2017 Investor Roundtable:General Discussion

[geneclean55]

The South Australia storage project tender winner is expected to be announced this week according to reneweconomy.com.au, with the Victoria project winner due to be announced by late August. S.A. to announce storage winner, delays EST mechanism

Fingers crossed ....

Exciting!

 

[Mike Smith]

Great news:

Michigan Legislators Will Have To Produce Documents In Tesla Suit - MITechNews

 

[vgrinshpun]

Well the UBS report that you reference but don't cite pins the battery cost of the Bolt at $10 200. Surprise, that's close to the $11800 when you buy it as a spare part. Anyway, Things the Botl has but the Sonic in it is base configuration hasn't : SiriusFM Radio, Solar absorbing windshield, LED stop and tail lights, heated outside mirrors, 17"alu wheels, 6 speaker audio system, 6 way seat adjustements for driver and passenger, electronic cruise control, 8" screen, powered windows, OnStar Crisis Assist/Emergency/... OTA update capable, There is also nearly $7000 of R&D and depreciation baked in the Chevy's price which the Sonic obviously hasn't due to different product/life cycles. The Bolt has aluminium parts, the Sonic doesn't. It has a frame that must carry 30% more weight etc. Really you can't just claim that both must be the same cost to produce beyond the drivetrain.

I did not reference UBS report - just the battery pricing info from your post.

You are apparently looking at the wrong configuration for the Sonic. The price I used is for Sonic Hatchback LT, MSRP $18,455. It includes things you listed as not included:

• Sirius FM radio - included
• Solar absorbing tinted glass - included
• Heated outside mirrors - included
• 6 speaker premium audio system - included
• 7" diagonal color touch screen - included
• OnStar with 4G LTE and built in Wi-Fi hotspot - included

 

[dc_h]

Is it your informed opinion that li-ion pack cost can be lowered below $80/kWh ?

I would bet a beer that pack costs will be closer to 50 than 80 by 2022.

 

[ValueAnalyst]

Invitations/date for Model 3 reveal (sounds dumb to include this but triggered a good run up to the previous m3 reveal)
Still awaiting Australia BES news
I wouldn't complain if they included a handful <50 of model 3's produced in June to end this quarter but I find it very unlikely given pricing/options etc are not released.
Tesla starts displaying new ‘Tesla Solar’ branded solar panels in store


"MAY 3

Tesla announces start of ‘solar roof tile’ production within next two months" aka june/july
-https://electrek.co/2017/05/03/tesla-solar-roof-tile-production-q2/

There's definitely more. Always so much going on with this company and I love it.

Positive news from Australia would be super.

I don't see M3 deliveries in the next week. That would surely change the rhetoric on Elon's timeliness though.

More color on Solar Roof ramp up could be positive. Will the expand Gigafactory 2 production to 5GWh from current plans for 1GWh?

I'm excited for Model S and model X margins in Q2 and Q3. Also market share after recent effective price drop.

Also, I wonder if Tesla will include data around used car sales Q2. Electrek article painted a positive picture on how quickly they flew off the shelf.

 

[mrdoubleb]

Wow, according to his linkedin the only real job Bill Mauer has ever had was retail clerk at Staples. I always assumed by his name that he was an older guy with lots of experience.

Come on now, don't be mean. He was a clerk at Staples for 5 years, helping you find superglue, than had a 1 yr internship at the investment office at his college and was promoted to "Head Portfolio Manager" there.
He is either a prodigy or they only let him play with Monopoly money.
He is the perfect North Star for TSLA shorts.

 

[ValueAnalyst]

I've been thinking what could drive the SP down when Model 3 launches and I am reminded of a NYT piece by Broder claiming the Model S range is cold weather was weak.

And Elon's response.

This is why I pay attention to who (author) is writing about Tesla more than the organization publishing it. I wouldn't put it past anyone like Broder publishing pieces like the one mentioned when Model 3 comes out.

I think the effect of FUD will decline as the market cap multiples, and as the stock become more liquid after s&p500 inclusion (~2Q18).

 

[ValueAnalyst]

The rest of the year is going to be extremely exciting : the ramp of the M3 + MY and semi reveal in September.

MY ramp up is in 2019, not 2017.

But the ramp of M3 is going to be very exciting. I think by end of August we should be 90% sure how much M3 will be delivered by the end of the year. Because by end of August it should be clear if ramp is going perfect, good, average, bad.

Q3 earnings call is likely when we'll get more color on the ramp, so end-October.

 

[callmesam]

I can't find the quote. It may have been an earnings call from 2013-2014, but Elon talked about the lower theoretical limit being the material costs at $65-$70/kWh.

 

[mrdoubleb]

I can't find the quote. It may have been an earnings call from 2013-2014, but Elon talked about the lower theoretical limit being the material costs at $65-$70/kWh.

One of the things we haven't heard much about yet is Tesla's contracts on raw materials for the batteries. They did say back when GF1 was announced (and it is quite obvious too), that they will go directly to raw material suppliers and realize savings by doing volume contracts.

Think about this for a second: when GF1 is fully ramped, it will produce as many Li-Ion batteries as everyone else produces today. That means an equal amount of raw materials. Now if material is scarce, this may actually push prices higher, but most likely these would decrease due to the huge volume Tesla purchases (or contracts years ahead).

But we haven't heard much about this yet, have we? I understand the prices would be kept a secret, so we won't know for sure, but logically, how could any other Li-Ion supplier compete with Tesla on cost per kw unless they make equally large purchases? Add to that their volume manufacturing price advantage and then we haven't discussed any technology advantage Pana/Tesla may have.

 

[ValueAnalyst]

Takata's bankruptcy filing will leave others picking up the bill, analysts say

 

[ValueAnalyst]

I can't find the quote. It may have been an earnings call from 2013-2014, but Elon talked about the lower theoretical limit being the material costs at $65-$70/kWh.

