Long-Term Fundamentals of Tesla Motors (TSLA)

[SuryaDham]

Where does one find 4+ year options in the US?

Paul is talking about warrants. I think he's talking about this one:
Société Générale Effekten GmbH Call 16.12.22 TeslaMot 330 - SG73U1 - Optionsscheine | comdirect.de
With a good broker you can buy it, even in the US, just plug SG73U1 into your trading plattform.
BUT keep in mind, it is a warrant! You bear the full issuer risk, a risk that I wouldn't want to bear over several years...

 

[Pete Patel]

Some people in the market are traders, and others are investors. The difference? Time horizon.

Please use this thread to discuss the long-term fundamentals of Tesla Motors, from the POV of an investor.

 

[Pete Patel]

Some people in the market are traders, and others are investors. The difference? Time horizon.

Please use this thread to discuss the long-term fundamentals of Tesla Motors, from the POV of an investor.

If someone can help me understand the POV of those who do not wish Tesla to merge with Solar City, it would be refreshing. First we have to ignore the short seller's POV. Those shorts are the type who would love a fake Picasso if they thought it was real at first. But help me understand why buying a solar company with a new factory is not a good idea. Is the price too high? or what is it? I really don't get those lawsuits either. It seems the legal action is prompted by short positions but it also serves as the basis of a counter claim if the merger is delayed and that delay causes lost profit potential. No?

 

[GoTslaGo]

If someone can help me understand the POV of those who do not wish Tesla to merge with Solar City, it would be refreshing. First we have to ignore the short seller's POV. Those shorts are the type who would love a fake Picasso if they thought it was real at first. But help me understand why buying a solar company with a new factory is not a good idea. Is the price too high? or what is it? I really don't get those lawsuits either. It seems the legal action is prompted by short positions but it also serves as the basis of a counter claim if the merger is delayed and that delay causes lost profit potential. No?

I will point you to the short term thread where there is/was a very thoughtful discussion regarding the merger. I would suggest you do a forum search using member DaveT to help find the relevant posts. Just last week.

 

[MitchJi]

I will point you to the short term thread where there is/was a very thoughtful discussion regarding the merger. I would suggest you do a forum search using member DaveT to help find the relevant posts. Just last week.

Or this particular post:
Short-Term TSLA Price Movements - 2016

The short answers:...

 

[aubreymcfato]

I guess my question is more relevant here (I hope):
has anyone a position in LIT, the ETF for Lithium?

I was wondering if it's a good low-risk investment, given that we are all long Tesla (and the general EV market)
in the long term.

 

[wdolson]

The Li-ion batteries Tesla uses need 6X more cobalt than lithium and i believe about 2-3X more nickel. It's cobalt that is the toughest commodity to get. Trying to corner the lithium market is only slightly easier than cornering the nitrogen market (Earth's atmosphere is 80% nitrogen). I think a lot of people are going to lose their shirt investing in lithium thinking it's going to go up and stay up in value.

There is a bit of a bottleneck in lithium mining right now, but that will be solved in a couple of years. It's fairly common and fairly easy to mine, it's just demand hasn't been very high until very recently and the world's mining capacity hasn't spun up.

Cobalt is about as abundant as lithium in the Earth's crust, but it's not as easy to refine and rarely is available in concentrated ores. Just about half then entire world's supply comes form the Democratic Republic of the Congo, which isn't the most stable country in the world. Among the top 10 producers in the world, only two are close proximity to the US, Canada and Cuba. Canada's production is declining, but Cuba has the most growth potential in the world as its mining activity has been low for most of the last 50 years.

 

[Bobfitz1]

The Li-ion batteries Tesla uses need 6X more cobalt than lithium and i believe about 2-3X more nickel. It's cobalt that is the toughest commodity to get. Trying to corner the lithium market is only slightly easier than cornering the nitrogen market (Earth's atmosphere is 80% nitrogen). I think a lot of people are going to lose their shirt investing in lithium thinking it's going to go up and stay up in value.
There is a bit of a bottleneck in lithium mining right now, but that will be solved in a couple of years. It's fairly common and fairly easy to mine, it's just demand hasn't been very high until very recently and the world's mining capacity hasn't spun up.

