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Very insightful interview. Thanks!!

Question about Tesla Network:

A lot of people believe that an ICE-AV is fundamentally uncompetitive to an EV-AV... Even if Google, Apple etc want to give the AV tech away for free to automakers, unless automakers are fully into EV making they will still remain uncompetitive right. So for others to put up a fight, they would have to 1) Google/Apple/etc have to develop the AV tech 2) Automakers have to fully integrate into their manufacturing processes (this can take a long time) 3) Develop EVs, fast charging networks or battery swap stations 4) Someone will have to build/operate a network to use these (maybe Uber/Lyft can short circuit this)... It still feel like Tesla has a potential lead of substantial magnitude.

Even if others come in with their own AV networks and try capitalising through ads and content, instead of fares, in theory Tesla could do the same. So an av network can be as lucrative to Tesla as it might be to other big players... Going to your FB example that's what happened right. FB became a behemoth in online ad market, despite Google being there already. So Google/Apple/Uber etc being already there in an AV network doesn't preclude Tesla from making it big there.

Overall I'm having hard time believing that Tesla may not benefit substantially from this. The key risk to Tesla as I see is the risk that it won't be able to attain FSD in a reasonably competitive time. As it stand right now, Tesla seems to be limping. But if it does attain in a good competitive time then Tesla has a fair chance of monetisation I feel.

For the record, I do agree with the Tesla Energy part.

I agree with a lot of what you're saying here. However, I do think there will be some major, major, major moves by big players in the near future (next 1-3 years). The reality is that Google (ie., Waymo), Apple, NVDA are very capable and very well-run companies. And they've already set their eyes on the autonomous transport industry in various ways. Uber, although they're in a bit or turmoil at the moment, also is a capable company as well. And then you've got Intel (w/Mobileye). Anyway, the point being is that these players aren't going to sit still and they have a lot of money to spend.

The problem with Apple and Google (and other large cap companies) is that it's difficult for them to find new large markets to conquer. There aren't that many of them. Thus, they've staked claims on autonomous transport because of its sheer size and also because of the coming disruption to take place.

I think in the next 1-3 years it's fairly obvious (at least to me) that Google or Uber or Apple either buy out an existing auto maker OR will start to make their own cars (ie., via Magna Steyr, Magna Steyr - Wikipedia) OR create some kind of joint venture partnership (ie., Waymo and an existing car company teams up to create a new line of cars).

Part of the reason it's almost inevitable is because 1) market is so large and tempting, 2) Tesla's efficiencies are too difficult to compete with, and thus 3) in order to compete they need to emulate Tesla's integrated strategy.

Tesla is definitely in the lead and I don't see that threatened any time soon, but looking out to 2025 I see a lot of competition from software-driven auto makers/partnerships (ie., Waymo or Uber or Apple branded cars and networks).
 
Hi Dave,

Really enjoyed the thoughtful interview -- thanks for posting.

On some of the business lines you are more skeptical about -- TE for example -- Tesla's ability to innovate rapidly and effectively may continue to provide an edge that makes it hard for the competition to catch up, even without fundamental breakthroughs of the kinds you mentioned. For example, given how late to the party they were and the strength of the competition they really had no business getting out ahead of the industry on autonomy. Yet somehow they managed to pull it off. Similarly, the vast improvement between Powerwall 1 and Powerwall 2 in just one generation resulted in the competition being far behind on price/value proposition, which is showing up in something on the order of 80% of new California residential installs subject to the SGIP going to Tesla.

The intense pace of innovation and speed with which innovations are turned into compelling commercial products is a competitive edge I don't see being matched by anyone any time soon in Tesla's main businesses. Assuming they can continue to innovate at a breakneck pace as they grow into a large entity (not a foregone conclusion but likely with Elon in charge), IMO it is likely that Tesla will continue to put distance between themselves and the competition in EVs, batteries, solar roof and Semi, rather than the competition closing the gap.

