Articles/megaposts by DaveT

[PeterW]

Dave , what are your thoughts on advertising? I see a lot of people comment that once the gen III comes Tesla will have to advertise (tv, radio) to sell that many cars.
My question is “With demand for the Model S as strong as it is and the likelihood that the Model X will be similar with no traditional advertising and a price point from $70k to over $100K; what happens to the demand for the Gen III when you half the price?”

 

[DaveT]

Even if it doesn't, the main original point I was trying to make, of Tesla selling 10M cars by 2030, would still only make Tesla a mid-tier car company (assuming all companies continue to exist for the next 15 years, and new car sales growth continues to go up on the scale people are projecting). So your thoughts on them making *more* than 21 factories would give way to your Tesla 3.0 thesis where they not only become a strong player, but the leader in the new vehicle market. By 2030, I am going to go out and assume that they need to be making 20M cars at a minimum per year, in order to be the front runner... meaning probably 40 giga factories, maybe more.

If they can keep the 25% margins then yeah, there is NO reason they can't start funding their own factories soon-ish without even needing to ask investors for money.

My rough guess is global auto sales will be at 130 million annually by 2030, from 82 million currently (Global auto sales hit record high of 82.8 million). In that case, Tesla probably doesn't need to make 20M to be the leader, but probably 15M in my opinion.

Regarding Tesla funding factories from their own profits, here's a quick and dirty chart showing how they could use profits (1/3 of operating margin to invest in factories) and how many they could fund (assuming each factory costs $2 billion). Note: this is purely factories funded from operating profit (and not from capital raising as my earlier chart showed).

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Dave. Great series. I am looking forward to your other planned posts. Will you be discussing your thoughts on EV competition in the 3.0 post? You know mine. I suspect there will be compelling vehicles made by the BMW/MB's of the world within the time frame ( up to 2020-30 ) that you are framing your most research.

Yes, I hope to cover competition in my later posts. The gist of my argument though is that Tesla won't be standing still and is constantly iterating on their technology at a faster pace than other auto makers are able to. Tesla's heavily influenced by the Silicon Valley tech and startup scene and the pace at which they are innovating is far faster than any traditional auto maker. In many ways, Tesla has modeled it's innovation pace from the software/tech industry and there's not a single traditional auto manufacturer that can match that pace. The traditional auto makers are good at large-scale manufacturing but they're not good at innovating at a blistering pace. This is Tesla's speciality. Consider auto-pilot and how fast they are trying to release it. Tesla's pace of innovation is unheard of in the auto industry. Further, Tesla doesn't plan to have dozens of models of cars, and this kind of focus will enable them to continue to iterate on a small portfolio of models (under 10) and will allow them to make their cars better and better.

 

[DaveT]

To further play devils advocate, what happens if Tesla invests in the Giga Factory and the Gen III is a flop either due to design, engineering, or supply problems. Then they have a albatross factory plus materials to build with, but the car is not selling or those that are sold are plagued by problems. That would surely send Tesla's Market Cap downward below "Tesla 1.0" levels. So yeh, I don't think 1.0 could be the fall back scenario because we know they will be making the huge investments in Gen III.

It's true there are more downside risks than the TSLA 1.0 scenario. In fact, there are risks to every company and product. However, I'd weigh the risk of Gen3 being a "flop" as less than 5%. The main reason for this is because Tesla has already successfully executed the Model S and this de-risks the company immensely. They have already shown that they can make a stellar car and make it with an impressive 25%+ gross margin. The risk for Gen3 lies more in how good the car will be. Will it be good, great, or stellar? Since it's still roughly 3 years away, all we can do is speculate and people have to make up their own minds. But very roughly and crudely put, if Gen3 is only "good" then we have TSLA 1.0 price pressure. If it's "great" then TSLA 2.0 price pressure. If it's "stellar" then TSLA 3.0 price pressure. But the quality of the product must also translate into demand. For example, if Gen3 is stellar it needs to attract a stellar amount of demand in order for a TSLA 3.0 scenario to add pressure to the stock price.

However, prior to Gen3 I think if something happens to significantly decrease Model S/X demand then that will have a huge impact on TSLA's stock price and we could be looking at a scenario where TSLA 1.0 isn't the bottom.

