2017 Investor Roundtable:General Discussion

[erthquake]

Two statements from the Audi $/kWh article: Audi: Claims EV Battery Costs Of Around €100/kWh ($112/kWh)

"Currently, a kilowatt hour costs about 100 euros ($112 USD) depending on the model."

"Audi intends to introduce the all-electric e-tron next year, and has already starting taking deposits on the ~300 mile SUV. The e-tron Sportback will follow in 2019. Both will have 95 kWh batteries – which apparent cost Audi around 9500 € ($10,600 USD)."

Question: If Audi is getting 300 miles with 95 kWh at $112/kWh cost, does this mean Tesla's advantage is really at battery density (i.e. more miles per kWh due to more advanced batter chemistry?) rather than cost per kWh?

In other words, is Tesla getting significantly more miles per kWh rather than producing each kWh at a significantly lower cost vs. competitors?

Remember that Audi's 300 mile rating is likely the NEDC version, which is unrealistically optimistic compared to the EPA's ratings. The Model S 100D's NEDC range is 393 miles, vs 335 miles for the EPA range.

 

[DurandalAI]

Two statements from the Audi $/kWh article: Audi: Claims EV Battery Costs Of Around €100/kWh ($112/kWh)

"Currently, a kilowatt hour costs about 100 euros ($112 USD) depending on the model."

"Audi intends to introduce the all-electric e-tron next year, and has already starting taking deposits on the ~300 mile SUV. The e-tron Sportback will follow in 2019. Both will have 95 kWh batteries – which apparent cost Audi around 9500 € ($10,600 USD)."

Question: If Audi is getting 300 miles with 95 kWh at $112/kWh cost, does this mean Tesla's advantage is really at battery density (i.e. more miles per kWh due to more advanced batter chemistry?) rather than cost per kWh?

In other words, is Tesla getting significantly more miles per kWh rather than producing each kWh at a significantly lower cost vs. competitors?

Energy density/battery chemistry will have little to do with range directly. They affect how many batteries you can physically cram into a car both in terms of volume and in weight.

So, a 95kWh battery is a 95kWh battery, no matter the chemistry. What changes is how much physical space it consumes, and how much it weighs.

Range is determined mostly be coefficient of drag combined with the speed of the vehicle, followed by things like vehicle weight, and inverter/motor efficiency, etc.

Battery chemistry is most likely to be a revolutionary thing in terms of charging/discharging rate, heat tolerance (look at the Leaf for bad heat tolerance), and life longevity. Beyond that, forget about the chemistry and battery density.

 

[ValueAnalyst]

Energy density/battery chemistry will have little to do with range directly. They affect how many batteries you can physically cram into a car both in terms of volume and in weight.

So, a 95kWh battery is a 95kWh battery, no matter the chemistry. What changes is how much physical space it consumes, and how much it weighs.

Range is determined mostly be coefficient of drag combined with the speed of the vehicle, followed by things like vehicle weight, and inverter/motor efficiency, etc.

Battery chemistry is most likely to be a revolutionary thing in terms of charging/discharging rate, heat tolerance (look at the Leaf for bad heat tolerance), and life longevity. Beyond that, forget about the chemistry and battery density.

Ok; thank you for this explanation.

Maybe I missed this discussion. What are people's thoughts on Audi's claim of $112/kWh cost?

 

[Alketi]

As DurandalAI said, motor/inverter efficiency, car aerodynamics, and also drivetrain gear ratios are some of the biggest factors in the efficiency calculation.

If Tesla isn't getting (essentially) the best price in the world for batteries from Panasonic and the world's largest battery factory then I would be fairly concerned.

 

[vgrinshpun]

More TE news:

Australin Powerwall installer Natural Solar sees explosive demand for Powerwall installations due to skyrocketing electricity bills and fear of power interruptions.