I really liked your description of the value Tesla's non-auto product lines bring in terms of building the ecosystem, etc. But I think you may be underestimating how valuable they will turn out to be in their own right. Time will tell one way or another.

I could be and hope I'm wrong with TE. I just don't see where Tesla can charge high margins over time. Usually in order to charge high margins, a company needs to be solving a problem in a way that others can't solve. Oftentimes it involves complexity. However, in terms of energy storage it's fairly straightforward. The powerwall and powerpack systems are not so complicated (at least from what I understand) that others can't copy it. For Tesla Auto, I think it's much more complex... because it involves so many parts (ie., design, thousands of parts and supply chain, sales, service, chargers, etc). But with TE it's basically just battery cells (and inverter, wiring, etc) and the software that runs it. And I don't see Tesla's sustainable advantage (barring an energy breakthrough by Tesla). I do see an advantage over the next 3-4 years though as Tesla has access to a larger (and probably cheaper) supply of cells. However, after battery production catches up and costs drop more, I think Tesla will only have a very slight advantage with cell costs and supply. Thus, putting pressure on margins via competition. I can see Tesla sell a lot of energy products over time, but I can also see their margin being compressed from low-cost and cut-throat competitors.

But maybe Tesla's breakneck pace of innovation will uncover some areas of TE that I'm not thinking of and make it more competitive and deserving of higher margins over time. All I can think of is they'll need an energy breakthrough of some sorts. Any other ideas?
 
I do see an advantage over the next 3-4 years though as Tesla has access to a larger (and probably cheaper) supply of cells.

The sad reality that even this advantage hasn't yet materialized, since Tesla is using externally sourced cells for it's headline Tesla Energy project. Maybe next year, but that's what we keep hearing about Tesla Energy for at least 2 year now.

But maybe Tesla's breakneck pace of innovation will uncover some areas of TE that I'm not thinking of and make it more competitive and deserving of higher margins over time. All I can think of is they'll need an energy breakthrough of some sorts. Any other ideas?

At this point, the major innovation that Tesla brings to the energy storage market isn't technical, it's financial. The company is simply willing and able to sink more money into it's products, absorbing more losses and buying market share at a higher cost than anyone else.
 
I could be and hope I'm wrong with TE. I just don't see where Tesla can charge high margins over time. Usually in order to charge high margins, a company needs to be solving a problem in a way that others can't solve. Oftentimes it involves complexity. However, in terms of energy storage it's fairly straightforward. The powerwall and powerpack systems are not so complicated (at least from what I understand) that others can't copy it. For Tesla Auto, I think it's much more complex... because it involves so many parts (ie., design, thousands of parts and supply chain, sales, service, chargers, etc). But with TE it's basically just battery cells (and inverter, wiring, etc) and the software that runs it. And I don't see Tesla's sustainable advantage (barring an energy breakthrough by Tesla). I do see an advantage over the next 3-4 years though as Tesla has access to a larger (and probably cheaper) supply of cells. However, after battery production catches up and costs drop more, I think Tesla will only have a very slight advantage with cell costs and supply. Thus, putting pressure on margins via competition. I can see Tesla sell a lot of energy products over time, but I can also see their margin being compressed from low-cost and cut-throat competitors.

But maybe Tesla's breakneck pace of innovation will uncover some areas of TE that I'm not thinking of and make it more competitive and deserving of higher margins over time. All I can think of is they'll need an energy breakthrough of some sorts. Any other ideas?

I think firm projections for TE margins are tough right now since we are at the beginning of the S curve, Tesla has not given much guidance yet, and the publicly available information I have found is not very robust. Also, I should be clear that I have very little experience with manufacturing and the experience I had was a very long time ago. So all of this is more speculative than the automotive business, and I don't claim to have any particular expertise.

With that out of the way, it sounds like we are in agreement that over the next 3-4 years Tesla's first mover advantage and scale could provide the opportunity to earn substantial margins. I would add that especially with Powerpack, operating expenses should be lower than the car business so even if gross margins are lower (which they may not be) operating profits could be comparable.