For those who might be looking to jump in right now, and wondering if it is too late, and what are the risks. Based on Tesla 1.0 pretty much being the worst case scenario at this point, and given the current stock price, that is a worst case scenario of a 20% growth in share price through 2019 which is a 4% Y/Y return on your investment. Now, that isn't by any means a "winner" stock... but hardly a loser. I think it is pretty safe to say, if you invested today, you would at the very least end positive on your investment through 2019.

That is the big take-away I see in this, just based on your first few posts, Dave. Please correct me if I am wrong. One could basically buy a 2 year leaps or actual stock and come out on the positive side in pretty much all scenarios. I would say this is one of the most solid investments one could make right now for a 5 year hold.

Well I wouldn't necessarily discourage or encourage anybody from starting a new investment in TSLA at this moment, just because everyone has different risk/reward profiles. There have been times in the past where I recommended starting new TSLA positions, but that was when the stock I thought the stock was very undervalued (ie., was in the low 130s or below). I was able to recommend buying the stock at that time because the downside risks were low in my opinion (yet the market thought the risks were high) and the upside reward very large. For example, Articles/megaposts by DaveT - Page 17 .

In terms of current risks, if somebody buys the stock at TSLA 2.0 levels, then the biggest risk is something happening to shift sentiment and bring the stock down to TSLA 1.0 levels. And there's always the possibility that the stock stays there for longer than expected. So, even 2 year LEAPs have a lot more risk than stock. However, if one is able to take a long view toward TSLA investing (ie., holding to at least 2019), then they can wait out the ups/downs and probably come out on top as long as TSLA releases a compelling Gen3 vehicle and is on track for at least a TSLA 2.0 trajectory. However, when I invest I have a super cautious side with my long-term positions (because the positions are focused and very concentrated), so I want a safety of margin. In other words, I don't want to have to count on TSLA keeping a TSLA 2.0 trajectory in order for my investment to work out. Even if TSLA "drops" to a TSLA 1.0 trajectory I still want my investment to have handsome rewards. Now, if you were able to get in when the stock was at a discount (ie., near TSLA 1.0 levels), then after 5 years even if TSLA is on a TSLA 1.0 trajectory then your investment will come out very good. However, if you come in at TSLA 2.0 levels and TSLA drops to TSLA 1.0 levels and stays there and ends there in 5 years, then it might work out where you make small gains but there's always the additional risk of TSLA not even making TSLA 1.0 (I'm currently attributing a 5% risk, but who knows it could be more).

The tricky part is the later a person waits to starts a TSLA investment position, then the likelihood is that TSLA 2.0 trajectory will strengthen and eventually it will be influenced by TSLA 3.0 exuberance. So, my writings aren't really geared toward people trying to start a new position in TSLA (since that's complicated and there are various strategies like using stop losses to do that). Rather, this series is more geared toward the investor who got in early and now has the opportunity to hold. Or the person who is opportunistic and can grasp the conceptual foundation I'm sharing and then use it to take advantage of a major buying opportunity when sentiment is terrible, the stock has lost a lot of value, yet the long-term story of TSLA remains the same.

 

[adiggs]

Yes, I hope to cover competition in my later posts. The gist of my argument though is that Tesla won't be standing still and is constantly iterating on their technology at a faster pace than other auto makers are able to. Tesla's heavily influenced by the Silicon Valley tech and startup scene and the pace at which they are innovating is far faster than any traditional auto maker. In many ways, Tesla has modeled it's innovation pace from the software/tech industry and there's not a single traditional auto manufacturer that can match that pace. The traditional auto makers are good at large-scale manufacturing but they're not good at innovating at a blistering pace. This is Tesla's speciality. Consider auto-pilot and how fast they are trying to release it. Tesla's pace of innovation is unheard of in the auto industry. Further, Tesla doesn't plan to have dozens of models of cars, and this kind of focus will enable them to continue to iterate on a small portfolio of models (under 10) and will allow them to make their cars better and better.

This focus on iteration - one way I've seen this expressed (not necessarily specific to Tesla) is part of a larger business shift from a focus on flexibility over efficiency. In the Industrial Economy, successful businesses were ones that achieved economies of scale, for whatever that might mean for their business. This leads to the outsourcing phenomenon where we have companies pushing out everything that isn't core (modern auto makers defining the gas engine as their core competency, and outsourcing as much of the rest as they can).

In the Information Economy, we're seeing an emphasis on flexibility as the driver for business success. The way I see it, the reason for focusing on flexibility is for the purpose of iteration, rapid innovation / change, specifically with a focus on learning and adapting quickly. Flexibility and learning become the primary determinants for business success, and I haven't seen evidence of another auto company coming close to Tesla with that focus.