With electricity prices on the rise and an uncertain future ahead for Australian electricity, it's not surprising that more and more Aussies are looking at the option of home batteries. What is surprising is just how fast the market is progressing — batteries are rapidly coming down in price and the numbers suggest they aren't just for early adopters anymore.

Before the Tesla Powerwall burst onto the scene less than two years ago, batteries were seldom considered an option for houses with solar panels, unless they were remote or off-grid. Powerwall installer Natural Solar says that only 2-3 per cent of customers even asked about batteries prior to 2015. "Since adding Tesla Powerwall to our energy storage range, the volume of consumer enquiries for battery power and Tesla Powerwall specifically has grown to more than 95% of customers," explained Natural Solar CEO Chris Williams.

"This is exciting," Williams said, "as it represents the typical Australian household and consumer, who are making educated decisions based on financials and are trying to offset the skyrocketing electricity bills expected to increase by 20 per cent in the coming weeks."

On July 1, South Australia will overtake Denmark in having the world's most expensive electricity.

South Australians in particular have even more motivation to install batteries, in the wake of the state-wide power failures that happened last year. Demand in South Australia has increased by 300 per cent compared to the rest of Australia with 98.5 per cent of those wanting a power back-up in case of further instability. It's not just households either — commercial enquiries for Natural Solar have seen an 800 per cent increase, with businesses wanting the option to keep their doors open and their lights on even when the grid is down.

Queenslanders are seeing similar interest, though up north it's events like Cyclone Debbie that are making residents look to batteries as an option. "Following an incident such as this, typically residents are looking for a full backup power solution as well for extra security and further independence from the grid," Williams explained.

Neither South Australia nor Queensland are the largest market for batteries, however. That title goes to New South Wales, who can also claim to be the innovators and early adopters when it comes to batteries — 53 per cent of Australian households with batteries currently installed are in New South Wales.

Natural Solar's Chris Williams sees it as just the first step towards an inevitable future. "Mass adoption of residential and commercial batteries is already underway and considered to be the new 'norm'," he said. "Rarely do our customers at Natural Solar enquire for just solar anymore, and battery power is the new market must have. Smart batteries, grid integration and community grids are easily the next step in Australia for renewables."

 

[geneclean55]

Australin Powerwall installer Natural Solar sees explosive demand for Powerwall installations due to skyrocketing electricity bills and fear of power interruptions.

Great news.
Was expecting an announcement on the SA government battery award this week. Doesn't look like it though.

 

[schonelucht]

Maybe I missed this discussion. What are people's thoughts on Audi's claim of $112/kWh cost?

You did. @vgrinshpun and I had a back and forth on it (really about non-Tesla battery production costs). My position is that $112 is very plausible on a cell level for Audi by the time they go in production (next year), but unlikely on a pack level.

 

[MitchJi]

Battery chemistry is most likely to be a revolutionary thing in terms of charging/discharging rate, heat tolerance (look at the Leaf for bad heat tolerance), and life longevity. Beyond that, forget about the chemistry and battery density.

I disagree. I believe that Tesla is currently working on their next generation of battery chemistry. I'll try to make a point on this in the next week or two.

Somewhat speculative but it's consistent with JB and Elon's statements and makes sense. If I'm correct it's a huge advance.

 

[DurandalAI]

I disagree. I believe that Tesla is currently working on their next generation of battery chemistry. I'll try to make a point on this in the next week or two.

Somewhat speculative but it's consistent with JB and Elon's statements and makes sense. If I'm correct it's a huge advance.

I think I may get where you're going with this. Energy density does 3 things: Reduces volume (size) of the batteries, reduces the weight of the batteries, and also reduces the $/kWh cost that's tied to material cost.
However, VA was speaking primarily on the topic of range as it applies to the batteries. Let's say you can increase energy density by 30%, which would drop the battery pack weight by 30%, cost by 30%, etc... You can either pack in more batteries and have a larger capacity battery, or you can have cost savings and a lighter vehicle.