Although it is hard to find solid competitive pricing info for Powerpack, a few data points I have seen on Powerwall are very striking to me and I take as very promising early indications that Tesla is far ahead of the competition at this early stage. The pricing comparisons I have seen for Powerwall suggest that Tesla is able to massively undercut its competitors at a price point per kWh ($393) that should leave room for substantial margins by the time TE is at scale. (I consider scale to be something greater than 1 GWh/quarter production volume, which hopefully will happen some time next year.)

With battery costs predicted to drop at a substantial rate industry-wide, and Tesla starting out with what appears to be a major cost advantage, how will the competition catch up? This will be the first generation of TE products produced at the Gigafactory from top to bottom, and I would expect significant improvements in the next few generations of products as Tesla develops expertise and know-how in producing storage products. Elon has said that Tesla's competitive advantage over the next 10 years will be in manufacturing and that Tesla has the goal of becoming the best in the world at manufacturing large objects. Tesla also has extensive experience making stable, safe batteries with exceptional longevity. It has the best talent around for battery chemistry and technology and some of the best if not the best inverter talent in the industry from what I can tell.

Tesla's significant cost advantage, determination to become the best in the world at automated manufacturing, exceptional team and ability to constantly innovate could create a durable competitive advantage for as long as there remains the potential to obtain significant cost reductions, which I expect we will see far into the future as large scale battery production has not even got off the ground yet. To catch up to Tesla, the competition will have to reduce costs at a faster rate than Tesla. I don't think they can do it for the foreseeable future (i.e., much longer than 3-4 years, when the competition will barely be getting off the ground with GF-level battery production), unless they get very lucky with some proprietary battery chemistry breakthrough or something along those lines. So innovation in manufacturing, combined with a substantial head start, could create a durable advantage.

There is also the opportunity for Tesla to continue to position itself with the top quality product in the market, offered at a lower price than the competition. That is a formula for industry dominance, where Tesla will be production constrained for a very long time. We may be seeing an early glimpse of this with Tesla's Powerwall sales in California. Based on a recent report Tesla has received something in the range of 80% of battery sales that qualify for the SGIP. 2017 Investor Roundtable:General Discussion Now someone could dismiss that by saying there is a home-state bias in favor of Tesla or it just got out of the gates faster than the competition, but I think it is more likely that this a reflection of the fact that the Powerwall is a far better value proposition than the competition, with the possible exception of a few special use cases. With Tesla's plans to build multiple Gigafactories around the world, the gap could grow even further. Also, as you note in the interview, the third generation product is usually the one that takes off. If PW3 is even more compelling than PW2 (which it undoubtedly will be), the competition could be in a difficult spot.

In addition, one of the advantages to having innovation in its DNA is that Tesla excels at is creating entirely new products and new product lines (starting with compelling EVs, Solar Roof, Tesla Semi, Autopilot and I would argue Powerpack and Powerwall). Once it has a foothold in this space, I wouldn't be surprised to see Tesla combine their battery and software expertise to provide new products and services, for example, that manage, optimize and stabilize the microgrids they help build. Providing solutions to more complex problems may create new opportunities to sell high margin products and services.

I don't want to overstate this. We are at the early stages and there are lots of unknowns. The Chinese government could decide to duplicate its solar strategy and throw tons of resources at this and undercut prices and force margins lower. A new battery technology could come out and catch Tesla flat footed. For a variety of reasons storage could turn out to be a low margin, commodity business some time after 2020.

If that's the case I think Tesla getting into this business still has value for many of the reasons you mention in your interview. Also, the potential for short to medium term cash generation to fund more Gigafactories could be very valuable. More fundamentally, making cheap storage available and ubiquitous removes a major barrier to the world switching to affordable solar power, which is critical to Tesla's mission and also makes EVs that much more appealing and cleaner to boot. If someone else was already in a position to sell cheap residential, commercial and utility scale storage at volume, maybe Tesla wouldn't have bothered. But as with automotive batteries, nobody was. So Tesla built the Gigafactory (and soon, Gigafactories), to kill two birds with one stone.
 
