Long-Term Fundamentals of Tesla Motors (TSLA)

[ItsNotAboutTheMoney]

Is there anybody on this thread, who believes that Tesla needs to further increase range if it wants to replace the ICE?

Seems to me that many investors are sticking their head in the sand, when they want to believe that the current range is enough.

Replace? 100% replace or replace lots of ICEs?

100% replace, yes, but it's not a range issue per se. If you want to replace all ICEs, you have to:
- bring down cost of batteries (and other components)
- be able to meet all needs:
- small people-movers
- larger, long-distance people movers
- larger vehicles dealing with heavier loads and towing.
- people who really insist on driving for many hours non stop.

How do you get there? You have to increase the volumetric and gravimetric energy densities of the batteries. Also at very high volumes you will need faster charging methods to deal with congestion; plus if you want to take the taxi market you'll want faster charging to improve the economics.

If you improve densities of the batteries, you can have higher capacities in a car.
If you can have higher capacities, it also makes it easier to charge faster (in terms of mph, which is what matters).
If you make batteries cheap, people will be more able to pay for additional capacity _if they need it_.

(If they need it. Give me a Model S 60 and Superchargers just in the current plan, including Portsmouth/Kittery, Portland and Bangor and I'm covered thanks. That's over 13,000 miles per year.
Our "2nd" car certainly would need that much range. A solid 50 miles would be enough.)

But 100% replacement is _lots_ of vehicles. Tesla's isn't looking at anywhere near 100% replacement. Gen 3's target is around 500,000 sales, no more than global BMW 3 Series sales. Just in the USA _new_ _car_ sales (just cars, not "light trucks, which includes pick-ups, CUVs and SUVs) are at 7 million per year. Total US new _hybrid_ car (not plug-in) sales in 2013 were 495,685.

The global automotive market is absolutely huge. If you're trying to evaluate Tesla current range should not be a concern. They have a base spec that works: 200 miles _EPA_ (not NEDC) with fast DC charging capability. They're building the Supercharger network based on that model and Elon Musk has said clearly that that's the base target spec for Model 3. At Model S prices it's natural that people are paying for more range and more performance, but at Model 3 prices it'd be like the 3 Series where most sales are the base models, including a lot of 3NNd. People will still be able to pay for more range and the full-size Model S should be able to offer even more range than now.

 

[jhm]

Porc, you need to come up with better FUD than that. The constraint on replacing ICE is battery manufacuting capacity, not range. What is needed is bout 5000 GWh/yr capacity. The massive rollout of hundreds of Gigafactories will take decades. In the meantime, energy density will ever decade. So in twenty years, a pack the size and mass of MS 60 will suffice for 240 kWh and a range in excess of 800 miles. Moreover, without any breakthrough in charging, Tesla should still be able to provide a half charge in about twenty minutes, 400 miles range in 20 minutes! So in the time it takes to scale up production, the technology will be more than adequate to finish the job.

 

[abasile]

Is there anybody on this thread, who believes that Tesla needs to further increase range if it wants to replace the ICE?

Seems to me that many investors are sticking their head in the sand, when they want to believe that the current range is enough.

As others have stated, the current range is almost certainly enough, for now. The primary limiting factors are cost and battery production capacity.

That said, I agree that adding range will make the case for EVs even more compelling and will thus increase the pool of resources available to furthering EV development and infrastructure. Consider the performance of the P85D. How many would argue that achieving a 0-60 time of 3.2s is essential to EV adoption? Surely we could consider 4.4s (the prior P85 time) to be "good enough". However, achieving supercar acceleration helps to drive home the point that EVs are better, creates a halo effect, and maintains strong interest in the Tesla brand even as the long-awaited Model X is further delayed. This translates to a higher stock price (compared to what it could be) and more interest from would-be EV competitors.

Further, having more range would be convenient in plenty of use cases. Being able to do a full days' worth of driving, whether to grandmother's house and back or to a client site across the region, on one charge would be of value to many.

Personally, I live on a high mountain 1.5 hours' drive from downtown Los Angeles and drive into the city on occasion. Most likely, it would be pushing it to make the round trip without stopping at a Supercharger on my return. (I don't yet own a Tesla, but from LEAF experience I know that it's best not to descend a mountain with a fully charged EV and of course extra energy is needed on the climb.) A 15 minute stop in Rancho Cucamonga would likely be enough, but what if I'm in a hurry, there's a lot of traffic around this suburban Supercharger site, and there's a wait to charge? Or, what about folks in areas that aren't so well served by Superchargers?

Certainly there are costs (money, weight, and efficiency) associated with having more battery capacity, but it is inarguable that more range has value. As batteries become cheaper and more energy dense, more and more people will want to maximize range.

 

[jhm]

I certainly would like to see Tesla offer higher capacity battery options. In fact, I expect that a 110 or 120 will be offered when the Model X comes out. Anyone serious about towing will want it. But the basic constraint in the short run is the supply of cells. Tesla can make twice as many 60kWh cars as 120 kWh cars with the same supply of cells. So in the short run you've got to consider the tradeoff of more unit sales for higher ASP.

