2017 Investor Roundtable:General Discussion

[Reciprocity]

Globally Semis consume about $100B worth of diesel each year. If Tesla can supply the energy with solar panel and do it profitably, it's indeed a big market, worth about $35B per year. If the all in cost is 5 cents, selling for 7 cents, there is $10B profit to be made each year. Tesla will achieve it in the long term, solar cost goes down every year while efficiency goes up. Gigafactory 2 is in place. Low cost shipping with their own Semi is in place.

On top of that, sooner or later Tesla network will work. Tesla is aiming for something huge, shorts are arguing about mouse nuts.

Haha, $100B, isn't it more like an order of magnitude larger then that? I read a post from @jhm to the effect that Tesla would offset 135B with 10% market share. I don't know who is right, it really doesn't matter. It's a lot. Each semi is equivalent to 34 model 3 in terms of consumption. 100,000 semis = 3.4 million model 3s. Which sales volume happens first? I'm going to say the semi, but it will be close. I also think this is not a coincidence. Will tells sell a million semis before it sells 34 million model 3s? I believe way before, though model 3+Y on the other hand, it might be close.

 

[jhm]

Haha, $100B, isn't it more like an order of magnitude larger then that? I read a post from @jhm to the effect that Tesla would offset 135B with 10% market share. I don't know who is right, it really doesn't matter. It's a lot. Each semi is equivalent to 34 model 3 in terms of consumption. 100,000 semis = 3.4 million model 3s. Which sales volume happens first? I'm going to say the semi, but it will be close. I also think this is not a coincidence. Will tells sell a million semis before it sells 34 million model 3s? I believe way before, though model 3+Y on the other hand, it might be close.

I think we are looking at two different things. I was estimating the market for new trucks, not the market for fuel.

According to the IEA, trucks used for road freight consume 17mb/d of fuel. This is 261B gallons of diesel per year. At $2.5/gal, this would be a fuel market worth $652B per year.

Now if this global fleet of trucks were magically all transformed into electric trucks, we would be looking at power consumption of about 2606 billion kWh. At 7c/kWh this would be worth $182B.

So at this grand scale, replacing the commercial fleet with electric trucks could replace a $652B market for diesel with a $182B market for commercial scale charging. I figure that the market for new trucks is around $135B to $170B. So even with electric trucks the market for power may still be slightly larger than for the trucks themselves. The combined market for trucks and charging could be about $250B. Even this combined market is less than half the cost of just the diesel presently consumed by trucks. This huge savings for the global economy is precisely the economic fuel that will drive the transition to electric trucking.

 

[TradingInvest]

Haha, $100B, isn't it more like an order of magnitude larger then that? I read a post from @jhm to the effect that Tesla would offset 135B with 10% market share. I don't know who is right, it really doesn't matter. It's a lot. Each semi is equivalent to 34 model 3 in terms of consumption. 100,000 semis = 3.4 million model 3s. Which sales volume happens first? I'm going to say the semi, but it will be close. I also think this is not a coincidence. Will tells sell a million semis before it sells 34 million model 3s? I believe way before, though model 3+Y on the other hand, it might be close.

I could be off, literally did it on the back of an envelop. 3 million Semis average 100k miles per year. That's 300 billion miles. Semi goes 5 miles per gallon, so 60 billion gallons diesel. At $2.5 per gallon, that's $150B per year. But some semis don't travel long distance, so I rounded to $100B.

If we use different numbers to estimate, we could get to a higher dollar amount, if we just use $4 per gallon diesel (EU is much higher than US), we can get to $240B. If we use a few years ago's diesel price, maybe $400B.

One thing is clear, in the future all transportation will use electricity, which will mainly come from the Sun. It's pretty huge. The Gigafactory2 will turn a lot of sand into solar panels in the next 10 years.

 

[Waiting4M3]

This huge savings for the global economy is precisely the economic fuel that will drive the transition to electric trucking.

This again comes down to us vs Big Oil. Even though there are savings to be had for everyone, it is distributed among all the little guys, and most of us aren't powerful enough to take on Big Oil. I hope the greed of Amazon/Walmart/FedEx/UPS/etc will drive them to buy Tesla semi and help us little guys fight Big Oil.