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I agree with a lot of what you're saying here. However, I do think there will be some major, major, major moves by big players in the near future (next 1-3 years). The reality is that Google (ie., Waymo), Apple, NVDA are very capable and very well-run companies. And they've already set their eyes on the autonomous transport industry in various ways. Uber, although they're in a bit or turmoil at the moment, also is a capable company as well. And then you've got Intel (w/Mobileye). Anyway, the point being is that these players aren't going to sit still and they have a lot of money to spend.
<Snip>
I think in the next 1-3 years it's fairly obvious (at least to me) that Google or Uber or Apple either buy out an existing auto maker OR will start to make their own cars
(ie., via Magna Steyr, Magna Steyr - Wikipedia) OR create some kind of joint venture partnership (ie., Waymo and an existing car company teams up to create a new line of cars).

Part of the reason it's almost inevitable is because 1) market is so large and tempting, 2) Tesla's efficiencies are too difficult to compete with, and thus 3) in order to compete they need to emulate Tesla's integrated strategy.

Tesla is definitely in the lead and I don't see that threatened any time soon, but looking out to 2025 I see a lot of competition from software-driven auto makers/partnerships (ie., Waymo or Uber or Apple branded cars and networks).
I agree with DaveT in that I don't believe that TN will be a major source of income for Tesla because I don't believe that intends to turn TN into a direct source of a substantial income. I think that they are planning to use it to make their cars more compelling, and possibly to monetize it with some added services (like Tesla Music). I think it's possible that Tesla will not even attempt to monitize the services that they provide. For example they might provide Tesla Music as a free or non-profit service.

That might sound crazy but is that any crazier than servicing cars with the intention of not making a profit? Elon said that Tesla won't compete with Uber, that Tesla owners will compete. I'm not sure if Tesla will try to make money from adds given the fact that Elon isn't very fond of advertising. I believe that he sees TN as a temporary advantage until they get the alien dreadnaughts rolling, at which point nobody else will be competitive (Elon said that if your competitors require three or five factories to produce what you can produce with one factory that isn't really competition).

So I agree with Dave that TN will not be a big source of income beyond helping them sell a ton of cars and semi's :D!
 
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I think in the next 1-3 years it's fairly obvious (at least to me) that Google or Uber or Apple either buy out an existing auto maker OR will start to make their own cars (ie., via Magna Steyr, Magna Steyr - Wikipedia) OR create some kind of joint venture partnership (ie., Waymo and an existing car company teams up to create a new line of cars).

Yeh I agree... it makes sense... but what do you make of all the problems they have had???
Google's failed partnership with Ford...

Failed Google deal left Fields in the lurch

Apple scaled back project titan away from building cars.

Apple Scales Back Its Ambitions for a Self-Driving Car

buying out a car company seems unlikely due to the size... even fiat/chrysler, one of the smaller companies.. has a $27B market cap + buyout premium. That would dwarf the eye popping Google Motorola acquisition for $12B in 2014... or Apple's Beats acquisition for $3B.
 
Yeh I agree... it makes sense... but what do you make of all the problems they have had???
Google's failed partnership with Ford...

Failed Google deal left Fields in the lurch

Apple scaled back project titan away from building cars.

Apple Scales Back Its Ambitions for a Self-Driving Car

buying out a car company seems unlikely due to the size... even fiat/chrysler, one of the smaller companies.. has a $27B market cap + buyout premium. That would dwarf the eye popping Google Motorola acquisition for $12B in 2014... or Apple's Beats acquisition for $3B.

$30B is peanuts for Google and Apple.

Much of their assets are held overseas and would be heavily taxed when brought home or distributed as dividends. They don't know what to do with their cash (almost half a trillion dollars in their bank accounts): right now, they prefer to buy stocks or bonds, but this means that they expect other companies to make better investment decision than they'd do on their own.

