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Credit Suisse Report and 10 percent more energy per cell

Discussion in 'TSLA Investor Discussions' started by blakegallagher, Aug 17, 2014.

  1. blakegallagher

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    There were a few sections of the Credit Suisse report that seemed fascinating to me. The most intriguing part that they seemed to present as fact is


    "Powertrain Costs: At start of Model X production, Tesla will be using
    a next-gen Drive Unit and battery cells that are 10%+ more energetic
    per cell. These improvements will back-fill to Model S as well."

    This was listed under a section detailing catalyst for increased margin.
     
  2. CatB

    CatB Member

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    That would be very nice. Of course I am hoping that would be available as an upgrade and not just a new 93kWh option on new orders :)
    Although even if I can't upgrade, thrilled to see continuous improvement.

    P.S. nice catch!
     
  3. blakegallagher

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    So does this mean 10 percent more range? Could it just mean they have the same range but use fewer cells resulting in a cheaper battery? I was under the impression that if they changed the number of cells they would have to get re-certified on crash testing and other criteria. If this 10 percent upgrade proves to be true does anyone have any knowledge on how this would translate in actual improvement to the car? I would love a 10 percent boost to range :)
     
  4. AudubonB

    AudubonB Mild-mannered Moderator Lord Vetinari*

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    That's an excellent find, Blake.
    I recall TM saying that the larger size, bulkier profile, etc., of the X vs the S was going to make it slightly less efficient, so perhaps an X so outfitted will have a range equivalent to an S of today.
     
  5. Matias

    Matias Active Member

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    Here's direct quote from Q2 2014 conference call

    "Colin Langan – UBS


    And on the Giga Factory, I mean is the chemistry going to be the same battery chemistry that you're currently using or is that part of the discussions that are going on with Panasonic?


    Elon Musk


    There are improvements to the chemistry, as well as improvements to the [indiscernible]. So we would expect to see an energy density improvement, and of course a significant cost improvement.


    JB, do you want to [indiscernible]?


    JB Straubel


    Yeah, that's, you know, the cathode and anode materials themselves are next generation, so we're -- I mean we're seeing improvements in the maybe 10% to 15% range on the chemistry itself.


    Elon Musk


    Yeah, in terms of energy density."


     
  6. blakegallagher

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    but those questions were in regard to the gigafactory and this report said 10% gain on Model X launch
     
  7. Matias

    Matias Active Member

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    Maybe Credit Suisse report is inaccurate.
     
  8. Joel

    Joel Active Member

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    My guess is the 10% will go straight to the bottom line. Model S will have the same range. And Model X will now have the same range as S (EPA 265 miles). Previously Elon stated all SUV have 10% less range due to their weight and high drag coefficient. With these newer cells, the Model X can achieve the same range as S. And Tesla can earn 10% (or whatever the average differential is between S & X) more on their batteries next year.
     
  9. StapleGun

    StapleGun Member

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    This is the most likely scenario. Apparently the report listed this in the "improving margins" section, Tesla has no reason to lower the price given the current demand, and Elon is very close to hitting the 30% gross margin target which unlocks more stock options for him.
     
  10. jhm

    jhm Active Member

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    I'm not sure how a 10% density gain is supposed to go straight to the bottom line. A density gain need not result in a cost per kWh reduction. Redesigning a smaller pack so few higher density cells can provide the same kWh as before does not add value for customers. It does not seem a worthy goal for Tesla. I'd much rather see the company demonstrate that it is driving technology forward and not just cutting costs for itself.
     
  11. Joel

    Joel Active Member

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    Tesla (and Wall Street) are measuring density on a cost and weight basis. When Tesla increases the energy density, this directly benefits the consumer. In your example, if there are fewer cells (i.e., a smaller pack), the car is lighter, which is beneficial for a variety of reasons. This is the goal for Tesla to continually increase the value of the battery pack. Whenever Tesla increases battery density, they are reducing both weight and cost. And this benefits both the consumer and Tesla.
     
  12. jhm

    jhm Active Member

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    You have not explained how an energy density gain goes directly to the bottom line. To be concrete, suppose Tesla has a pack of the same mass as the 85, but with 10% more density. This now is a 93.5 kWh pack. This pack may cost more ore less for Tesla to produce. For simplicity suppose it cost about the same. Tesla has basically two options. It can set a higher price for the 93.5 than the 85 or keep the price the same. If it keeps the same price, the customers get a better product for the same money, but this need not do anything to improve the bottom line for shareholders. If it raises prices, then there is the possibility of improving the bottom line, but the customers are clearly paying more, albeit for a superior product. This is why it is not a clear path to the bottom line. There are other issues and choices to be made.
     
  13. austinEV

    austinEV Active Member

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    If they can get cells with 10% more capacity at the same price, they can make an 85kWh car with 7200 cells instead of 8000 cells. The pack costs almost 10% less since you bought fewer cells. TM can, at their option, increase the profit margin of the 85kWh car. To take this to the extreme, if cells were $0.10 they could either sell 85kW cars at a huge profit per car, or pack as many cells as it could hold and make a ~110kWh car, or choose any point in between of increasing value or profit.
     
  14. Joel

    Joel Active Member

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    Your underlying assumption is false. Whenever the energy density increases, the price and weight decrease. Elon repeatedly states that Tesla could manufacture a 500 mile pack for the Model S today, but it would be expensive and heavy. That is Range comes at the expense of cost and weight. The revealing question analysts should ask Elon is: when will we see a 500 mile battery at the same cost as a today's 85kwh battery. Instead, analysts and others ask "when can Tesla manufacture a 500 mile battery?"

