7) A competitor commercializes a next-generation battery technology superior to Tesla's
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Long-Term Fundamentals of Tesla Motors (TSLA)
- Thread starter Robert.Boston
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7) A competitor commercializes a next-generation battery technology superior to Tesla's
EVNow
Well-Known Member
You disregarded the most likely scenario - there are other chemistries that catch up or overtake Li-Cobalt. They are safer too - so you don't need cell level guarantees against thermal runaway. Once battery becomes a commodity - then traditional car making skills become important. That is where traditional OEMs excel in.
MartinAustin
Active Member
Can't help thinking that Tesla are on top of that situation. Elon has said a few times under questioning that the current battery is the best combination of size and performance and he expects that to continue for a while; you can't make those sorts of comments without constantly researching whatever is out there.
Sure, if by some slim chance GM finds the next state-of-the-art battery technology all by itself and Tesla can't compete, I guess that'll become an issue for stockholders. But Elon will be happy, because all he wants is to eliminate gas-burning cars. As long as that happens, he doesn't care if Tesla is at the top of the pile or not. Not really the best news for investors :|
Sure, if by some slim chance GM finds the next state-of-the-art battery technology all by itself and Tesla can't compete, I guess that'll become an issue for stockholders. But Elon will be happy, because all he wants is to eliminate gas-burning cars. As long as that happens, he doesn't care if Tesla is at the top of the pile or not. Not really the best news for investors :|
Elon himself said he thought it would be about 15% at the shareholder's meeting. The thing I don't get is if someone thinks they will sell 100,000 Model S/X how do they pin the Gen III number at 150,000? I mean a $35,000 car is half the price. It is way more affordable. Also, 25% gross margin is the target for the end of this year. They didn't say they would stop there. I would think they could get to 30% gross margin. Still, there are plenty of risks but for me I want my money in Tesla because a company like Tesla makes the future brighter.
Another car company is unlikely to make an advance in battery tech. Such an innovation is likely to come from a startup.
Any such company would want to pitch Tesla, as it is the largest consumer of batteries.
As long as they remain open to new possibilities, Tesla will know about advances first.
JRP3
Hyperactive Member
Here's the potential problem. Tesla is closely involved with Panasonic and the 18650 format, and Tesla wants increased production. To get that Tesla may have to commit to X number of cells for X number of years. Meanwhile lets say the Envia chemistry works out for GM, who isn't sharing, suddenly Tesla is stuck with a less desirable battery chemistry and format. Not only is their advantage gone but now they are at a disadvantage.
Very true. However the established cell manufactures such as Panasonic and Samsung will be more likely to actually bring new technologies to high volume markets. Startups can innovate and invent, but do not have manufacturing expertise, which can be the most important skill for a cell manufacturer's survival.
GSP
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JB Straubel has stated that the first two things that Tesla asks from potential cell suppliers are their (10- year?) technology roadmap and cost roadmap. That way they know if worthwhile improvements are in the pipeline before committing to a long term contract. This is also useful to know before committing to buying Gen 3 factory tooling, which will depend on lower cost and higher volume cells.
GSP
JRP3
Hyperactive Member
Problem is a tech breakthrough can jump over planned road maps. As for production, look at GM or Nissan. If something like Envia works out then GM can have LGChem do the production, and similarly Nissan has a lot of battery production capacity in house. Both LGChem and Nissan battery production is under utilized at this time. I do hope Panasonic has something special waiting in the wings because the 4ah cell we know about is only a volumetric improvement and not gravimetric, which is more important.
I just hope that Elon doesn't turn out to be Tesla's Achilles heal in the end. I am worried that he is using Tesla to force other companies to go electric, with no ambitions of beating them to a pulp and become the largest manufacturer in the world. We, as investors, need Elon to be a Capitalist and find ways to make Tesla (and himself) as rich as possible. For example, by the time other car companies catch up, Tesla will have Superchargers all over the world. I want him to charge Ford customers the cost of a tank of gas to fill up their EVs while on road trips. Hopefully he sees the money making opportunity of being the next Exon Mobile as much as he sees the possibility of making a difference as a car manufacturer.
EVNow
Well-Known Member
Exactly. A 200 mile $35k car will sell a lot more than a $75k car. Infact, I think the sales of S/X will go down once the Gen 3 comes on board. Even many of the current S owners would have actually bought a Gen 3 if it was available.
Margin on Gen 3 would depend a lot on their cost & execution. Both are difficult to estimate now.
A good question to Elon would be - come 2017, if you can't sell Gen 3 for $35k with 15% margin, would you still sell for $35k with less margin or would you sell for higher @ 15% margin.
Another thing that would impact Gen 3 sales is what the competitors are going to do. One approach, apparently preferred by many here, is to assume competition will be completely absent. A nice feeling - but not prudent (or even realistic). Leaf is not going to have the same range in 2017 as it did in 2011. What happens if Nissan sells $25k, 150 mile range Leaf ? Will that impact a $35k 200 mile range Gen 3 ? If so, how much ?