I believe that this drive to flexibility and cycle time / learning, over scale, is one reason we're starting to see vertical integration coming back (early days), Tesla being a notable example. With increased vertical integration, Tesla has more direct and immediate control over more of the manufacturing process, and they can learn and make changes over more of the car, more quickly.

Alistair Croll and his talks about The Business Singularity being one expression of this idea.

 

[DaveT]

Dave , what are your thoughts on advertising? I see a lot of people comment that once the gen III comes Tesla will have to advertise (tv, radio) to sell that many cars.
My question is “With demand for the Model S as strong as it is and the likelihood that the Model X will be similar with no traditional advertising and a price point from $70k to over $100K; what happens to the demand for the Gen III when you half the price?”

I think Tesla will gradually increase its use of advertising over time, but they'll do it wisely and efficiently. Currently they have such a long waiting list for the Model S, it doesn't make sense to drum up even more demand since that will lengthen the waiting list. But I think after they're able to hit a 50k annual production run rate (end of this year) with the Model S, then I think it would be a good use of money to gradually up their advertising for the Model S to drum up more demand.

Regarding Gen3, for the Gen3 sedan my rough guess is initial demand will be 10x the demand of the Model S and will grow over time. And initial demand for the Gen3 crossover will be 10x of the Model X. However, these are really rough guesstimates and nobody really knows until the rubber hits the road, literally. With Gen3, I think it'll be the same story where Tesla won't advertise since the waiting lists will be long, but once they're able to reach volume production and it makes sense to advertise then they will.

 

[chickensevil]

To further play devils advocate, what happens if Tesla invests in the Giga Factory and the Gen III is a flop either due to design, engineering, or supply problems. Then they have a albatross factory plus materials to build with, but the car is not selling or those that are sold are plagued by problems. That would surely send Tesla's Market Cap downward below "Tesla 1.0" levels. So yeh, I don't think 1.0 could be the fall back scenario because we know they will be making the huge investments in Gen III.

I just don't see that as a possibility. By the tI'm Gen3 hits they will have 3 designs under their belt with two of those being made wholly in house from the ground up.

As long as we have the core engineers still at Tesla that car is going to have the combined knowledge of three other cars contributing to the design and engineering.

I would place a tragic death of a major individual at the company as a higher "risk" category than I would the chance of them releasing a total flop of a vehicle.

 

[clmason]

I just don't see that as a possibility. By the tI'm Gen3 hits they will have 3 designs under their belt with two of those being made wholly in house from the ground up.

As long as we have the core engineers still at Tesla that car is going to have the combined knowledge of three other cars contributing to the design and engineering.

I would place a tragic death of a major individual at the company as a higher "risk" category than I would the chance of them releasing a total flop of a vehicle.

By "flop" I meant and noted "design, engineering or supply problems". Say the battery factory is wildly over budget and/or plagued by equality problems. That could prevent the gen 3 rollout and could send the share price below Dave's Tesla 1.0 valuation. That was my point. Yeh and I'm playing devils advocate, I'm not saying this likely but it is a risk.

 

[ecarfan]

I see a lot of people comment that once the gen III comes Tesla will have to advertise (tv, radio) to sell that many cars.

If Tesla executes the Gen III as well as they did with the Model S then I doubt they will need to advertise (in the traditional sense) for years to come. There will still be a ramp up period to quantity production levels and with the almost certain high levels of online buzz and press attention that will be all the advertising needed.

On the flip side...I talk to a lot of people about Tesla and EVs and I find that even where I live (SF Bay Area) most people know almost nothing about what makes the S such a great car and they have no idea about the Supercharger network, free lifetime charging, or the benefits of EV ownership.

A year ago I was pretty much the same way. I knew Tesla had made a cool and extremely expensive sports car and I knew the S had received great reviews but figured I couldn't afford it any time soon. Well, after my father ordered an S last August I started studying the car and the company more closely and the more I learned the more excited I got. Then I came up with a way to buy one (no loan).

The Gen III debut is going to get far more attention than the S did in 2012 because by 2017 Tesla will be an established brand, EVs will be more accepted because there will be other new EV cars on the market from VW and Audi, the Supercharger network will be everywhere, and the new model will be in an affordable price range for many middle class Americans. Traditional advertising will not be necessary. And by the way, gas is almost certain to cost significantly more in 2017! Don't forget that right now in Europe gas is at US$10 or more.