The problem is:
- they aren't many market opportunities right now (few companies needs billions, even though the interest rates are the lowest in decades)
- the main players in the auto industry aren't able to reinvent themselves with new tech and software
- this is a 2-trillion waiting for disruption
- new entrants (e.g Tesla, China) aren't staying still and might well become monopolies in both energy production & distribution, transportation, and logistics.

I expect the market value of some foreign auto-manufacturers to drop so low that the GAFA will not miss the opportunity to buy them on the cheap, even if it means reselling them later if the acquisition doesn't work as expected (cf. Moto > Lenovo).
 
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Gigafactory Concerns

I'm wondering if anyone's concerned with the (apparent) performance of the Gigafactory?

There were comments left by someone this week who claimed to be a Gigafactory employee detailing a list of very specific issues. I'll attach his post below (in case it gets deleted), but even before getting into that speculation, let's list the facts as we know them:

1. The directory of battery technology at Tesla, Kurt Kelty, resigned (or was fired) right around the Model 3 delivery event. Highly unusual timing.

2. The Powerwall 2 is still horrifically backordered months after it's introduction.

3. Tesla used Samsung cells, instead of its own, for the Australian Powerpack delivery.

4. There are reports that Tesla replaced the battery packs on early Model 3s.

5. After mentioning Model 3 production bottlenecks, Elon just recently visited the Gigafactory.

I'm aware that all of these issues can be hand-waived away by any of us, however these points, taken together, to me tend to indicate the the Gigafactory may be underperforming on some level.

A couple more, this time under the speculation category:

-- Elon's language to the Governor of PR was far more muted ("Hopefully, Tesla can be helpful") for what would be a larger scale attempt, than in his previous conversations with Australia. Just an observation. [I'm again aware of alternate explanations]

-- The Tesla semi was delayed to "Divert resources to fix Model 3 bottlenecks & increase battery production for Puerto Rico & other affected areas." This is a bit awkward in its implications. Like, really? But again highlights the Gigafactory.

Taking ALL these recent events in consideration leads me to have some reasonable concerns about what may or may not be happening at the Gigafactory. Are there raw material issues? Production issues? Other issues?

Now we get to the "employee's" post (below). Take this with a grain of salt, but his observations are very specific and his posting history shows past comments about Sparks Nevada. Some of his issues make sense, some others are a bit puzzling, at least to me.

Thoughts? Anyone have any concerns or is everything just pretty, pretty good?

EnDeep2 days ago


I work at the Gigafactory in Nevada, I can tell you exactly what’s causing the delays first hand. It starts with the location they chose to build the factory at.

1) That part of Nevada has people who have been casino workers for generations, there’s no production or technical skilled talent within 300 miles.

2) They built the factory in the middle of no where, 20 miles from the nearest city. Most employees are paid $13-$14 an hour. It’s not difficult math to determine your fuel and vehicle maintenance cost exceeds such a minimal income.

3) There’s only a single highway on that 20 mile distance to get there. This stretch of I80 is notorious for being closed down for hours due to weather, brush fires and accidents. It was just closed today for over 6 hours due to a semi truck accident. Employees can’t get to work means production gets cancelled at least once per week due to I80 road closures.

4) Despite Elon also owning Solar City, and the original plan to make the Gigafactory solar powered, that plan was permanently scrapped. Nevada Energy who supplies power to the factory has always been notorious for being extremely unreliable with major outages in the entire area constantly. Just a 3 second power failure, which happens there 2-3 times per week is an extremely major production killer to Panasonic who makes the battery cells inside the Gigafactory. The time it takes to get the equipment back up and running after even the slightest power bump is on average 6 hours. All battery cells produced for about 3-4 hours prior to the power bump also become worthless and must be disposed of. Millions of batteries end up unusable in the trash from just a 3 second power bump.