 

[Johan]

I certainly would like to see Tesla offer higher capacity battery options. In fact, I expect that a 110 or 120 will be offered when the Model X comes out. Anyone serious about towing will want it. But the basic constraint in the short run is the supply of cells. Tesla can make twice as many 60kWh cars as 120 kWh cars with the same supply of cells. So in the short run you've got to consider the tradeoff of more unit sales for higher ASP.

Well I bet the total gross margin is better for a car with high ASP than two with low at the equivalent value.

 

[jhm]

Well I bet the total gross margin is better for a car with high ASP than two with low at the equivalent value.

That would depend on how Tesla chooses to price them. I would argue they should be priced so that GM/kWh is the same for each version and across models. In a battery constrained environment, this would leave Tesla indifferent to the mix of versions and models demanded.

 

[Johan]

That would depend on how Tesla chooses to price them. I would argue they should be priced so that GM/kWh is the same for each version and across models. In a battery constrained environment, this would leave Tesla indifferent to the mix of versions and models demanded.

Perhaps they should, but they have said in quarterly calls several times that highly optioned cars have higher gross margin. The big battery option is the most expensive option. One way to see it is that they are giving the customer the choice to get a large battery but since they are battery constrained it's right of them to "tax" the customer for this (high margin on the battery upgrade).

 

[JRP3]

In fact, I expect that a 110 or 120 will be offered when the Model X comes out.

I'm not so sure about that. 110 would need a 30% improvement in cell energy density over the 85, ready to go in 2015. (Assuming the X will use the same pack architecture as the S.) Maybe at some point but I'd be quite surprised to see it available at launch.

 

[vgrinshpun]

I'm not so sure about that. 110 would need a 30% improvement in cell energy density over the 85, ready to go in 2015. (Assuming the X will use the same pack architecture as the S.) Maybe at some point but I'd be quite surprised to see it available at launch.

I am also not sure that we will see 110 or 120 kWh battery at the Model X launch. I do believe, though, that Model X will be offered with about 10% larger battery - 93 or 94 kWh.

The prediction about 10% larger battery comes from the Credit Suisse August report. Given that they predicted next generation drivetrain (which is now/going to be used in D variants of Model S), their prediction now carries little more weight than a casual speculation. From the "Not a Fair Fight" initiation report dated Aug 13, 2014 (PT $320):

Margin improvement: We expect margin to be a bit choppy in 1H15 due to the new Body Shop installation and Model X launch. But in 2H15, marginsshould be very strong – potentially approaching double-digit EBIT margin, due to Operating Leverage (i.e. much higher volume to spread fixed costs), more efficient production line (the new assembly line / body shop should be much more efficient due to lessons learned from initial production), and lower powertrain costs (Model X will get an improved Drive Unit and a Battery that is 10%+ more energetic per cell – these will be back-filled to Model S).

 

[pGo]

What about next gen Battery which holds more kW/weight and Tesla still goes with 85kw for Model X? The reduced weight will provide additional efficiency.

Tesla does not have to charge bigger battery premium.

 

[pGo]

Its worth mentioning here that Tesla has super devoted customers, an asset others will envy for years to have. A recent example is some hints from P85D thread. A guy who is awaiting delivery of his car sent a missile (a toy from amazon) to factory. A whole new thread is discussing how to appreciate the efforts of the factory workers and may be send them pizza or thank you notes. Unreal.

 

[vgrinshpun]

What about next gen Battery which holds more kW/weight and Tesla still goes with 85kw for Model X? The reduced weight will provide additional efficiency.

Tesla does not have to charge bigger battery premium.

I believe that the larger battery will be offered as an option. The reason that Credit Suisse listed this under the "Margin Improvement" category is because the assumption is that due to technology advancement the same cell (18650) could hold approximately 10% more energy, while weighting approximately the same and costing approximately the same.

So with the new cell Tesla could offer 85kWh option, with the battery priced at the same level as previous generation of 85kWh battery. This will yield higher gross margin because new generation 85kWh battery will have 10% less cells at the same cost per cell to Tesla. Since each cell will weigh less the total weight of the vehicle will go down, but efficiency would be mostly improved for a city cycle. Weight has much less impact on a steady highway driving (almost negligible).

They could also offer the option of the larger battery, say 94kWh, at an added price. Once again, since cost per cell presumably stays approximately the same, Tesla would be able to increase their margin

 

[MartinAustin]

1. As of 2010 there were more than one billion motor vehicles in use in the world excluding off-road vehicles and heavy construction equipment. Global vehicle ownership per capita in 2010 was 148 vehicles in operation per 1000 people.
   

2. Motor vehicle - Wikipedia, the free encyclopedia

   en.wikipedia.org/wiki/Motor_vehicle
   
   

Tesla produces 50,000 cars at present (approximately), so even if people were lining up out the door to buy them (which, uh, they are), Tesla couldn't replace all the oil-burning vehicles in the world's fleet at that rate, for twenty thousand years. It would be Q4 of the year 22014.