Honestly, I think most analysts continue to underestimate the company and it's potential. Also, the potential market for grid storage is generally below their radar. I think long term that will bring in potentially more revenue than selling cars. Plus there will be a big market for Tesla selling drivetrains to other car companies.

Sure Tesla could stumble, the gigafactory could run behind schedule and delay the Gen III, the X Falcon doors could have glitches, all kinds of things could happen. But those are low probability events and there are always solutions to technological problems.

My money is on Elon.

 

[SteveG3]

I am curious about what you see as risk factors

Hi Auzie. I ended up doing a pretty lengthy response to your question and decided it was more appropriate to post it on the "Risks to Tesla's Business" thread.

http://www.teslamotorsclub.com/showthread.php/30985-Risks-to-Tesla-business/page3

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If Tesla executes the Gen III as well as they did with the Model S then I doubt they will need to advertise (in the traditional sense) for years to come. There will still be a ramp up period to quantity production levels and with the almost certain high levels of online buzz and press attention that will be all the advertising needed.

I thoroughly agree. Within weeks of the reveal of the prototype and continuing through launch, I think most articles on the Gen III car will contain one of these 3 phrases,

a) "the most anticipated product launch in history"
b) "arguably the most anticipated product launch in history" (followed by nods to the iphone, and what else?)
c) "which followers of the Cult of Elon gushingly hype as the most anticipated product launch in history"

 

[DaveT]

#5 Tesla’s Competitive Advantage part 1: Battery Costs (The Case for TSLA...)

(This is post #5 in a series explaining my long-term TSLA investment philosophy. For previous posts, see Articles/megaposts by DaveT)

I know I’ve promised to lay out what TSLA 3.0 is (see previous posts for TSLA 1.0 and TSLA 2.0 summaries) but before doing that I’d like to lay some more foundation by outlining what I believe to be Tesla’s main competitive advantages. This will help to form the context of why I think TSLA 3.0 is possible and why it will play a growing role in the stock price’s volatility in years to come.

Tesla’s battery costs is the first competitive advantage that I will cover. Tesla's competitive advantages are the main reasons why I think Tesla is in an unique position to be the most exciting and fastest growing auto maker in the world.

First, in order for other auto makers to compete directly with Tesla’s cars they need to get their battery costs down to Tesla’s level. The problem is Tesla is constantly improving their battery costs as they increase their supply agreements and also roll out the Gigafactory. While other auto makers have plans to meet Tesla’s current costs, I haven’t seen any auto makers that can keep up with Tesla’s dropping battery costs.

This poses problems for other auto markers. While they can compete in segments where Tesla isn’t (ie., the Leaf, etc), it’s difficult to compete with Tesla head-on since they’re not securing batteries at the same cost as Tesla.

One of the main reasons why Tesla has a cost advantage with batteries is because they are using a small-format battery, the 18650 format. They also have created their own cell design where they’ve stripped out all the extraneous parts of the cell since much of the cell management is done through their powertrain thermal management system (basically a system of computers monitoring each cell’s performance, state of charge, thermal state, etc).

In order for other auto makers to reach the level of battery costs that Tesla is and will achieve, they need to do the following:
1. Adopt small-format battery cells in their electric vehicles.
2. Build large gigafactories.

These two things are difficult for other manufacturers to achieve. First, to adopt small-format batteries for their electric vehicles, auto makers will need to create advanced software to manage the state of each cell and allow them to harmoniously all work together in a safe and efficient manner. Currently, I don’t see any auto maker have the expertise in software and electrical engineering needed to accomplish this. Their best bet would be to either spend a lot of money to hire this talent or to use a 3rd party (ie., another company) that specializes in these fields to create a battery pack with small-format cells. Either way, it’s definitely possible but it’s not going to be easy.

Second, other auto makers will need to build large gigafactories to achieve the same cost savings as Tesla does with their gigafactories. In other words, Tesla is going to see a massive reduction of costs with the scale of their gigafactories, and in order for other auto makers to keep up they need to make massive investments like Tesla. The other option is other companies like Samsung or LG make the massive investments and reach a cost savings similar to Tesla. However, I haven’t seen Samsung or LG or any other company with plans to make a battery factory even close to the scale of Tesla’s gigafactory.

