2017 Investor Roundtable:General Discussion

[Ugliest1]

I did a naughty thing today - I commented on Montana septic Seeking alpha article today. The schadenfreude was too hard to resist.

Your post encouraged and inspired me to, just for fun, go and add a couple of comments (only speaking truth and quite respectfully too, way more respectful than what I was feeling). Of course they may or may not get approved for posting; I'll never know since I won't be going back to that page. I noticed JRP3's comment too, good one @JRP3!

 

[ValueAnalyst]

Regarding the Dahn video: The lifetime of the battery is important for the mobility-as-a-service side of Tesla (2020+ issue). In the shorter term, however, what's probably a bit important is the range-per-charge of the Model 3/Y. Frankly, whether it is 240+ miles or 300+ miles probably doesn't matter too much since Tesla won't be able to meet demand for the foreseeable future, anyway.

Question for the forum: at what point, do you think, a potential buyer would stop looking at the range-per-charge metric when deciding among options? I understand 200-mile mark was an important one, but I would think this metric becomes less important to a potential buyer as the average range among options increases.

Long-term thought: It'd be nice to never have to charge a battery, but I don't think many would mind charging it once a month, especially given that the charge time will drop to 5-10 minutes with the next-gen Superchargers (by 2019?).

Since an average driver only drives their car 12,000-15,000 miles per year, and likely less going forward since people may opt for mobility-as-a-service option for shorter rides, then ~1,000-mile range would give us once-a-month charging.

I estimate after conquering the 500-mile mark, the range will be less of a differentiator among competitors.

Extrapolating Elon's 5% per year guidance, and maybe a step-change somewhere in there, 500-mile range is likely 8-10 years away.

At this point, we would likely have heard about any new battery chemistry that would achieve 500 miles in less than 5 years.

The point of this spitballing: Tesla is unlikely to lose its lead on commercialized battery chemistry before it becomes a mute point.

 

[erthquake]

Regarding the Dahn video: The lifetime of the battery is important for the mobility-as-a-service side of Tesla (2020+ issue). In the shorter term, however, what's probably a bit important is the range-per-charge of the Model 3/Y. Frankly, whether it is 240+ miles or 300+ miles probably doesn't matter too much since Tesla won't be able to meet demand for the foreseeable future, anyway.

Question for the forum: at what point, do you think, a potential buyer would stop looking at the range-per-charge metric when deciding among options? I understand 200-mile mark was an important one, but I would think this metric becomes less important to a potential buyer as the average range among options increases.

Long-term thought: It'd be nice to never have to charge a battery, but I don't think many would mind charging it once a month, especially given that the charge time will drop to 5-10 minutes with the next-gen Superchargers (by 2019?).

Since an average driver only drives their car 12,000-15,000 miles per year, and likely less going forward since people may opt for mobility-as-a-service option for shorter rides, then ~1,000-mile range would give us once-a-month charging.

I estimate after conquering the 500-mile mark, the range will be less of a differentiator among competitors.

Extrapolating Elon's 5% per year guidance, and maybe a step-change somewhere in there, 500-mile range is likely 8-10 years away.

At this point, we would likely have heard about any new battery chemistry that would achieve 500 miles in less than 5 years.

The point of this spitballing: Tesla is unlikely to lose its lead on commercialized battery chemistry before it becomes a mute point.

Note that drivers with the ability to charge at home won't care how often they have to charge for daily driving. For long-distance travel, differentiation comes down to range coupled with recharge time. Once batteries achieve 350 miles of range and full recharge times under ten minutes, the only differentiation left is the cost of the battery.

Edit: not sure Tesla has the lead with chemistry, they may, I don't know. Their lead is in manufacturing speed and quality.

 

[DurandalAI]

BMW to raise global production capacity 27% by 2020, report says

Model 3 reservations have not collapsed demand for BMW. Apparently.

I'm sure someone has done market research on who these Model 3 reservation holders are, and whether or not they are delaying vehicle purchases as a result.

Well, I don't know how good this data is given the relatively small sample size, but a quick Google search showed that a large amount of Model 3 reservation holders tend to be your standard midsize car driving folk, the kind that own a Toyota Camry, for instance.
Model 3 Reservation Holder Survey Underlines Tesla's Mass Market Challenge - DailyKanban

So maybe the Model 3 won't impact BMW 3 series sales too much at first/ever?

