GM to introduce Tesla rival, JB Straubel comments on battery cost

[lolachampcar]

sleepyhead,
I hope you are right but I think the numbers are very big, even for a $22B market cap. I like the idea of a Gov loan tailored to (and limiting only) the battery production problem. It would just seem odd for Tesla to be soooo hot to replace debt with equity money to get out from under one Gov loan only to jump right back into the same frying pan. As for China solving the battery problem for Tesla, I think Tesla is the only one that can sell the idea of doubling the world's capacity of 4/3rds A fat cells thus they are the ones in a position to best generate funding to build capacity. I really do not see any single source drinking enough of the KoolAid to build the capacity but then I have been wrong before.

It's the management bandwidth on funding that has me most concerned. It's easy to lull yourself into believing the magician can pull another rabbit out of the hat when you've seen him do it a couple of times already. My fear is that these rabbits are getting mighty large for the hat and there are a lot of them in need of pulling (battery capacity, non-battery capital ramp costs, funding receivables,,).

I've got my popcorn out and am looking forward to an education.



On a different topic.
Tesla may be making headway against the dealers but let one OEM with an existing dealer network even think about going around them with what they tout will be the future of car sales. Dealers know Tesla is trying to crack the door open. The concern is not if Tesla gets through the door but that the majors will try to follow. To really push BEV, the majors will eventually have to tout them as THE future and when they do the writing will be on the wall for the dealers. They will not go quietly which adds one more bump in the road for an existing mfg.

My gut tends to agree with Elon that conventional dealers do not work on BEVs. Sure, it could be a chicken and egg thing. Do they not sell because they are not compelling or because the dealer is not the right channel. Perhaps it is both. An interesting although very small comparison may be Zero Motorcycles. Zero has a compelling product albeit an expensive one. Their largest outlet by far is a pure electric motorcycle outlet even though they have conventional ICE dealers all over the country.

 

[bonaire]

Battery discussion is based on today's technology. The 15 or 20 Ah prismatic or "toast-sized" flat cell versus the cylindrical cell.

Let's say a new prismatic comes out with same size but double capacity. You can still do a flat skateboard using them or use the T-shape or block packs using them. The benefit of using cylindrical cells today is still there if chemistry can be stuffed into either format but the range available of the competition goes up with higher capacity prismatic form factor. Even though the Volt has a 40 mile electric range plus engine range extender, not much benefit is found in saving gas if you double the battery range since many drivers don't travel more than 40-50 miles a day. But it would be a huge selling point. The Volt range is stymied due to "SOC range limit boundaries to give longer battery life". If range is doubled, then many more commuters can get to *and back* from work and not need to plug in there at their job site making that design more compelling, especially if the price can stay the same. A 150 mile Leaf would be nice but what really will sell will be the high-demand CUV style vehicles with EV and EREV designs. In my area, at least 50% of the cars I see while driving around are CUV or larger. Go to the mid-west and there are even more trucks and "family trucksters".

Putting a 6Ah cylinder 18650 against a 30Ah prismatic would double Tesla's range and also double Volt and Leaf range. Tesla then can either drop the # of cells (lower range) or keep the large pack and market 400+ mile range. What the competition has to do is figure out how to best place prismatics in a wider, flatter placement pack with good TMS and adopt a new platform(s) for various model sizes. It has to happen in order to manage the future demands of BEV and EREV needs.

I think the failure of the competition was to try to adopt batteries into a traditional chassis and not build a purpose-built frame like the latest Prius or the Model-S. The issue is - can they adopt to a new architecture and cell placement for their future designs in a cost-effective manner? Is it a matter of altering the frame and metal dies to store batteries in a flat pack?