Without going with the small-format battery cells and constructing gigafactories, other auto makers have little chance to reach the cost savings that Tesla is and will see with their batteries.

This is one of the main reasons why I think Elon Musk open-sourced Tesla’s patents. Elon would like to see other auto makers use the 18650 (or similar) cell format. The reason? Because that’s really their only chance to reach the cost savings needed to have compelling electric vehicles that compete with what Tesla will be releasing.

Even if other auto makers somehow managed to successfully make an electric vehicle using small-format batteries, then they would still need to make huge gigafactories to bring down their costs to compete with Tesla. The problem with this is that the electric vehicle market is still rather small and the management of other auto makers are rather practically-minded and would like to see proof of a large electric vehicle market before spending the capital required to make massive battery factories. They want to avoid the fate of spending billions of dollars to create battery factories only to find out that there isn’t demand for electric vehicles. Currently, the Model S is selling in tiny amounts compared to the overall market, and while it’s an intriguing product it does not convince any auto maker management team that they need to spend billions of dollars to create huge battery factories now. It probably won’t be until Gen3 sells like hotcakes when other auto makers start to see there’s substantial demand for electric vehicles, and that’s when they’ll probably take the electric vehicle market more seriously. By then, Tesla will have a firm and commanding lead in the electric vehicle market and will be on a path to expanding both gigafactories and car factories abroad.

In reality, the concern isn’t that competition is going to out-compete Tesla when and if they get serious with electric cars. The real concern is if other auto makers are going to be able to really ever compete. And if they aren’t able to compete, this threatens to slow down the EV revolution and the the transition of the world’s transportation to electric.

In the next few posts I’ll share more of what I believe to be Tesla’s other competitive advantages.

 

[JRP3]

Let me take the counterpoint for a moment. The main cost driver for the cells Tesla uses is the already established volume production capacity of the format and the energy density of the material. Prismatics lag because the volume of production is much lower as is the energy density. However production capacity is increasing and energy density is as well. As both begin to approach Tesla's level the advantages of the 18650 format may disappear to some degree. In fact we do not yet know what format the GF will actually be building. Elon has said that using half as many cells as they currently do would be beneficial. Assuming he want's to offer larger pack capacity that would require a larger cell format even with energy density improvements.

 

[AlMc]

Dave: Thanks again for sharing your thoughts with this latest (#5) installment. While I agree that TM has a good sized first disrupter moat with compelling/long distance EVs, I do believe that the BMWs/MBs have the cash/name recognition to take on this segment of the EV market in the future. My unscientific thesis would have TM well ahead, growing, with TSLA appreciation for the next 5-7 years (say 2020 for argument sake), during that time BMW/MB (pick a name) will pair up with Samsung or LG, or a Chinese company, to build their own series of Gigafactories. They will be able to acquire the 'in house' expertise for the drivetrain and software needed to make their own vehicles. This is actually what Elon/TM wants as well and I could even see more cooperation between TM and other vehicle manufacturers per TMs mission statement. This cooperation, while not good for TM investors is good for humanity so I can definitely see the divide between TM and other EV manufacturers quickly diminish.

Will look forward to your, and other's, thoughts on this and future installments to see if your logic/scientific approach can quickly tear apart my 'gut' approach.

 

[pGo]

I've heard JB talking about slightly longer cells than 18650 as the ideal cell size. I think that's what they'll build at gigafactory.

 

[callmesam]

Dave: Thanks again for sharing your thoughts with this latest (#5) installment. While I agree that TM has a good sized first disrupter moat with compelling/long distance EVs, I do believe that the BMWs/MBs have the cash/name recognition to take on this segment of the EV market in the future. My unscientific thesis would have TM well ahead, growing, with TSLA appreciation for the next 5-7 years (say 2020 for argument sake), during that time BMW/MB (pick a name) will pair up with Samsung or LG, or a Chinese company, to build their own series of Gigafactories. They will be able to acquire the 'in house' expertise for the drivetrain and software needed to make their own vehicles. This is actually what Elon/TM wants as well and I could even see more cooperation between TM and other vehicle manufacturers per TMs mission statement. This cooperation, while not good for TM investors is good for humanity so I can definitely see the divide between TM and other EV manufacturers quickly diminish.

Will look forward to your, and other's, thoughts on this and future installments to see if your logic/scientific approach can quickly tear apart my 'gut' approach.

When do you think BMW/MB will break ground on their first gigafactory?