Doesn't matter one bit what the range is. Manufacturing capacity is the key thing to modify.

 

[jhm]

Tesla Model S drivers put way more miles on their cars than Nissan Leaf owners do (we think)

Both Tesla and Nissan have racked up more than a billion electric kilometers. What interesting is that Model S owners are putting alot more mileage on their cars than Leaf owners. So while the Model S is more expensive, their owners are getting more out of them.

 

[abasile]

Tesla Model S drivers put way more miles on their cars than Nissan Leaf owners do (we think)

Both Tesla and Nissan have racked up more than a billion electric kilometers. What interesting is that Model S owners are putting alot more mileage on their cars than Leaf owners. So while the Model S is more expensive, their owners are getting more out of them.

No surprise here. With its declining battery capacity (lousy, heat sensitive first generation chemistry) and limited charging infrastructure in our area, our 2011 LEAF is really only good for local driving, within a 20-25 mile radius. When it was new, we regularly took it on longer drives, hypermiled to stretch the charge, and waited hours for charging, but now we only do that on rare occasions. Still, as an EV, it remains (for me) more enjoyable to drive than any ICE.

Given that I have no interest in ever buying another vehicle with an ICE, Tesla is the only manufacturer building cars with sufficient utility for all of the driving currently handled by our Prius. At the same time, my family could use a roomier vehicle with more seating and AWD. That leaves the Model X as the only real choice. (Yes, one could compromise with the third row jump seats in the Model S, but why compromise in such a large purchase?)

 

[ItsNotAboutTheMoney]

Tesla Model S drivers put way more miles on their cars than Nissan Leaf owners do (we think)

Both Tesla and Nissan have racked up more than a billion electric kilometers. What interesting is that Model S owners are putting alot more mileage on their cars than Leaf owners. So while the Model S is more expensive, their owners are getting more out of them.

Absolutely not surprising. Volt drivers drive more electric miles than Nissan Leaf owners. If you buy a short range vehicle, it stands to reason that you'd not be driving long distances.

 

[MartinAustin]

Absolutely not surprising. Volt drivers drive more electric miles than Nissan Leaf owners. If you buy a short range vehicle, it stands to reason that you'd not be driving long distances.

Not only that... it's a short range vehicle with slow charging.

If the Leaf were a short-range vehicle with fast charging, at least they could get back on the road again very quickly, and rack up more miles... but they can't.

 

[abasile]

If the Leaf were a short-range vehicle with fast charging, at least they could get back on the road again very quickly, and rack up more miles... but they can't.

This isn't entirely true. With CHAdeMO quick chargers, a LEAF can be charged relatively quickly. The issue here is the quality of the charging network. With CHAdeMO (as well as COMBO-DC), there is typically no site redundancy, availability is often not 24/7, prices are typically greater than gasoline, and station locations are often not helpful for inter-city travel.

By building out an international, reliable, highly available, and well placed network of "free" fast charging stations, Tesla is constructing a wide moat that is under-appreciated by many. Others could potentially duplicate the Supercharger network, but it would take a lot of time and effort.

 

[ItsNotAboutTheMoney]

What about next gen Battery which holds more kW/weight and Tesla still goes with 85kw for Model X? The reduced weight will provide additional efficiency.

Tesla does not have to charge bigger battery premium.

I don't know that they would be aband le to do that. I think a lot would depend on Panasonic. Tesla has a contract with Panasonic that's going to run for several years. Unless capacity improvements can be incorporated into existing manufacturing lines, I think Tesla would stick with the existing cells for the 85kWh model to work towards fufilling the contract using "older" capacity, and then offer the expanded capacity with new cells at a premium that'd help them and Panasonic lower future battery costs.

 

[adiggs]

Not only that... it's a short range vehicle with slow charging.

If the Leaf were a short-range vehicle with fast charging, at least they could get back on the road again very quickly, and rack up more miles... but they can't.

If you live in the Pacific Northwest, then the Leaf IS a short-range vehicle with fast charging. There is an extensive network of DC chargers that the Leaf and a few others are able to use in this corner of the country. I've personally experienced how well it works when driving from the Canadian border down to the OR/CA border 2 years ago in the BC2BC rally. The 2 Leafs and the iMiev were arguably covering ground faster than me in the Roadster.

One particularly poignant window of time had me plugged in at one of the slow West Coast Electric Highway chargers in Centralia, WA, while both Leafs and the iMiev in the rally charged and left AND another Leaf that wasn't in the rally charged and left using the fast charger, before I finally got to move my car across the street to the Roadster charger (yes Six - I still remember that!) and then finish up. (The WCEH standard setup is a 32A J1772 charger and a DC fast charger in 2 parking spots next to each other).


The point being that we have evidence that it's NOT just the supercharger network that expands the usable range of electric cars. Any and every adequately dense DC / fast charging network will make any compatible vehicle more capable.