Wikipedia says the 85kWh pack in 2013-2014 weighed 1,200 pounds. If you reduce it by 30%, you drop 360 pounds. Curb weight of the vehicle was 4,722 pounds, and you drop it to 4,362 pounds, which is a 7% difference. (That weight reduction won't translate directly into a 7% increase in range, but even if it did, that's an extra 18 miles range for the same kWh.) Very good improvement for sure, but I wouldn't classify it as revolutionary.

From the battery work that I'm aware of what's being done for Tesla is improving battery lifespan, to turn the battery packs into 500,000 or 1,000,000 mile battery packs. THAT would be revolutionary, and dramatically change the TCO for a Tesla.

Cheers!

 

[FutureTSLACEO]

Sure, they may all be going to employees, but I think they want to make a "splash" by announcing, "and today, we are shipping 1,000 Model 3 vehicles" or something similar. Will drive people crazy.

Likely plausible if announcing in mid-July or later. 1000 parts per week in July was mentioned in the quarterly report. I don't recall anyone asking # of parts per week in May or June. I imagine the production time for a model 3 to be < 1-2 days with the automation. Can't wait!

 

[neroden]

Yes every as in 100%. Berkshire too. You don't remember the Man that said I don't invest in tech because I don't understand it? Isn't that your definition of a rookie? Anyways you point to what fits your narrative and discount all other points.

What on earth did you mean by "behaving this way"?

The major reinsurance companies in Berkshire, which is *why I invest in it*, are very forward-looking and have repeatedly rolled early with major changes in the market, including being the first to reprice based on climate change risks; they have thrived in frequently-changing and highly competitive markets. General Re has actually managed corporate culture reform, eliminating problems which had built up. "Berkshire Hathaway Energy" (formerly Mid-American) is going 100% wind and eliminating its reputation as a dirty energy company. This is the opposite of the stuck-in-a-habit behavior. Some companies do make the transition, you know.

Buffet's inability to pick stocks anymore -- and I really think he's lost the ability -- is actually the one thing which concerns me most about Berkshire Hathaway. That is a risk, and it is a risk of the sort I described. But it's *such* a good insurance company. It's basically my financial sector exposure, since I think most of the major financial institutions are both crooked and houses of cards.

 

[Starno]

Tesla Focus Means Victory Versus Complacent Mainstream In Electric Car Market-Report

 

[neroden]

The article says they want a battery factory, not a Tesla battery factory. To only mention of Tesla was that it was the inspiration based on trip to see the gigafactory. I just don't see an Australian factory until the next round of gigafactories at the soonest if at all. There are 23 million people there, they can be serviced from China and India.

On the other hand, Australia could give the shortest possible supply chain to the mines. This is an argument for locating the factory in Australia and shipping the cars out of it. Have to weigh it against the shipping costs, though.

 

[neroden]

One key consideration: Trucking market itself will grow as it takes share from Railroad/Other

Very unlikely. The economies of scale in railroads (and barges/ships, for that matter) are monumental and can't be matched by trucks. All the low-volume and all the high-urgency stuff is already being done by trucks.

 

[ValueAnalyst]

Number of Gigafactories

I estimate that Tesla will need to have built 14 Gigafactories with 200 GWh avg capacity to meet my projection for 2025.

I estimate that this will cost Tesla a total of $70B, financed 50:50 internal cash flow and non-dilutive debt and some capital from partners.

 

[ValueAnalyst]

Very unlikely. The economies of scale in railroads (and barges/ships, for that matter) are monumental and can't be matched by trucks. All the low-volume and all the high-urgency stuff is already being done by trucks.

Are you predicting that a 50% reduction in marginal per-mile cost of trucking will not move any market share from Railroad to Trucking?

If so, then you would be at odds with Warren Buffett who made the prediction at Berkshire's last annual shareholder meeting.

 

[EinSV]

I wonder if that's the surprise?

Regardless if or when they can announce 100k reservations I believe that that will move the SP.