And that's likely the cell cost. Pack cost will be higher, so $80-$85 seems about right for theoretical limit. New chemistry may be needed beyond 2020, if Tesla wants to reduce battery costs further.

I think Tesla can flood the market at that $80-$85 level with "8-12 maybe 20 Gigafactories" for ten years before anyone can possibly catch up anyway so this conversation may not be too important, but good to have in our back pockets in case battery cost comments from competitors increase.

 

[22522]

And that's likely the cell cost. Pack cost will be higher, so $80-$85 seems about right for theoretical limit. New chemistry may be needed beyond 2020, if Tesla wants to reduce battery costs further.

I think Tesla can flood the market at that $80-$85 level with "8-12 maybe 20 Gigafactories" for ten years before anyone can possibly catch up anyway so this conversation may not be too important, but good to have in our back pockets in case battery cost comments from competitors increase.

I wonder what chemistry that is?

In that 'limit' may have forced a directional investment in research, sourcing, substitution...

 

[ValueAnalyst]

I wonder what chemistry that is?

In that 'limit' may have forced a directional investment in research, sourcing, substitution...

It's likely that Tesla is at the forefront of research into more advanced battery tech.

In 2021/22 and beyond, if Model 3/Y can achieve 300 mile range with 50 kWh battery due to 7% per year improvements in battery density, then at the $80/kWh cost at the pack level, that's a $4,000 battery. As the battery cost becomes fewer percent of the total car cost, any further battery cost improvement from new battery chemistry may not be as impactful as it has been in the past.

I think the primary purpose of research into new battery chemistry would be to move away from cobalt, which JB had identified years ago as the more likely concerning element (when someone asked about the world's lithium supply).

The reason for harping on this topic: I see battery tech as one of the areas we as shareholders need to keep a close eye on, not only because of its immediate impact on gross margins, but also because it likely is the largest competitive risk where a competitor can come in and change the game with more advanced battery chemistry (step-change in density, cost per kWh, improved battery degradation, availability of materials, safety, and so on).

Here's an overview of different types of li-ion chemistries and their strengths and weaknesses: Types of Lithium-ion Batteries – Battery University

 

[erha]

I think this forum generally underestimate the risk that Tesla is facing. Elon might be the least risk-averse CEO of any large company right now. Ramping Model 3, the Gigafactory and the solar cell factory in Buffalo while bringing to market solar roofs, commercial and residential energy storage is super risky. If one of these product launches starts to go wrong, Elon and JB might need to put so much energy into fixing the problems that it impacts the other parts of the business. It is totally possible to imagine one of these products being more capital intensive to bring to market which might put a lot of strain on the company. At the moment it seems like the availability of capital in the market is great, but if the macro turns sour Tesla might be in for a rough ride.

Anyways, I'm all in as always, but I try to consider the risks we are facing in the coming months.

 

[ValueAnalyst]

One thing that really impresses me about Elon Musk & Team is the respect they get from customers and competitors alike:

Iridium's CEO hails SpaceX launch as 'critical' to company's future, hails Musk as a visionary

 

[vgrinshpun]

BTW, interpreting the last week's increase in ABL by $625M, it could pay for 12.5K of Model 3 at ASP of 50K. assuming an average delivery of 2 weeks within US, 12.5K cars will fill in transit pipeline for up to 6.25k/week production level. So it seems that Tesla did not have any problem to convince the lenders that this goal is realistic in the relatively near future (end of 2017-beginning of 2018). I think that deliveries in 2017 would be limited to US. So as Tesla ramps up production beyond 6K M3/week, and expand deliveries to Europe and beyond, they will need another increase in ABL.

 

[ValueAnalyst]

I believe this is the most important input in my DCF:

How many cars do you estimate will be participating in Tesla Network in 2025?

Of course this input incorporates a slew of other ones that will play crucial roles until 2025.

I haven't received many responses to this. Any thoughts, anyone?

FWIW, my DCF assumes 20+ million cars at end-2025 on Tesla Network, growing at the global GDP growth rate thereafter.

This could mean many tens of billions of dollars in annual gross profit from Tesla Network by 2025.

This will probably prove conservative as Tesla will likely have built its "8-12 Gigafactories" by then, and will continue to grow faster than GDP.

 

[myusername]

I haven't received many responses to this. Does anyone have any thoughts on this?

FWIW, my DCF assumes ~20 million cars at end-2025 on Tesla Network, growing at the global GDP growth rate thereafter.

This will probably prove conservative as Tesla will likely have built its "8-12 Gigafactories" by then, and will continue to grow faster than GDP.

"FWIW, my DCF assumes ~20 million cars at end-2025 on Tesla Network, growing at the global GDP growth rate thereafter."

omg... i needed a good laugh this morning. thanks.

 

[schonelucht]

My point is very simple. If one takes an EV with MSRP of $X, and backs off the battery cost, the result should be in the ball park of the similar ICE vehicle MSRP.

No 1) Because R&D and depreciation are sunk costs that need to be recouped on a per unit basis and therefore weigh much higher in the low volume Bolt than in any ICE where GM can share those many more cars and 2) the (base) Sonic is not similar to the Bolt, granted some of the stuff I mentioned in in the trim you want to compare it with, but other things aren't.

I explained both in my original reply but you conveniently trim my posts to just the arguments you can rebut but skip the rest completely.

It can't get simpler than this. Otherwise the stuff just does not add up, and my BS meter goes off the scale.

My BS meter goes off when you ignore the official communication from Renault with respect to the value of their battery for tax reasons under the Dutch regulation. Let me know when you come up with at least a semblance of a plausible reasoning.