 

[larmor]

I'm sure someone has done market research on who these Model 3 reservation holders are, and whether or not they are delaying vehicle purchases as a result.

Well, I don't know how good this data is given the relatively small sample size, but a quick Google search showed that a large amount of Model 3 reservation holders tend to be your standard midsize car driving folk, the kind that own a Toyota Camry, for instance.
Model 3 Reservation Holder Survey Underlines Tesla's Mass Market Challenge - DailyKanban

So maybe the Model 3 won't impact BMW 3 series sales too much at first/ever?

Well that is interesting, but new camry prices have risen steadily.

 

[tander]

Regarding the Dahn video: The lifetime of the battery is important for the mobility-as-a-service side of Tesla (2020+ issue). In the shorter term, however, what's probably a bit important is the range-per-charge of the Model 3/Y. Frankly, whether it is 240+ miles or 300+ miles probably doesn't matter too much since Tesla won't be able to meet demand for the foreseeable future, anyway.

Question for the forum: at what point, do you think, a potential buyer would stop looking at the range-per-charge metric when deciding among options? I understand 200-mile mark was an important one, but I would think this metric becomes less important to a potential buyer as the average range among options increases.

Long-term thought: It'd be nice to never have to charge a battery, but I don't think many would mind charging it once a month, especially given that the charge time will drop to 5-10 minutes with the next-gen Superchargers (by 2019?).

Since an average driver only drives their car 12,000-15,000 miles per year, and likely less going forward since people may opt for mobility-as-a-service option for shorter rides, then ~1,000-mile range would give us once-a-month charging.

I estimate after conquering the 500-mile mark, the range will be less of a differentiator among competitors.

Extrapolating Elon's 5% per year guidance, and maybe a step-change somewhere in there, 500-mile range is likely 8-10 years away.

At this point, we would likely have heard about any new battery chemistry that would achieve 500 miles in less than 5 years.

The point of this spitballing: Tesla is unlikely to lose its lead on commercialized battery chemistry before it becomes a mute point.

One answer to your question would be if gas prices go up, electricity prices go down (or you can get it for free), or Tesla starts making an economy model. In any one of these situations you can get the main driver for buying is because it saves people money, and that would pretty much make all of the other stuff pretty secondary for a lot of people.

I agree with the bottom bit, it wouldn't be that surprising if tomorrow or in five or 10 years someone in a garage or something comes up with something better than what Tesla is using and decides to build their own company instead of selling to tesla or whomever. But that company probably won't get built overnight, and tesla is pretty much the 800lb gorilla at this point, or maybe more like gorilla that is eating fast enough to become the next 800 pounder.

 

[JamesTm]

I make this post becouse i have some thoughts about some next changes in tesla vehicles, model S, 3 and X.


There will be no bigger batteries in near future(1-2 years) becouse they optimize cells for higher charge rate, low cost and to keep the weight of battery or lower it.


I think they will keep the same capacity per volume or increase slightly(10-20%) but optimize for C rate and low cost. Depends on the capabilities they obtained for the new automotive 2170 cell wich should be different than 2170 used in V2 of powerwalls and powerpacks.

Maybe will launch 110-120 kwh battery for S and X when they will switch to 2170.

But the biggest question is if the switch will be when the model 3 will launch or somewhere in q4/2017 - q1/2018 ?

This depends mostly on the end of the 18650 contract with panasonic, availability of necesary 2170 cells and new battery packs with those 2170 cells.
They should switch to the new packs in the same time with model 3 launch, otherwise a lot of people will feel unsatisfied and will not buy S or X.

But this also depends when will be the switch to SC v3 and the new higher charge rate. Maybe those new bigger SC stations are prepared exactly for that.....

I see a very low probability to offer higher SC rate for model 3 and not for S and X in the same time.

I think this will bring cooled charging cable, cooled cables from charge port inside the car to the battery and cooling the battery also to sustain higher amperage and charge rate.

Most probably charging rate will be 400-500 kw, but maybe elon will jump to 1000 kw if 350 kw is a child toy )

If SC will have cooling capacity as in one of their patents to cool the cables and battery in the car we can't know how far will they go and i don't know if higher voltage is necesary.

There is one more reason i think charging rate will be very high and some other thoughts, but in another post...it's late now for me and need to get some sleep


I may have some gramatical errors becouse english is not my natural language and these are just my opinions, don't take them as absolute facts.