All things being equal, I would guess that Tesla would prefer not to reveal the number of Semi pre-orders to keep competitors guessing. Instead, they could say something less specific like "we have sold out our first year of production" without putting numbers on it.

BUT, if Tesla decides to do a cap raise to accelerate the buildout of all of those Gigafactories they are talking about, then announcing Semi pre-orders during or shortly after the reveal would be much more likely IMO.

 

[neroden]

The work is good, but the time scale is so long the work has to be speculative, and sometimes seems that way. So I am looking for a way to help reduce the error bar on the work.

And classify, or label, things as large or small error bar information so that your readers can treat information appropriately.

There are a couple of ways to evaluate risk. There was a Sequoia way from many years ago?

1. People risk (Do they have the right people?)
2. Financial risk (Are they going to run out of money?)
3. Technological risk (Will it work, or will something else work better?)
4. Market risk (Is there a market, can the company address the market, and will people choose this product over others?)

Another way to take stuff apart is by personality priorities:

1. Supportives care about: Why? (This is where Musk companies have an advantage. This is 55% of the population/audience.
2. Analysts car about: How? (They are skeptical and don't want to accept anything that will blow up in their face. You have to show your work for this 15% of the population.)
3. Controllers care about: What and When? (It is a time driven use model for this 5%.)
4. Promoters care about: Who? (Who is involved makes all the difference for this 25% that are sales oriented.)

So the first is about what to investigate, and the second is about how to communicate it. Sort of,

You are trying to do something hard. Every perspective is valid in some sense. Belief systems come from observation. The two lists are not totally orthogonal.

Very nice description. Going through the first risk assessment: I'd say Tesla has the right people and won't run out of money. They have the risk of others matching or exceeding their technology, but in electric cars and stationary batteries this risk is several years away; in semi-autonomous driving it's a risk which is months away; in solar panels it's a risk which is here and now; and in fully autonomous driving, the tech simply doesn't work yet. For most of their products they have a huge market and are addressing it better than anyone else, but I am skeptical of the supposed market for "Tesla Network", and I am skeptical of the competitive positioning in the market for normal rooftop solar.

 

[neroden]

Are you predicting that a 50% reduction in marginal per-mile cost of trucking will not move market share from Railroad to Trucking?

Yes. Absolutely. It would reduce the pricing power of the railroads, which would make less money; they'd have to cut prices to compete with trucks. They very definitely have room to do that.

In addition, you're not going to get a 50% reduction in the marginal per-mile cost of trucking any time soon. You can cut the fuel cost roughly in half. But you can't eliminate the labor cost any time soon -- people don't want unattended trucks. The tech doesn't work yet, but the tech isn't even the issue here, the psychology is.

Oh, also, if Tesla takes any share of the profits from the reduced fuel costs...

Anyway, it's worth understanding that the US in particular (and also Europe) are actually unreasonably biased towards trucking for reasons of history. There's a lot of traffic which would be cheaper to handle by railroad or ship but which goes by truck anyway. The companies which are still using railroads are mostly very-high-volume customers in a position where trucks are very far from competitive. This includes the major trucking companies, which load hundreds of shipping containers onto a single train and shoot it across the country to be picked up by trucks at the other end.

 

[ValueAnalyst]

Yes. Absolutely. It would reduce the pricing power of the railroads, which would make less money; they'd have to cut prices to compete with trucks. They very definitely have room to do that.

In addition, you're not going to get a 50% reduction in the marginal per-mile cost of trucking any time soon. You can cut the fuel cost roughly in half. But you can't eliminate the labor cost any time soon -- people don't want unattended trucks. The tech doesn't work yet, but the tech isn't even the issue here, the psychology is.

Oh, also, if Tesla takes any share of the profits from the reduced fuel costs...

I'm not predicting "a 50% reduction in the marginal per-mile cost of trucking any time soon," but over the next ten years.

Again, please read my posts carefully before you comment on them. I would like to dramatically cut down on our back-and-forth.