 

[Bobfitz1]

Haha, $100B, isn't it more like an order of magnitude larger then that? I read a post from @jhm to the effect that Tesla would offset 135B with 10% market share. I don't know who is right, it really doesn't matter. It's a lot. Each semi is equivalent to 34 model 3 in terms of consumption. 100,000 semis = 3.4 million model 3s. Which sales volume happens first? I'm going to say the semi, but it will be close. I also think this is not a coincidence. Will tells sell a million semis before it sells 34 million model 3s? I believe way before, though model 3+Y on the other hand, it might be close.

A back of envelope calculation shows that selling each Semi is a much less profitable proposition for Tesla than selling 13 M3.
The 180K priced Semi will need a 1000 KWh battery. LR M3 at the moment needs a 75 KWh battery. So if you have 1 MWh of Mcells, that is enough for 1 Semi or 13 M3. But if we assume each will have a similar gross margin, say 20% to keep it simple, then the gross profit from 1 Semi is $36K. But gross profit from 13 M3/MY would be $130K (assuming avg price is $50,000). The gross profit to be made from selling 13 M3/MY is 3.5 times the profit from 1 Semi.

So to the extent that Tesla EV volume is constrained by the GWh of cells they are able to produce at any future year you pick, they can only maximize profits (and profits = capital to invest in add'l GFs) by limiting the numbers of Semi sold until M3/MY production can meet demand for those. Not to say they will choose to limit Semis produced if this scenario comes to pass.

We can only speculate on how internally Tesla plans to balance all this. If those who believe Tesla can make very large profits from making and selling the energy needed by the Semis, then perhaps they see Semi as a loss leader vs what they can make selling more M3/MY.

Advancing fast on so many tracks, each requiring huge amounts of cells to scale (M3, MY, pickup truck, Semi, battery storage) they must believe they will be able to finance and build a large number of GFs quickly enough to keep up with rising volume of all the products that consume them. The number of GF needed to keep up, I think, is larger than what we've imagined up until now. Executing all of those, the right number and timing, is I think going to be a huge challenge. Far larger than anything they've managed to execute so far.

 

[Oil4AsphaultOnly]

I agree with the direction. One quibble, based solely on my guess of how the market will actually evolve, is that it looks like you're thinking about charging in the traditional fueling station paradigm. That is to say, all of the current fueling station business shifts over to a new charging business (such as Tesla).

I expect that we'll see plenty of businesses that build some of their own charging infrastructure that they either use exclusively (all trucks return at night to a central parking lot / charging area), or a mix of own charging plus on-the-road charging. I don't have any kind of guess at the proportion - only that own-charging (comparabe to today's garage charging) will be >0% and <100% (not exactly going out on a limb there ).

Thinking about the transition, I'm hoping the own-charging dominates the early deliveries, and it looks from a Tesla perspective like they sell a fleet of trucks along with the hardware and installation services to install an own-charging system at the customer's facility(s). Which the customer pays for relatively quickly (such as 1/3rd up front for the charging system, and balance due on system completion) -- because that'll help cash flow, and help Tesla scale the truck AND energy business faster from nothing to something.

To add another reason for businesses to have their own chargers: the driver's time is money.

On the drive out, it makes sense for the driver to charge while having a meal, but on the return trip, it makes even more sense for the driver to park the semi at a charger and go home for the night - unless the difference between what the business pays for electricity (vs. Tesla pricing) justifies having the driver go out to the megacharger site, wait for the charge, and drive back?

Assuming 1 penny / kwh difference (business pays 8 cents/kwh), a single 30 minute's worth of electricity (800 kwh to cover 400 miles) would only save the business $8. Average US OTR driver wages are $35/hr, which means the business would have to pay AT LEAST ~12cents/kwh for their electricity before it made sense to NOT have chargers at the depot.

So Tesla won't capture all the charging revenue, because businesses won't do all their charging there.

 

[schonelucht]

Reuters is out with a very negative article on the Tesla S/X manufacturing process. Some of the claims seem far fatched, like a huge outdoor parking 'yard' with up to 2000 cars waiting for additional fixes. There should be some independent evidence of this but to my knowledge there is none. Sources are 9 current and former employees of which 5 were fired for cause. Still

Build fast, fix later: speed hurts quality at Tesla, some workers say

 

[Reciprocity]

A back of envelope calculation shows that selling each Semi is a much less profitable proposition for Tesla than selling 13 M3.
The 180K priced Semi will need a 1000 KWh battery. LR M3 at the moment needs a 75 KWh battery. So if you have 1 MWh of Mcells, that is enough for 1 Semi or 13 M3. But if we assume each will have a similar gross margin, say 20% to keep it simple, then the gross profit from 1 Semi is $36K. But gross profit from 13 M3/MY would be $130K (assuming avg price is $50,000). The gross profit to be made from selling 13 M3/MY is 3.5 times the profit from 1 Semi.