The largest selling model in the world is Ford Focus. It sold about 1 Million last year. Prius sold about 400k worldwide. Elon would be very happy if they can come close to matching Prius.
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I know that is the wet dream of a lot of folks - but the chances are extremely low. Even with 500k sales, Tesla would still be a small player and Fords of the world have no reason to capitulate. They also have a lot of lobby power - they will get uncle Sam to foot the bill for a country-wide charging network (to an extent that has already happened in some parts of the country). In other parts of the world where people are very welcoming of governments taking active role in economic life, there will be very good networks setup in the public domain.
One more thing - Tesla has a particularly nasty problem with "destination" charging. They can't easily put up charging stations in expensive urban areas (unlike other OEMs who have dealers in urban areas).
As much as I like Tesla's innovation, I think marketing, segmenting the consumer space, is something they will consider traditionally.
Nissan is a good brand, but not premium. Audi, Mercedes, Volvo, BMW - these are each other's competitors. The Leaf is not a Gen3 competitor, just like no Nissan model is a BMW competitor.
I think BMW will be Tesla's main competitor for the time being. They are the No.1 premium car brand in the world (AFAIK), and they have demonstarted they are willing to evolve towards hybrids and EVs (even if the i3 is way inferior to Tesla's technology). If anyone, they can be a threat, not Nissan. The i3 is the electric 3 series. My biggest worry about such a late Gen3 intorduction is that the i3 will be at its 2nd if not 3rd generation by 2017/18.
As for becoming the next Ford, VW or GM: even if Tesla could make a - 15-25k EV, i'd prefer them creating a new brand for that. Releasing much cheaper, less premium cars would damage the Tesla brand in the premium segment. Now don't get me wrong, I'd love them to do a 15k car, and i would also expect it to be of good quality, but they would need a more mainstream brand for that. Expecting Gen3 to sell like a Focus would be unrealistic. But it should sell like an A3, a C Class or a BMW 3 series.
Nissan is a good brand, but not premium. Audi, Mercedes, Volvo, BMW - these are each other's competitors. The Leaf is not a Gen3 competitor, just like no Nissan model is a BMW competitor.
I think BMW will be Tesla's main competitor for the time being. They are the No.1 premium car brand in the world (AFAIK), and they have demonstarted they are willing to evolve towards hybrids and EVs (even if the i3 is way inferior to Tesla's technology). If anyone, they can be a threat, not Nissan. The i3 is the electric 3 series. My biggest worry about such a late Gen3 intorduction is that the i3 will be at its 2nd if not 3rd generation by 2017/18.
As for becoming the next Ford, VW or GM: even if Tesla could make a - 15-25k EV, i'd prefer them creating a new brand for that. Releasing much cheaper, less premium cars would damage the Tesla brand in the premium segment. Now don't get me wrong, I'd love them to do a 15k car, and i would also expect it to be of good quality, but they would need a more mainstream brand for that. Expecting Gen3 to sell like a Focus would be unrealistic. But it should sell like an A3, a C Class or a BMW 3 series.
Agreed, already there was a dust-up over Elon's laughing when the BMW i3 was mentioned during Quarterly Earnings call... now, some quasi "fighting words" from BMW when asked about Tesla vs. the upcoming BMW i8:
BMW Sees No Rival in Tesla as It Readies Plug-in i8 - Bloomberg
Has anyone done some detailed back of a napkin analysis of why Tesla needs 3 to 3.5 years to come out with what will substantially be a down sized Model S? While I guess we can speculate they need to wait that long for the more advanced batteries they expect will allow Gen III to come in at 35K, putting that aside, does a company with all the advanced design tech and now experience with developing 3 EVs, need 3+ years?
I didn't really see them as fighting words. He said the i8 will be in a different market than the Model S and won't compete with it. I agree.
The average product development cycle of a new car (the Gen 3 still considered a new car- tooling for new body, new motor, new wiring, other TBD additions) is 4 to 5 years, considering they have devoted resources and all technologies in hand to start with. Tesla is still a small establishment. I don't believe they have fully dedicated resources working on the Gen 3 as yet as engineers are still busy with the Model S and Model X. Further the battery technology for Gen 3 may still be different than the S, however I don't know this for a fact. Finally, but not least, they are working with Panasonic to reduce the price of the Gen 3 battery pack, which will take time for Panasonic to evaluate and finalize.
