several times larger."

 

[erthquake]

You seem to imply that GM and F will have to keep paying their workers. That is wrong. They routinely cut productions in some plants and lay off workers to adjust to market demands. Here is one from Q1 of 2017. SUV demand is up, passenger car demand is down. So, they laid off 2000 workers.
GM to Cut Production Shifts at Michigan, Ohio Plants


BTW, I believe Tesla also shuts down factory routinely for the same reason, but always gives some different excuse. Last quarter was the clearest proof. Had they not shut down the factory for 1-2 weeks, more newly produced cars would have gone into the inventory/marketing/loaner pool (aka depreciation chamber). So, this aspect of managing number of workers/work hours seems to be the same as other auto makers.

Selling TE (a discretionary item) in a recessions? Good luck with that.
Auto loans: This could be a point. I don't know enough about Tesla's loans to comment on this. But Tesla has RVG, which others don't.

The Next Financial Crisis Might Be in Your Driveway

If more defaults happen on auto loans, repossessions will increase and flood the used car market which will likely depress new car sales.

Buying TE products isn't like buying a purse. It actively saves money for the purchaser which will probably be upper income earners that tend to be less affected by recessions.

You're twisting yourself into pretzel by suggesting the Tesla factory shutdowns are to cover up demand reductions. That's a ludicrous assertion and once again tanks your credibility.

 

[RobStark]

Some well off folks don't like buying new premium vehicles in a recession. It is like rubbing your success in the faces of the growing number of unemployed and underemployed people.

Replacing your roof or adding solar panels and BES is does not have the same effect. I don't think.

 

[22522]

There are a lot of conversations going on here.

1) There have to be a few parallel spots in the line.
2) Pumped storage takes a long time to construct. The environmental impact is not strictly positive.
3) The long term view and constancy of purpose of Tesla management will make the stock more widely held by people who are not interested in timing the market. This may make the stock more stable during downturns and more ratchet like during upturns. Musk's "no guidance past June" statement attracted a lot of emotional investors who have seen the tyranny of "the man" destroy jobs, regions and lives. Owning Tesla shares is a part of their identity. These are not just environmental people, but "pry the stock out of cold dead hand" people.

Slight exaggeration, but, the main source of Tesla shares may be Tesla, when they need to raise money.

 

[Ulmo]

I think Tesla juiced the thrifyness to amp the earnings by pausing necessary SuperCharger buildout. Tesla is close to chest on both surprise good things and lack of progress on or desire to do obvious business beneficial upgrades, improvements (promised or not), and fixed, so there's still a small chance they surprise with a good upgrade to charging, but this seems so well timed for my juiced theory.

SuperCharge.Info

 

[Yggdrasill]

Your comment has a lot of wishful thinking But I would just want to understand, why you think GM , F and FCA have higher risk. They don't own the dealerships; so they have much lower risk. They have survived many recessions except the 2008 deep recession. if there is excess inventory, at some point they will just cut back on production. Tesla will need to keep paying for the stores and service centers with low sales volume in this scenario. It seems F, GM and FCA have lower risk

I don't know the extent to which a recession would hurt the big car companies, but that's not the real risk. The real risk is that they don't suvive the transition to BEVs. They have huge sunk costs in the ICE technology, and nothing they do seem to suggest they are willing to let go of those sunk costs.

Probably the only car company that seems serious about BEVs is Volkswagen. I think they had a real wakeup call with dieselgate. Too bad for their competitors who have yet to wake up. If Tesla won't eat their lunch, Volkswagen will.