This seems to be the most crucial point for me. They will need to have a technology, then plan to start building, then start building, then begin to produce cells, then put those cells into cars.

Since TM has a jump on the competition, they'll begin cell production in 2017 (at the earliest).

If MB is able to produce cells in 2020, then Tesla will be making 50GWh/year by the time MB breaks ground on Gigafactory #1.

Tesla could have 3-5 factories in operation or breaking ground by that time.

 

[AlMc]

When do you think BMW/MB will break ground on their first gigafactory?

This seems to be the most crucial point for me. They will need to have a technology, then plan to start building, then start building, then begin to produce cells, then put those cells into cars.

Since TM has a jump on the competition, they'll begin cell production in 2017 (at the earliest).

If MB is able to produce cells in 2020, then Tesla will be making 50GWh/year by the time MB breaks ground on Gigafactory #1.

Tesla could have 3-5 factories in operation or breaking ground by that time.

IMO, it will be Samsung, LG or a Chinese company gigafactory that will supply BMW/MB with batteries. Could be a joint effort. I am not saying that these batteries may not be more costly that TMs but I am suggesting that these companies who pride themselves on innovation are not going to go quietly.

In addition, Elon/TM mission statement is to promote the growth of EVs. He has shared many of the patents already and I would not be surprised if he shares other advances in the future if it fits in with his mission.

I love my model S, am looking forward to my X (if I can convince my wife..another story/another thread), as many others here I have done very well investing in TSLA and expect it to fund my retirement over the next couple years. I do not know Elon...but he seems little motivated by money. This is a cause for him, I think TM has a nice run through ramp up of Gen III (2018-2019) but I expect major competition (not the Leaf, Volt or Prius) by 2020. If my 'gut' is correct, TM very well may be at $800-$1,000/share. I will hopefully have an S, X and Gen III (for my daughter), a decent retirement fund and sell 3/4 of my TSLA.

Plans and opinions can change, but that is my current one.

 

[callmesam]

IMO, it will be Samsung, LG or a Chinese company gigafactory that will supply BMW/MB with batteries. Could be a joint effort. I am not saying that these batteries may not be more costly that TMs but I am suggesting that these companies who pride themselves on innovation are not going to go quietly.

In addition, Elon/TM mission statement is to promote the growth of EVs. He has shared many of the patents already and I would not be surprised if he shares other advances in the future if it fits in with his mission.

I love my model S, am looking forward to my X (if I can convince my wife..another story/another thread), as many others here I have done very well investing in TSLA and expect it to fund my retirement over the next couple years. I do not know Elon...but he seems little motivated by money. This is a cause for him, I think TM has a nice run through ramp up of Gen III (2018-2019) but I expect major competition (not the Leaf, Volt or Prius) by 2020. If my 'gut' is correct, TM very well may be at $800-$1,000/share. I will hopefully have an S, X and Gen III (for my daughter), a decent retirement fund and sell 3/4 of my TSLA.

Plans and opinions can change, but that is my current one.

If a competitor scales in an identical manner to TM's plans (i.e. building a gigafactory equal to all 18650 production in 2014) by 2020, then they will be able to sell ~100,000 vehicles by 2020 and scale up over the next two - three years.

That seem to be weak competition as the first TM gigafactory reaches production capacity of 500,000 packs/year.

Like you, I have plans for a Model X and Gen III as the last cars I'll need as far as I can see.

The biggest risk for all auto companies is that driverless/autonomous technology allows for lower costs for automobile "shared" ownership through:

1. Reduction in insurance costs.

2. Reduction in per/use costs to the point where private ownership is disfavored.

3. Electrification will reduce fuel, repair and maintenance costs

Projections of 130M cars produced per year will have to take into account that perhaps 95% of the earth's population will NOT buy or own private vehicles.

This is counterbalanced with the opportunity to sell vehicles into markets where heretofore private car ownership wasn't even a possibility.

List of countries by vehicles per capita - Wikipedia, the free encyclopedia

Currently 152 of 182 countries, worldwide, have less than 5 cars/1000 residents. (5%)

 

[RobStark]

He has shared many of the patents already and I would not be surprised if he shares other advances in the future if it fits in with his mission.