PART 2

The real delay to Tesla production is due to the battery cells not being manufactured to the true capacity they calculate being able to do on paper. This problem falls on Panasonic’s shoulders. When you factor in the initial problems I listed in my other post here you then have to factor in the Panasonic failures. Panasonic gave up attempting to produce the different cells used for the power walls, that’s why the Australian deal had to rely on Samsung not Elon’s own Panasonic cells being used.

1) I’d point out first that production is absolutely not being rushed or corners cut on quality just to meet promises. It’s the exact opposite. Panasonic takes the term “anal” to an entirely new level when it comes to product quality standards. I could write for days on the rigorous and extensive quality standards Panasonic lives by. If a single cell has even a microscopic scratch invisible to the human eye on the outside of the metal can the cell is rejected and sent to the trash. Production is then completely halted until the cause of that scratch is located and corrected. That’s just the cosmetic issues, I won’t even go into the measurement tolerances of every battery component that sends entire lots of components and almost fully finished cells into the trash daily.

2) Extremely poor quality management from the American side are a major problem with Panasonic as well. They don’t keep good talent and instead keep only warm bodies to fill seats that they deem easier to manage. These managers have no technical or production background and the first step Elon should demand is Panasonic dumps the management staff they currently have from production managers all the way down to the individual line leads.

3) The Japanese Technians Panasonic rotates in from their Japan plant are top notch and are at the heart of keeping any production going. The problem is these Technical Advisors (or TA’s as they’re referred to as within Panasonic) do not speak any English. Part of their role is to train the US based employees technical repair and maintenance of the production line equipment. This can’t happen because of the language barrier and the technical capabilities of the local people Panasonic has hired is non existent. This further goes back on the management for not weeding out the people who are technically incapable of ever performing true equipment troubleshooting or repairs. I’ve seen one of these incompetent “technicians” cause the production line to be down for days because he used a pair of channel locks to tighten a hex head bolt and completely rounded off the bolt head which then caused further equipment damage. Human caused problems like this from the Americans they hired as “technicians” are a daily problem with them doing more harm than good. Parts for any of the equipment they damage has to be shipped in from Japan to repair, nothing they use on that equipment is off the shelf or available anywhere in the US.

For Tesla to ever meet demands they’ll need to fix the limited access remote location problems. From Sparks, NV to the Gigafactory would be a prime location for one of Elon’s tunnels. It’s that or build affordable apartments close to the facility.

They’ll need to solve the unreliability of power supplied from Nevada Energy (even though the factory is only a few miles away from the power plant). That can be fixed by bringing back the idea of solar power and back up battery power supplies. Nevada Energy only progressively gets worse in unreliability, there’s no hope they’ll ever get better.

They’ll need to fire from the top down all the current American management at Panasonic, none of them are “keepers”. Bring in managers from the Midwest or other areas who have actual production experience.

Restructure Panasonic’s technical employees. There needs to be a top down management team from manager to technical lead devoted solely to technical issues and repairs. Get rid of the current people Panasonic’s incompetent managers have brought in as “technicians” that do more harm than good. Again the available pool of people in this area capable of performing actual technical skills is extremely limited so again they’re going to have to attract in people from outside the area to fill these positions.

I could make a longer more detailed list easily but I think you get the point.
 
Gigafactory Concerns

I'm wondering if anyone's concerned with the (apparent) performance of the Gigafactory?

There were comments left by someone this week who claimed to be a Gigafactory employee detailing a list of very specific issues. I'll attach his post below (in case it gets deleted), but even before getting into that speculation, let's list the facts as we know them:

1. The directory of battery technology at Tesla, Kurt Kelty, resigned (or was fired) right around the Model 3 delivery event. Highly unusual timing.

2. The Powerwall 2 is still horrifically backordered months after it's introduction.

3. Tesla used Samsung cells, instead of its own, for the Australian Powerpack delivery.

4. There are reports that Tesla replaced the battery packs on early Model 3s.

5. After mentioning Model 3 production bottlenecks, Elon just recently visited the Gigafactory.

I'm aware that all of these issues can be hand-waived away by any of us, however these points, taken together, to me tend to indicate the the Gigafactory may be underperforming on some level.