So to the extent that Tesla EV volume is constrained by the GWh of cells they are able to produce at any future year you pick, they can only maximize profits (and profits = capital to invest in add'l GFs) by limiting the numbers of Semi sold until M3/MY production can meet demand for those. Not to say they will choose to limit Semis produced if this scenario comes to pass.

We can only speculate on how internally Tesla plans to balance all this. If those who believe Tesla can make very large profits from making and selling the energy needed by the Semis, then perhaps they see Semi as a loss leader vs what they can make selling more M3/MY.

Advancing fast on so many tracks, each requiring huge amounts of cells to scale (M3, MY, pickup truck, Semi, battery storage) they must believe they will be able to finance and build a large number of GFs quickly enough to keep up with rising volume of all the products that consume them. The number of GF needed to keep up, I think, is larger than what we've imagined up until now. Executing all of those, the right number and timing, is I think going to be a huge challenge. Far larger than anything they've managed to execute so far.

I wasn't comparing semi to model 3 in terms profit by battery cell, though Tesla will make money from charging as well. Maybe as much as 30%. I was merely comparing consumption or amount of fossil fuels offset. You know, the mission of Tesla. Why do a semi now? A roadster and a semi. Why now? Timing seems odd unless you look at the fact that Tesla will become the largest utility on the planet charging semis and offset the most fossil fuels by far then any other single vehicle.

 

[Reciprocity]

I think we are looking at two different things. I was estimating the market for new trucks, not the market for fuel.

According to the IEA, trucks used for road freight consume 17mb/d of fuel. This is 261B gallons of diesel per year. At $2.5/gal, this would be a fuel market worth $652B per year.

Now if this global fleet of trucks were magically all transformed into electric trucks, we would be looking at power consumption of about 2606 billion kWh. At 7c/kWh this would be worth $182B.

So at this grand scale, replacing the commercial fleet with electric trucks could replace a $652B market for diesel with a $182B market for commercial scale charging. I figure that the market for new trucks is around $135B to $170B. So even with electric trucks the market for power may still be slightly larger than for the trucks themselves. The combined market for trucks and charging could be about $250B. Even this combined market is less than half the cost of just the diesel presently consumed by trucks. This huge savings for the global economy is precisely the economic fuel that will drive the transition to electric trucking.

As usual, it's better to go to the much smarter source. Thank you, I try to read everything you post because it's always full of great insights. Now if only I could remember what I read accurately.

 

[Reciprocity]

I could be off, literally did it on the back of an envelop. 3 million Semis average 100k miles per year. That's 300 billion miles. Semi goes 5 miles per gallon, so 60 billion gallons diesel. At $2.5 per gallon, that's $150B per year. But some semis don't travel long distance, so I rounded to $100B.

If we use different numbers to estimate, we could get to a higher dollar amount, if we just use $4 per gallon diesel (EU is much higher than US), we can get to $240B. If we use a few years ago's diesel price, maybe $400B.

One thing is clear, in the future all transportation will use electricity, which will mainly come from the Sun. It's pretty huge. The Gigafactory2 will turn a lot of sand into solar panels in the next 10 years.

Bingo, this was my point as well, doesn't matter much how many hundreds of billions it is, the semi is a conduit to convert that consumption to electricity and thus solar+battery. This is out of gold at the end of the Solar City rainbow that Elon said everyone would interesting why it was necessary. To accomplish what Tesla is trying to do they will need dozens of GF1s and GF2s. 100,000 semis is about 100GWh of battery packs. That will need to be charged full at least 30 times a month. That's 3TWh a month of charging. That is a lot of solar and batteries for charging as well as the original 100GWh for the semis. That's 36TWh per year per 100K trucks and full gigafactory with is batteries for every 100k semis per year. If Tesla can sell 500k semis per year in 5-10 years, where are the 500GWh of batteries coming from. Holy crap. Can Tesla spend the billions of cash flow from model 3? I think so.

 

[avoigt]

Interesting how Jeremy Clarkson views Tesla as of today. I expect in the years to come we will see a lot of today harsh critics tempering their stance and all of the sudden claiming the opposite...