He has open sourced all Tesla patents "in good faith." Meaning he wants reciprocity from companies using Tesla patents, so far only the Chinese seem interested. In India Mahindra and Tata said they are looking things over. Nissan and BMW maybe interested in Supercharger technology. It seems no one other than the Chinese are even mildly interested in Tesla powertrains. Unless there is an agreement in writing, the next Tesla CEO can sue any company using Tesla patents if he/she chooses. Proclaiming "All are patents are belong to you" is not legally binding.

Elon can open source Tesla patents but not Panasonic patents or battery supplier patents like Hitachi.


Open sourcing Tesla patents that build on existing Panasonic-Hitachi patents are not that valuable on their own.

 

[AlMc]

He has open sourced all Tesla patents "in good faith." Meaning he wants reciprocity from companies using Tesla patents, so far only the Chinese seem interested. In India Mahindra and Tata said they are looking things over. Nissan and BMW maybe interested in Supercharger technology. It seems no one other than the Chinese are even mildly interested in Tesla powertrains. Unless there is an agreement in writing, the next Tesla CEO can sue any company using Tesla patents if he/she chooses. Proclaiming "All are patents are belong to you" is not legally binding.

Elon can open source Tesla patents but not Panasonic patents or battery supplier patents like Hitachi.


Open sourcing Tesla patents that build on existing Panasonic-Hitachi patents are not that valuable on their own.

OK. Rob, I will play 'devil's advocate' here even if I don't necessarily believe the following will happen. Elon stays on for 4-5 more years, during which time he sees his (TM mission statement) still not taking hold. He does not care about money, only seeing the vision of a planet's transportation being renewable. He opens up all info (patents/secret sauce) to BMW/MBs/other car companies that are 'trying' to produce EVs instead of ICE vehicles......

 

[RobStark]

OK. Rob, I will play 'devil's advocate' here even if I don't necessarily believe the following will happen. Elon stays on for 4-5 more years, during which time he sees his (TM mission statement) still not taking hold. He does not care about money, only seeing the vision of a planet's transportation being renewable. He opens up all info (patents/secret sauce) to BMW/MBs/other car companies that are 'trying' to produce EVs instead of ICE vehicles......

Tesla is not 100 % owned by Elon Musk. Elon will not live forever. If current rate of employee stock options continue current shares will be diluted 50% in 25 years. There are those convertible notes worth $2.3B out there. I know there are a few targets out there where Elon himself gets a large wad of options but still don't see him owning more that ~ one quarter of the stock. You invite professional investors in they expect professional results. Not " I don't care about the money altruism." So far they are buying into standardizing the electric vehicle industry with Tesla standards is good for Tesla shareholders.

 

[DaveT]

I've heard JB talking about slightly longer cells than 18650 as the ideal cell size. I think that's what they'll build at gigafactory.

In fact we do not yet know what format the GF will actually be building. Elon has said that using half as many cells as they currently do would be beneficial. Assuming he want's to offer larger pack capacity that would require a larger cell format even with energy density improvements.

Elon's also mentioned that he thinks the ideal cell size is somewhat closer to the 28650. But this is still a very small format battery cell compared to the large format cells.

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Let me take the counterpoint for a moment. The main cost driver for the cells Tesla uses is the already established volume production capacity of the format and the energy density of the material. Prismatics lag because the volume of production is much lower as is the energy density. However production capacity is increasing and energy density is as well. As both begin to approach Tesla's level the advantages of the 18650 format may disappear to some degree.

I don't doubt that prismatics (ie., large format cells) will drop in price as production volume increases. And prismatics will also increase in energy density. The question is whether or not it will be able to keep up and match the cost savings that Tesla achieves via the Gigafactory (and eventually multiple gigafactories) and also improvements in energy density in their cells too.

I think Telsa's advantage with batteries is the following:
1. Flexibility - Tesla is willing to go with whatever cell format and chemistry that allows them to get the best cost and energy density.
2. Software expertise - Tesla is able to leverage advanced software to provide cell thermal and power management and other core safety features.
3. Focus on battery tech - Tesla is in communication with the cutting edge of battery advancements and is constantly looking for improvements.
4. Guided by First Principle - Tesla is trying to get battery costs down to the bare minimum possible over time.
5. Willing to make big investments even before demand is realized - Tesla is investing billions (and will likely invest tens of billions more) into gigafactories. It's interesting to note that this is largely before demand of its vehicles is proven at the level of battery production they're planning. Other auto makers are comfortable waiting to see the EV market mature and to scale reactively (ie., first see the demand and then make decisions to meet that demand), but this approach will always be behind... especially when the EV market really starts taking off.