 

[ValueAnalyst]

I make this post becouse i have some thoughts about some next changes in tesla vehicles, model S, 3 and X.


There will be no bigger batteries in near future(1-2 years) becouse they optimize cells for higher charge rate, low cost and to keep the weight of battery or lower it.


I think they will keep the same capacity per volume or increase slightly(10-20%) but optimize for C rate and low cost. Depends on the capabilities they obtained for the new automotive 2170 cell wich should be different than 2170 used in V2 of powerwalls and powerpacks.

Maybe will launch 110-120 kwh battery for S and X when they will switch to 2170.

But the biggest question is if the switch will be when the model 3 will launch or somewhere in q4/2017 - q1/2018 ?

This depends mostly on the end of the 18650 contract with panasonic, availability of necesary 2170 cells and new battery packs with those 2170 cells.
They should switch to the new packs in the same time with model 3 launch, otherwise a lot of people will feel unsatisfied and will not buy S or X.

But this also depends when will be the switch to SC v3 and the new higher charge rate. Maybe those new bigger SC stations are prepared exactly for that.....

I see a very low probability to offer higher SC rate for model 3 and not for S and X in the same time.

I think this will bring cooled charging cable, cooled cables from charge port inside the car to the battery and cooling the battery also to sustain higher amperage and charge rate.

Most probably charging rate will be 400-500 kw, but maybe elon will jump to 1000 kw if 350 kw is a child toy )

If SC will have cooling capacity as in one of their patents to cool the cables and battery in the car we can't know how far will they go and i don't know if higher voltage is necesary.

There is one more reason i think charging rate will be very high and some other thoughts, but in another post...it's late now for me and need to get some sleep


I may have some gramatical errors becouse english is not my natural language and these are just my opinions, don't take them as absolute facts.

Ha! I actually thought "where is this person from?!" Then I read the last paragraph and went "aha!"

Your English is fine, there's room for improvement. Check RosettaStone or find an American significant other. Either works equally well. One of them is more costly.

I agree with your comments (from what I understood). I think charge rate and/or range maybe the differentiator between the model s/x and the model 3.

 

[ValueAnalyst]

Note that drivers with the ability to charge at home won't care how often they have to charge for daily driving. For long-distance travel, differentiation comes down to range coupled with recharge time. Once batteries achieve 350 miles of range and full recharge times under ten minutes, the only differentiation left is the cost of the battery.

Edit: not sure Tesla has the lead with chemistry, they may, I don't know. Their lead is in manufacturing speed and quality.

I think it's pretty clear Tesla has the lead on chemistry since they have the longest range for a production car by far.

I agree that the battery cost will be the biggest differentiator for the foreseeable future. I think range was super important in 2010-15, but now has played out. Performance and safety are important, but will be secondary to cost.

This is why quickly building the four next-gen Gigafactories around the world is essential. After the model 3 final reveal, and the wave of another 500,000 reservations, Tesla will likely issue $5-10 billion non-convertible debt to finance the simulanous start of the additional Gigafactories.

 

[neroden]

Nissan and GM have little scale but they will cross the 200k threshold shortly after Tesla.

FWIW Ford has somehow managed to waste 88k out of its threshold already, and BMW has wasted 40K.

Everyone else has no scale.

Well, I suppose one of the Chinese companies which has never sold cars in the US could move in, *after* achieving scale in China, and distribute enormous numbers of cars *while* getting the full tax credit. Even after it's expired for Tesla and GM.

Do you think Congress would repeal the tax credit if that happened?

Tesla should pretty much exhaust short term US demand after credits expire and can focus on the ROW for 6 months to year. That would follow experiences in other countries where major incentives expire. Of course people spending $130k plus on a BEV would rather have the $7500 than not but usually has little relevance to the actual purchase decision.

 

[Reciprocity]

I make this post becouse i have some thoughts about some next changes in tesla vehicles, model S, 3 and X.


There will be no bigger batteries in near future(1-2 years) becouse they optimize cells for higher charge rate, low cost and to keep the weight of battery or lower it.


I think they will keep the same capacity per volume or increase slightly(10-20%) but optimize for C rate and low cost. Depends on the capabilities they obtained for the new automotive 2170 cell wich should be different than 2170 used in V2 of powerwalls and powerpacks.

Maybe will launch 110-120 kwh battery for S and X when they will switch to 2170.

But the biggest question is if the switch will be when the model 3 will launch or somewhere in q4/2017 - q1/2018 ?