The biggest hurdle for Tesla is it's success. It has awoken the giants. VW, GM, Ford and others now have a much stronger focus on EVs and can small Tesla keep up with those organizations who already have a large number of international car factories and large buying-power with the suppliers. BMW messed up with their iterations (i3 and i8) but the others know how to build consumer cars. The i3 might actually do well once it grows on people. The Prius was pretty ugly to start. I envision Toyota even coming to the party at some point with something more than their hybrids. And as we know, Tesla is selling with a good percentage of the reason being its looks. Looks, size and Performance are trumping "green" for the Model-S when it compares to the other EVs on the market. However, to really make EVs work for humanity, the Model-S is not the answer - we all know a small, cheap and easy to manage EV is what "most people" will be able to want/afford/adopt. With Europeans mainly driving econo-box diesels to get by, something small is fine as long as it doesn't use that expensive petrol there. The USA is going to grow slowly in the EV marketplace unless car prices come down or gas goes way up. Given that 25% or more EVs are sold in CA and many for the use of the HOV lane, the compelling growth curve will not be enormous for years to come. However, each $1K lower in price for the Leaf and Volt, I believe that would lead to 1000 more per month sold. Take the Volt down to MSRP of $30K and they'll hit 5000/mo easy. Take it to $25K and 10,000/mo is possible.

 

[rage_777]

I'm curious why everyone is still throwing around the "dealers won't sell them because they don't make money in service" thing? I've never seen a credible source on that. Is it just some conspiracy theory that sounded good so everyone assumed it was fact? What does the salesman who makes a commission on the SALE care about how often you bring the car in for service? Not to mention, tesla has already shown that EVs aren't exactly zero maintenance (their recommended yearly service is more than I'd pay to service our Audis for a smaller interval).

I think dealers didn't push EVs because they didn't think consumers would want them. The volt, who,e nice, isn't exactly flying off the lots like some other models. Same with the Leaf. Lets face it, the non tesla EVs tend to suck a little bit. If they out out compelling EVs, they'll sell.

The reason that I think it's true is because the dealers don't make much on the new cars. They do make a lot of money on used cars. But the manufacturers don't have anything to do with the service, so the dealerships can make all their money from there. Not to mention the price difference when going to a dealership for service and any other place. If I were to change my front brake pads at a dealership, it might cost me $300. Do the same service at another place and it will cost about $150. Which brings up another point, the dealerships make a lot of money off of parts. OEM parts are ridiculously expensive.

I also think most manufacturers don't really want to sell the EVs because they don't make money producing them. Aren't they selling the Leaf and Volts for less than it costs to make it? If that is the case, then why would you want to sell them instead of the cars that will make you money? If you were selling lemonade and one makes you money and the other one costs you money to make, wouldn't you be trying to sell the one that makes you money?

 

[Evpro2]

GM and the other competitors have dream cars, Tesla has real cars. By the time a competitive EV comes out Tesla's SC nationwide network will be a reality. Advantage Tesla.

 

[vin5xxx]

@lola

"On a different topic.Tesla may be making headway against the dealers but let one OEM with an existing dealer network even think about going around them with what they tout will be the future of car sales. Dealers know Tesla is trying to crack the door open. The concern is not if Tesla gets through the door but that the majors will try to follow. To really push BEV, the majors will eventually have to tout them as THE future and when they do the writing will be on the wall for the dealers. They will not go quietly which adds one more bump in the road for an existing mfg."

The majors can't follow Tesla because they have contracts with the dealers. Their dealer relationship is permanent because of all of the state legislation.

 

[Ampster]

As others have commented in other threads, this could be a major sea change to and industry that has been historically slow to change.

 

[CapitalistOppressor]

Now hold on a sec...

"Perhaps more interesting is the benchmarking area, where batteries from seven different manufacturers are being tested, including packs from Nissan, Hyundai, Toyota (variants of the Prius battery) and Ford. Notably missing were any packs from Tesla, but GM representatives did say there are Tesla vehicles on the grounds that have been tested and taken apart. "There is nothing in the Tesla battery that we don't know," said Doug Parks, GM vice president, global product programs. He added that Tesla's strategy is "very intriguing" and that GM is taking a close look at it, but that simply "matching what Tesla did is not that exciting.""