Elon has said that only 10% of "executive time" is currently spent on Gen3. With the cash raise, they have enough to fund development of the X, and then profits from the S and X will be used to develop Gen3. If Gen 3 was their 100% priority, I'm guessing they could get it done in less than a year. I think they are focusing on making Gen2 efficient and profitable and building infrastructure (galleries, service centers, superchargers, brand awareness, etc.) as they wait for batteries to drop in price.
marvinat0rz
Member
I'm pretty sure it is a combination of
1) Wait for the natural, annual reduction in battery cell cost to make a cheap battery feasible (this is the big one)
2) Gradually gain experience and build in-house expertise for large-scale manufacturing
3) Offset the development cost of the G3 vehicle by letting high-end vehicles pay for component development
4) Build a brand as a premium carmaker, which is probably the cheapest and most reliable way to make people buy your stuff
5) Build enough capital to pay for the development and scaling in manufacturing
Right now, a compelling electric vehicle is just borderline technologically and economically feasible. The Model S is the demonstration of this. When battery costs have fallen enough in 3-4 years to make a compelling low-cost electric vehicle possible, Tesla will be the only company in the right position to capitalize on it. This is a textbook example of the entrepeneural lesson "often, someting is a bad idea until suddenly it isn't". The "something" in this case is electric vehicles. When it becomes obvious that "suddenly" has hit, it will be too late to go for the first-mover advantage. This effect can be seen in every major technology startup during the last 20 years.
A lot of people, myself included, are shocked how popular and compelling the Model S really turned out to be. And I agree with you that at this point, I wish that G3 development could be a couple of years faster. Although Tesla has the first-mover advantage, others have started the race. I think most the points on my list are holding Tesla back from executing the G3 vision sooner. Crucially, there isn't enough capital, there isn't enough expertise/staff and the perfection of component development hasn't hit its peak yet. But batteries are still too expensive, and this is an external factor which is holding everyone back from achieving a compelling low-cost EV. It is also why the big carmakers are cancelling EV programs left and right. It just hasn't sunk in that electric will be the superior, sensible way of doing things in a couple of years. We have front-row seats to a massive paradigm shift in automobiles.
Also I think we are staring ourselves blind at the Gen3 vehicle. If Tesla is indeed as successful with G3 as the current stock price expects, we won't be talking about 200,000 vehicles/year in 20 years. It'll be more than that if Tesla maintains the technological lead and management does its job properly. In that regard I think that the current $150/share is about right, but it is a price which will be surrounded by huge volatility. This is a 10-year race.
1) Wait for the natural, annual reduction in battery cell cost to make a cheap battery feasible (this is the big one)
2) Gradually gain experience and build in-house expertise for large-scale manufacturing
3) Offset the development cost of the G3 vehicle by letting high-end vehicles pay for component development
4) Build a brand as a premium carmaker, which is probably the cheapest and most reliable way to make people buy your stuff
5) Build enough capital to pay for the development and scaling in manufacturing
Right now, a compelling electric vehicle is just borderline technologically and economically feasible. The Model S is the demonstration of this. When battery costs have fallen enough in 3-4 years to make a compelling low-cost electric vehicle possible, Tesla will be the only company in the right position to capitalize on it. This is a textbook example of the entrepeneural lesson "often, someting is a bad idea until suddenly it isn't". The "something" in this case is electric vehicles. When it becomes obvious that "suddenly" has hit, it will be too late to go for the first-mover advantage. This effect can be seen in every major technology startup during the last 20 years.
A lot of people, myself included, are shocked how popular and compelling the Model S really turned out to be. And I agree with you that at this point, I wish that G3 development could be a couple of years faster. Although Tesla has the first-mover advantage, others have started the race. I think most the points on my list are holding Tesla back from executing the G3 vision sooner. Crucially, there isn't enough capital, there isn't enough expertise/staff and the perfection of component development hasn't hit its peak yet. But batteries are still too expensive, and this is an external factor which is holding everyone back from achieving a compelling low-cost EV. It is also why the big carmakers are cancelling EV programs left and right. It just hasn't sunk in that electric will be the superior, sensible way of doing things in a couple of years. We have front-row seats to a massive paradigm shift in automobiles.
Also I think we are staring ourselves blind at the Gen3 vehicle. If Tesla is indeed as successful with G3 as the current stock price expects, we won't be talking about 200,000 vehicles/year in 20 years. It'll be more than that if Tesla maintains the technological lead and management does its job properly. In that regard I think that the current $150/share is about right, but it is a price which will be surrounded by huge volatility. This is a 10-year race.
I invested in TSLA, and I stretched so much to buy a Model S, precisely because Elon is not the type of capitalist you describe.
But they don't need charging stations (assuming you mean Superchargers) at destinations. Anything north of a 110V will do for destination charging, and for long term airport parking, even 110V is fine.
EVNow
Well-Known Member
Never heard of Infiniti ? I guess Infiniti is not that big in Europe ...
Not that it matters. If Nissan has an EV with comparable range for less than Gen 3 - it would be a big threat to Tesla as it would be a substitution product.
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Not really. When I go on a day trip to Portland or Vancouver, BC - I need quick destination charge to be able to come back the same day.
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