    Energy density is a reduction in cost and weight. Any increase in energy density will come with a reduction in cost and weight, which benefits both the consumer and the shareholder similar to other technologies. When Apple manufactures a faster microprocessor, it is faster and lower in cost. This is why Apple holds the price relatively constant with their iPhones and iPads. The consumer has a better product and Apple's margins increase. When Tesla increases energy density for their battery packs, Tesla and their consumers experience the same outcome(s).

    Your underlying assumption is the increase in energy density comes at a higher price and (or) a heavier battery. This is not the case. The reason Credit Suisse commented on the increase in energy density (which is the same reason everyone is investing in TSLA) is to highlight Tesla is experiencing a return on their investment.

    There is a difference between range and energy density. Whenever Tesla improves energy density, "technology drives forward" (as you stated above).

    Does that make sense? As a shareholder and customer, smile when you read Tesla has improved energy density. :smile:
     
  15. Joel

    Joel Active Member

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    Do you have a link to the report?
     
  16. vgrinshpun

    vgrinshpun Active Member

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    #16 vgrinshpun, Aug 18, 2014
    Last edited: Aug 18, 2014
    There is another page from the CS report that details the battery cost reduction. The explanation of their approach to calculating the battery cost reduction on this page clarifies the meaning of the "10%+ more energetic" wording. It seems to mean that every cell contains 10% more energy within the same volume (18650 format for Model S/X), while costing the same as old cell (approximately the same total amount of molecules of approximately the same cost of each - this how I think Elon would explain it).

    It is up to TM to decide how to package this, but I would take the following swag on how they might:


    1. Model X packaging for the "more energetic" cells is straight forward. Since it is a new car I thing that Tesla will use the same amount of cells, at approximately the same cost (7104 in the original 85kWh pack), but since each cell contains 10% more energy, the total capacity of the pack will be 1.1 x 85 = 93.5kWh. As detailed on the report page referenced above, it could be that these 93.5kWh will let MX go further due to the additional efficiencies. According to CS MX will use next-gen more efficient drive unit, lower rolling resistance custom designed tires. The net result is that all these improvements will as a minimum provide the same range as Model S, at the pricing level that is similar to the current Model S platform.
    2. For Model S one approach could be to use the same quantity of cells, but have 10% larger battery that can drive car further due to improved efficiencies of new gen drivetrain and new lower rolling resistance tires, say 265 x 1.1 x 1.05 = 306. According to CS, the cost to Tesla of this updated MS platform should be the same as old platform. My speculation that such significant upgrade would warrant increase in price, similar to the increases that other luxury manufacturers introduce every year. If TM increases price by 3%-5%, this increase will go directly into improving their margin above 28% guided for this year.

    Kudos to BlakeGallagher for digging out this gem of information. These improvements are going to be very strong catalyst going forward, as they will be officially released by TM. I think this is part of the things that Elon referred to in the ER CC when he was saying that MX reservation holders do not have enough information to know how right they are to reserve the SUV against which, borrowing a phrase from Adam Jonas (Morgan Stanley), existing MS "will look like chopped liver". This is really exciting staff!

    Snap1.png
     
  17. vgrinshpun

    vgrinshpun Active Member

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    Just to add another speculation, the increased battery capacity for MX by 10% would mean that a tweaked drive units can have have a 10% higher output in the performance version, if one assumes that maximum total power produced by two drive units is limited by the battery size. This means that performance version of MX could possibly match performance of current MS P85! Can't wait until TM releases options/specs for MX!
     
  18. eepic

    eepic Member

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    I would caution we may be getting ahead of ourselves. In the conference call, the battery improvement discussion was in the context of the gigafactory.

    While a larger battery size has been speculated on TMC, we have never had any public mention or indication of such for the initial Model X launch. If you read the CS note above (thanks for providing!) it even says this is once the GF reaches maturity. Feel free to correct me by linking some source material.

    And with regards to MX range, in the February Europe talks JB mentioned they've made some interesting improvements that will allow for the AWD Model X to go the same distance as the MS, despite the extra weight. My guess has been it's different gear ratios in the two drive units that are energy optimized for different speed ranges.
     
  19. vgrinshpun

    vgrinshpun Active Member

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    During the ER CC Elon mentioned that Model X reservation holders do not have enough information to know how right they are to have made the reservation (my paraphrase). There were previous hints from Elon about the second row seats and autopilot driving from the highway ramp on to ramp off. So the question is what else was not even hinted publically that makes reservation holders so right without knowing why? I believe that upgraded battery and drivetrain might be just this missing piece. So the fact that there was no any public mentioning of this before does not make this speculation less likely to become reality. If anything, I would argue the opposite is true, as explained above.

    I have included snap shot of the page that you referring to only as a point of clafification for the wording used by CS. The actual page that was quoted in the original post by BlakeGallagher was specifically referring to introduction of the Model X in 2015 (see snapshot below)

    The AWD design that was optimized to have neutral effect on the range, as mentioned by JB, is not in any way linked to the capacity of the battery. The CS report specifically talks about increased battery capacity - "cells that are 10%+ more energetic"



    Snap91.png
     
  20. SteveG3

    SteveG3 Active Member

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    yes, the question was asked about the GF, but as I hear the answer, the 10-15% chemistry improvement would be in the GF cells, but the first use of the new chemistry wouldn't necessarily be with GF production.

    question is at ~25:20 http://www.media-server.com/m/p/bbz2caea
     

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