So, you have the battery packs of all these other cars (which are significantly lower performers of the Tesla) being tested thoroughly, but none of the Tesla? I would think that battery and its complementary systems would be under the largest microscope. Not to copy, but to learn from. How much are they learning and expanding on by testing these other low-end (for lack of a better term) battery systems?

First, it's possible that other automakers are not legally capable of building a Tesla style pack. There is a fair argument to be made that Tesla has surrounded their pack design with an impenetrable wall of patents. If so, it doesn't make a lot of sense for them to spend a lot of time studying the Tesla pack design, because its a fundamental departure from the way big batteries have traditionally been built, which means any insights you get from the design are useless unless you are willing to hire Tesla to build your batteries.

Second, there is an equally fair argument that the path Tesla has chosen is ultimately going to be a blind alley because the economies of scale you get from 18650 production are an illusion that can only be maintained in the tiny niche that Tesla currently inhabits. Once you invest the billions of dollars needed to scale up the capacity needed for significant market share, the economies of scale for large format cells are superior to the small cells that Tesla is using. That, in fact, has been what automakers have been saying for years. If so, it doesn't make much sense to study Tesla's pack.

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There are so many ways Tesla can get capital:

-Tap into another government loan.
-Issue bonds. They can issue a lot of bonds (a couple $billion) next year if their stock goes up another $100.
-Free cash flow. This might be a lot higher than you expect. Might have a $billion in cash flow just two years from now.
-Issue new shares. My least favorite option.

Raising capital is not a concern for me. If you are talking about building battery factories then look no further than China and they will gladly build as much as Tesla wants once they see how the Model S is selling like hotcakes in China.

If Tesla is successful then the money will follow big time. If Tesla doesn't grow as fast as I expect then the money will not be necessary.

I agree that Tesla can raise the cash they need. My only concern is that their public position to this point has been that they don't need any more cash in order to roll out GenIII. That is clearly wrong I think, and as an investor I want to see a plan to address their battery production issues. Otherwise, I'll be forced to conclude that they have fairly low expectations for S and E platform sales in the 2018 timeframe, and those expectations are not compatible with their current stock price.

- - - Updated - - -

A few observations-
My notion of a 4000 cell Tesla came from comments Elon made regarding the ideal number of cells (4K) for performance, range and safety. He was talking about G3 at the time which leads me to believe (like others here) that we will see G3 models with almost identical range to the MS 60 and 85 models. I find the most useful information comes out of Tesla during casual technical Q&A sessions where core strategic business concepts leak through.

I didn't even realize Elon had mentioned the number 4,000. When I simulate the pack though, that's what I get as an approximate average number of cells. It wouldn't shock me if Tesla intended to just release a single model with 4,000 cells and a ~240 mile range though and call it a day, instead of having an entry level car with a 200 mile range and a better model with a 270-300 mile range.

Almost 75% of current sales are cars with the bigger 85kWh pack. Tesla might be smart to just go with a common pack size with a range substantially larger than the 200 mile number they have been discussing.

Thinking about it, the weighted average I have been using in my simulations probably does qualify as an "ideal" number from Tesla's point of view because it's essentially what the market has been shown to want (in aggregate) in terms of range, only scaled into a simulated GenIII pack.

 

[lolachampcar]

the only caveat I would have on G3 pack size(s) would be the need to do whatever is required to make the $35K x-Fed subsidy price point. They may not be able to do that with the "85" size pack whatever that actually turns out to be.

 

[CapitalistOppressor]

the only caveat I would have on G3 pack size(s) would be the need to do whatever is required to make the $35K x-Fed subsidy price point. They may not be able to do that with the "85" size pack whatever that actually turns out to be.

The cells would likely still cost ~$2.00-$2.50 each. So a total pack cost of $10-$12k, which is why I've been assuming that there would be two models.

If you go with just the number of cells to get ~200 miles of range the initial pack cost is much closer to $8-$9k, which is much more compatible with a $35k price point. I think that to be competitive and profitable, the total pack cost probably needs to be kept under 25% as it is with the Model S.

It seems easier to do that if you have two batteries like you do now, and is probably a more rational way to satisfy the market.