A couple more, this time under the speculation category:

-- Elon's language to the Governor of PR was far more muted ("Hopefully, Tesla can be helpful") for what would be a larger scale attempt, than in his previous conversations with Australia. Just an observation. [I'm again aware of alternate explanations]

-- The Tesla semi was delayed to "Divert resources to fix Model 3 bottlenecks & increase battery production for Puerto Rico & other affected areas." This is a bit awkward in its implications. Like, really? But again highlights the Gigafactory.

Taking ALL these recent events in consideration leads me to have some reasonable concerns about what may or may not be happening at the Gigafactory. Are there raw material issues? Production issues? Other issues?

Now we get to the "employee's" post (below). Take this with a grain of salt, but his observations are very specific and his posting history shows past comments about Sparks Nevada. Some of his issues make sense, some others are a bit puzzling, at least to me.

Thoughts? Anyone have any concerns or is everything just pretty, pretty good?
I recently moved to Reno and drove up to GF1 as close as I could (the security shack, which has a Powerwall 2). That part of I-80 doesn't seem that bad... Traffic was not heavy at the time I drove there. Although there was a brush fire just being put out and I can see some active fire still going on on the hills by the road. It is true that part of the road was closed for about 6 hours two days ago due to an accident. Recently a new road was opened to link I-80 with a nearby town called Silver Springs. Housing price is almost half there compared to Reno-Sparks. So this should help. But the traveling distance is still about the same as from Sparks.

It is true Reno does not have a tradition in manufacturing. The businesses moving into this area are mostly tech mainly in software and distribution centers. University of Nevada Reno's Engineering School is getting a lot of investments recently but the fruits can only be reaped in time.

Regarding NV energy, in the past 3.5 months I've lived here, I had perhaps 4 outages. ~3 short ones like 2 or 3 secs and one long one that lasted a few minutes. It is the worst utility I ever had and my head hurts when thinking of GF1's production suffering that much due to this. They need to build some micro grid capability. Not sure why they scrapped the solar powered plan they had (if true).
 
Gigafactory Concerns

I'm wondering if anyone's concerned with the (apparent) performance of the Gigafactory?

There were comments left by someone this week who claimed to be a Gigafactory employee detailing a list of very specific issues. I'll attach his post below (in case it gets deleted), but even before getting into that speculation, let's list the facts as we know them:

1. The directory of battery technology at Tesla, Kurt Kelty, resigned (or was fired) right around the Model 3 delivery event. Highly unusual timing.

2. The Powerwall 2 is still horrifically backordered months after it's introduction.

3. Tesla used Samsung cells, instead of its own, for the Australian Powerpack delivery.

4. There are reports that Tesla replaced the battery packs on early Model 3s.

5. After mentioning Model 3 production bottlenecks, Elon just recently visited the Gigafactory.

I'm aware that all of these issues can be hand-waived away by any of us, however these points, taken together, to me tend to indicate the the Gigafactory may be underperforming on some level.

A couple more, this time under the speculation category:

-- Elon's language to the Governor of PR was far more muted ("Hopefully, Tesla can be helpful") for what would be a larger scale attempt, than in his previous conversations with Australia. Just an observation. [I'm again aware of alternate explanations]

-- The Tesla semi was delayed to "Divert resources to fix Model 3 bottlenecks & increase battery production for Puerto Rico & other affected areas." This is a bit awkward in its implications. Like, really? But again highlights the Gigafactory.

Taking ALL these recent events in consideration leads me to have some reasonable concerns about what may or may not be happening at the Gigafactory. Are there raw material issues? Production issues? Other issues?

Now we get to the "employee's" post (below). Take this with a grain of salt, but his observations are very specific and his posting history shows past comments about Sparks Nevada. Some of his issues make sense, some others are a bit puzzling, at least to me.