 

[bambam4171]

He looked slightly embarrassed saying the last few sentences. Given what he said about it before that certainly is easily understandable.

 

[Hogfighter]

There's been quite a bit of chatter lately about the uselessness of this thread (and the short term thread) due to certain members' incessant posts.

Over the years there's actually been a ton of useful information on these threads. The BS of the f*res was an awesome buying opportunity that was covered on this forum. The arbitrage play from SCTY comes to mind as well. Recently the thought experiments of what TSLA can accomplish with recent advances/announcements that great posters are bringing to the table fall into this category, as well as JHM's work on blind-faith price targets. My portfolio thanks you all!

 

[SwTslaGrl]

45k R2 reserved

Roadster reservations

 

[ZsoZso]

Interesting how Jeremy Clarkson views Tesla as of today. I expect in the years to come we will see a lot of today harsh critics tempering their stance and all of the sudden claiming the opposite...

Its funny that he is still sticking to their old BS, though, saying "it was a fair review" about the roadster.
No, it wasn't! It was a scripted comedy show, pure entertainment and nothing to do with a fair car review.
Which was within the legal rights of the BBC, hence they won the lawsuit, but that has nothing to do with truth or fairness of the review. They decided to ditch the car and pretend it ran out of juice during the test even before they got their hands on the car.

 

[ZsoZso]

45k R2 reserved

Roadster reservations

Cool ! Thats triple of what I was expecting here.

Others thought my estimate was way too high:

Cash, not income, but good point. Find it hard to assume 15,000 $50k reservations. Maybe 5,000 which would total $500M with the founders.

So thats roughly $2.5 billion cash injection to ease the need for new investment for the M3 ramp!

 

[Mkorpal]

45k R2 reserved

Roadster reservations

That is a pretty flaky rumor so I'm going to just ignore that one.

That said, it's obvious that the Semi and Roadster have boosted the cash reserves for sure. I'm not worried at all about cash at this point.

 

[30seconds]

Personally I don’t use unverified accounts from random store employees to base investment decisions. I think we had seen lots of those types of sources turn out to be mistaken about the production ramps in the past.

Anyways we will find out soon enough. If there is anything like 25k+ Roadster reservations I think it will be major news.

The CEO of Panasonic letting everyone know that they are the bottleneck, and that this will soon be resolved is an interesting account.

Tesla Gigafactory battery production for Model 3 is about to increase, says Panasonic

 

[Bobfitz1]

The other thing that can be inferred from the semi reveal is that the cost of batteries and solar production are going to drop enough for Tesla to sell,electricity for $0.07 per kWh profitably. The implications for TSLA are huge!
Tesla has been successful in spite of the facts that due to the high costs of batteries EV.’s and TE cost more than ICE’s and coal power.

We all hope cost of all three are going to continue to drop. We just don't know how fast over time this will occur.
Regardless, reasoning backward from a future aspirational electricity price point ($.07) to conclude that Tesla battery and solar PV will drop enough by 2020 - 2023 to get there is cart before the horse logic. To be clear, we have to look at all the available information and estimate battery cost and PV costs (plus any others to arrive at total cost of operation) for say 2022, and then see what electricity cost is likely to be by that year. A few members have tried doing just this. I don't know how solid their battery and solar cost projections are, so for now, whether Tesla gets there by the year Musk's statements imply is not yet clear or certain. Like you I'm not concerned they won't get there at some future date. Anyone paying attention to Musk's optimistic projections I think will agree that when we arrive at 2021 or 2022, he could easily say 'guys, we've made great progress. We'll be able to provide the electricity you need now for $.09 per Kwh and 2 - 3 years from now we'll lower that to $.07.

The drop in battery costs have recently made Li battery storage more economically attractive than building new gas peaker plants.
Coal has become uncompetitive with natural gas and even less so with wind and PV solar.

[/QUOTE] By 2019 or 2020 when those things switch Tesla will be the only company with those advantages. At that point they will be able to not only sell the semi’s at a good profit but the electricity to power those semi’s. They will be like a combination of Daimler (selling semi’s) and exon selling the fuel. [/QUOTE]

Totally right IMO. As long as Tesla is able to build enough GFs as rapidly as they grow the battery demand with all the coming products, they look unstoppable.

 

[dalalsid]

45k R2 reserved

Roadster reservations

Hmm that's about $2.5B off the top of my head