This depends mostly on the end of the 18650 contract with panasonic, availability of necesary 2170 cells and new battery packs with those 2170 cells.
They should switch to the new packs in the same time with model 3 launch, otherwise a lot of people will feel unsatisfied and will not buy S or X.

But this also depends when will be the switch to SC v3 and the new higher charge rate. Maybe those new bigger SC stations are prepared exactly for that.....

I see a very low probability to offer higher SC rate for model 3 and not for S and X in the same time.

I think this will bring cooled charging cable, cooled cables from charge port inside the car to the battery and cooling the battery also to sustain higher amperage and charge rate.

Most probably charging rate will be 400-500 kw, but maybe elon will jump to 1000 kw if 350 kw is a child toy )

If SC will have cooling capacity as in one of their patents to cool the cables and battery in the car we can't know how far will they go and i don't know if higher voltage is necesary.

There is one more reason i think charging rate will be very high and some other thoughts, but in another post...it's late now for me and need to get some sleep


I may have some gramatical errors becouse english is not my natural language and these are just my opinions, don't take them as absolute facts.

I have to say it but I agree. Not much need for greater then 100kwh battery. Maybe a larger SUV or pickup but not for S/X. Faster super chargers and home charging brings greater then parity with ICEv. Ideally you can charge on long trips to 80% in 15 minutes or less. If you drive 200+ miles you need 15 minutes to get your blood circulating, especially us old folks that can afford S/X (speaking only for myself with that statement.) Not that we won't see larger in the near future, 5 years or so. The capacity, C rate and durability are there. Now just make a billion of the damn things and we can all retire before we are 70 and beat the odds.

 

[TNEVol]

The point of this spitballing: Tesla is unlikely to lose its lead on commercialized battery chemistry before it becomes a mute point.

The word is "moot" not "mute". But other than a pet peeve, what is the basis for your projected oil price rise? Based upon the highly technical (and expert) discussion in the shorting oil thread I can see some slight potential for a seasonal rise to about $55 but I am aware of no rationale for major price increases given inventory and US increased production.

 

[Reciprocity]

This idea of Tesla losing leadership in battery chemistry is silly. Simply put, they will and it won't matter. The reason, all hat no cattle. You can have all the magic chemistry you can muster, if you don't have a gigafactory or there or five, what's the point?

It's one thing to have great science and it's another to have the cast iron balls to get the job done. You need both to be successful. The old school auto manufactures have lost there will to take the kinds of risk required to compete. It's all but over. Model 3 at 20%+ margin and good, consistently improving volumes ends the debate. At least until there is some major break through. A major break through that doesn't require a mammoth factory, then we can worry.

 

[30seconds]

Does he/she own a Model S? I would think anyone putting significant money shorting Tesla should do some real research. Most of these hedge fund shorts seem to live in Manhattan and take Uber to / from work

I happen to know the partner of an international hedge fund, and I talked with him briefly about Tesla. Today, he made me chat with the analyst that follow TSLA for them: I discovered they have a small (don't know how much) short position.

The following are his bear points that I remember.
It's important to know that both of us were on the street, so it was a noisy conversation without the help of a computer for checking figures or remembering exact infos.

But here we go:

• Tesla is losing a lot of money, even without counting CapEx. They spend ~75k$ per car.
  
• The don't have any advantage over incumbents: they don't know manufacturing, they didn't invent anything, Panasonic owns the battery design, Silevo technology proven to be meaningless. Fremont is not a great factory, this is why GM & Toyota left it.
  
• Tesla now has the market cap ~ Volswagen. But Volswagen sells millions of cars, and invested 60billions for their whole infrastructure (factories, service centers, shops, etc.). Tesla is building a Gigafactory just for batteries, and it won't be enough. They will need to ask a lot more money.
  
• They don't have any advantage even with Autopilot: industry journals show others are close to them (eg. Daimler).
• They don't have and advantage on battery storage: it's a crowded market with a lot of products.
• When the other auto makers will arrive, Tesla won't have anything over them. Making EVs it's easier than making ICEs, so the others will reach them soon, because they have more experience.

I tried to reply as I could and with the arguments/numbers I know by heart, and we'll probably will have another conversation. I'm trying to convince them:

• at least to offer me dinner for my time ;-)
• to understand they got it wrong. I don't have a special need for them to make even more money than they do, but I figure more money on Tesla the better.