Thoughts? Anyone have any concerns or is everything just pretty, pretty good?

His comment history suggests he does live in the Sparks area. His comments also have a raging anti-liberal bias, leading me to be wary of his motives. Another red flag is his comment about the Japanese Panasonic workers not speaking any English. I think he's a projecting a typical American's mono-linguistic view of the world. I'd be very surprised if any high-level, tech-oriented Japanese citizen couldn't competently speak English.

That said, I'm not completely discounting his report, yet. It sounds plausible, but I need more evidence before giving it serious consideration for incorporating it into investment decisions.

Edit: And his reference to the recent truck crash on I-80 does check out.
 
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Why would Tesla not use the powerpacks to stabilize the nv energy power coming to the gigafactory. It's a not like only solar can charge these packs. Grid stabilization is one of the major service powerpacks provide.

There certainly seem to be issues with the scaling of NMC cells, but this piece of logic at the minimum smells like BS.
 
Another red flag is his comment about the Japanese Panasonic workers not speaking any English. I think he's a projecting a typical American's mono-linguistic view of the world. I'd be very surprised if any high-level, tech-oriented Japanese citizen couldn't competently speak English.
This is not a red flag IMO. In terms of speaking English, Japan is even worse than French.
 
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Why would Tesla not use the powerpacks to stabilize the nv energy power coming to the gigafactory. It's a not like only solar can charge these packs. Grid stabilization is one of the major service powerpacks provide.

There certainly seem to be issues with the scaling of NMC cells, but this piece of logic at the minimum smells like BS.
This was the main issue I had with his comments as well. I don't understand how the grid can be that poor and yet at the same time Tesla has (permanently?) scrapped plans for the solar roof and, even more surprisingly, not deployed any of their own products to stabilize the 3-second power outages. That makes no sense.

For the rest, as I said, we can certainly explain-away any of the individual circumstantial evidence but the fact remains that TE products are not exiting the factory at any great speed, despite the backorders. At the very least, it's something to keep an eye on. I'm amazed that no analyst seems to ask specific questions in this regard.
 
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I will send the link to IR for possible comment.

This was the main issue I had with his comments as well. I don't understand how the grid can be that poor and yet at the same time Tesla has (permanently?) scrapped plans for the solar roof and, even more surprisingly, not deployed any of their own products to stabilize the 3-second power outages. That makes no sense.

For the rest, as I said, we can certainly explain-away any of the individual circumstantial evidence but the fact remains that TE products are not exiting the factory at any great speed, despite the backorders. At the very least, it's something to keep an eye on. I'm amazed that no analyst seems to ask specific questions in this regard.
 
This was the main issue I had with his comments as well. I don't understand how the grid can be that poor and yet at the same time Tesla has (permanently?) scrapped plans for the solar roof and, even more surprisingly, not deployed any of their own products to stabilize the 3-second power outages. That makes no sense.

For the rest, as I said, we can certainly explain-away any of the individual circumstantial evidence but the fact remains that TE products are not exiting the factory at any great speed, despite the backorders. At the very least, it's something to keep an eye on. I'm amazed that no analyst seems to ask specific questions in this regard.
For the most part, they all seem to simply ignore TE. They generally don't give it much weight, if any, in the valuation.
 
(Not sure why we are camping out here in DaveT's thread, maybe mod can help move these out if Dave chooses to)

From the SolarCity research days I remember it's not easy to get off of NV Energy. PUC is in their pocket. The casinos wanted to leave but the PUC said they would have to pay 100s of millions to NV Energy as exit charges. This was a long drawn out war for years IIRC. There was also some other tech company going through similar mess (box something). You can easily look up all this if you care.

If Elon wanted a solar/wind powered factory he should have started that way. But I believe he chose not to in the interest of speed.

I don't think it's easy to get off now. In fact I very specifically called out this risk way back in some thread. Nobody knows what the agreement is between Tesla and NV Energy. I just hope it's not too punitive and Tesla thought this through early in the game.
 
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