Hope you find this helpful.

 

[woof]

• More interestingly, Tesla is not following the disruption playbook. Those of you who have read Christensen can understand this much better than me. But the idea is that disruptors come from below, not from high.

Which is why it's the Model 3 that's the disruption engine, NOT the Roadster, S or X, which were/are the financial means of getting to the 3.

 

[30seconds]

Actually Tesla has followed the disruption playbook pretty well - Target early adopters with an expensive, minimially viable product while working on cost decrease + capability increase for next generation for next set of adopters.

Basically TVs, PCs, laptops, cell phones, smartphones and many other items have followed this path.

Unfortunately common sense is not part of business school curriculum.

 

[D-egg-O]

I'm sure someone has done market research on who these Model 3 reservation holders are, and whether or not they are delaying vehicle purchases as a result.

Well, I don't know how good this data is given the relatively small sample size, but a quick Google search showed that a large amount of Model 3 reservation holders tend to be your standard midsize car driving folk, the kind that own a Toyota Camry, for instance.
Model 3 Reservation Holder Survey Underlines Tesla's Mass Market Challenge - DailyKanban

So maybe the Model 3 won't impact BMW 3 series sales too much at first/ever?

I don't trust dailykanban authors.

 

[SPadival]

I suspect 2017-2018 will be a period of consolidation for Tesla with relatively low capital/R&D expenditure on new gigafactories and Model Y. My reasoning is based on how a former colleague describes what he has learnt from Elon.

What it's like to work for Elon Musk, from the exec who has been with him since before PayPal

Spikes, who is now the technology evangelist of Aurionpro company Cyberinc, said the other big business lesson he learned from Musk – which he only appreciated when he started his own business – was the value of good cashflow.

"After I started my business I had a lot of 'aha' moments remembering times when Elon and I had disagreed, or I was curious about his decision-making process, and then I got it," he says.

"I realised the value of the dollar, and why certain phases of the company operated in certain ways. I grew up as a computer technologist and didn't have an MBA. Knowing the importance of good cash flow and working capital and the decision-making process that goes along with it were my weaknesses. I learned those things the hard way and learned to appreciate what PayPal and SpaceX went through in the early days."

In my opinion, cash flow from Model 3 sales would only get better in 2018. He will probably wait until a couple of quarters of profit before "burning" more cash AKA investment in gigafactory/R&D. Unless some country offers to build Tesla's car + battery gigafactory for free.

 

[ValueAnalyst]

The word is "moot" not "mute". But other than a pet peeve, what is the basis for your projected oil price rise? Based upon the highly technical (and expert) discussion in the shorting oil thread I can see some slight potential for a seasonal rise to about $55 but I am aware of no rationale for major price increases given inventory and US increased production.

Thank you for teaching me something. I had just finished going off on someone about their English...

The rationale is too long to type, but in general:

Production increase in US shale (~5 of global supply) cannot alone make up for declines in ex-US non-OPEC conventional production (45-50% of global supply) and ex-US non-OPEC unconventional production (10-15% of global supply).

Int'l rig count is still at rock-bottom signaling no rebound in ex-US production. Depletion rates around the world are spiking as production has not declined as quickly as it should have given back-to-back-to-back years of underinvestment in capex/e&p.

Bakken and eagle ford have peaked; permian will peak in 2019/20 and its growth will be limited in the shorter term by takeaway capacity.

OPEC will extend cuts into 2H17, but they don't need to as total oil inventories (crude+product) are declining at a ~1.0 mbd rate vs. seesosal build in 1Q17 (so: flat when it should be building).

This means: get ready for fireworks when the summer driving season starts, next week.

I can go on for pages, but this is the high-level summary.

 

[dw4ngg]

One answer to your question would be if gas prices go up, electricity prices go down (or you can get it for free), or Tesla starts making an economy model. In any one of these situations you can get the main driver for buying is because it saves people money, and that would pretty much make all of the other stuff pretty secondary for a lot of people.

I agree with the bottom bit, it wouldn't be that surprising if tomorrow or in five or 10 years someone in a garage or something comes up with something better than what Tesla is using and decides to build their own company instead of selling to tesla or whomever. But that company probably won't get built overnight, and tesla is pretty much the 800lb gorilla at this point, or maybe more like gorilla that is eating fast enough to become the next 800 pounder.

Odds are this hypothetical company would be bought out.....