Thanks for the info about cobalt and mining wdolson! I haven't yet done any research on cobalt, but I will delve into it soon for reasons you point out.

I have done a good bit of research and thinking about lithium and how supply ramp up will lag exponentially rising demand, driven by Tesla and other major EV manufacturers in or entering the market. Based on that I have invested in Pure Energy Minerals.
Lithium is fairly common as a % element in earth's crust, however the relevant fact is that there are a very limited number of places where it's found in sufficient concentration to make mining or Li production from Li brines economically possible. Australia has large reserves of hard rock pegmatites containing refinable lithium. Currently they ship that to China for processing and since China is a major consumer of lithium and it's demand is growing fast, it will be some years before that supply could ramp to meet some of U.S. demand growth.
The lithium brine operations in 2 or 3 locations in South America are the other major supplier of Li. They all have plans to expand and improve on their slow and inefficient pond concentration methods. It looks as if they will also take some years to ramp up supply to multiple times what they currently produce. That leaves Clayton Valley in Nevada. It's proven reserves of lithium in subsurface Li brine is one of the largest in the world. Pumping brine is far easier than mining pegmatites. Processing technology is advancing.

If Tesla and others execute their battery production plans and ramp up nearly as fast as planned, it will be quite a few years before Li supply catches up to demand and drives price of Li down from their historically high current price. Therefore there appears to be a good window for new Clayton Valley based suppliers to build commercial sized Li operations and profit from the current and future high lithium market prices.

 

[JRP3]

Some discussion of lithium and other elements here as well The Resource Angle

 

[wdolson]

I haven't heard anything lately about the lithium find in Wyoming, but there was talk of it being one of the largest finds in the world.

 

[Bobfitz1]

I haven't heard anything lately about the lithium find in Wyoming, but there was talk of it being one of the largest finds in the world.

Wyoming find sounds like nothing serious, unless things have evolved alot since this 2014 newspaper article:
High hopes of Wyoming lithium deposit stalled

Current world production of cobalt is 3 x lithium. 100,000 metric tonnes vs 33,000 tonnes.
Cobalt price per tonne was $32,000 USD per tonne in March 2012, and is currently at $27,000 USD.
Lithium price in 2012 (in inflation adjusted dollars) was $4,456. per metric tonne. Current price is $7,475 per tonne.

A good intro to lithium supply vs demand is this Jan. 2016 article from the Economist.
http://www.economist.com/news/busin...e-batteries-companies-are-scrambling-supplies

 

[wdolson]

I believe cobalt has more industrial uses than lithium, which is why production is so much higher, but a boom in Li-ion battery production will put a strain on cobalt supplies. The cost of cobalt is much more per tonne too, though cobalt is significantly denser than lithium.

Cobalt is used in a number of Li-ion chemistries, but it isn't used in all of them. The holy grail everyone is trying to figure out right now is lithium-air batteries. The problem is making an anode out of a gas is kind of a difficult engineering problem. Theoretically the energy density could be much greater than what we have today.

Tesla uses Lithium-Nickel-Cobalt-Aluminum (NCA) specifically. It has the highest energy density of any of the chemistries, though it can be a fire hazard if not managed correctly. Fortunately Tesla put a lot of thought into that problem from the start.

 

[Bobfitz1]

Cobalt is used in a number of Li-ion chemistries, but it isn't used in all of them. The holy grail everyone is trying to figure out right now is lithium-air batteries. The problem is making an anode out of a gas is kind of a difficult engineering problem. Theoretically the energy density could be much greater than what we have today.

Lithium-air batteries have great potential. Could eventually store 10 x the energy as Tesla's best at this stage of refinement.
One thing we've learned over past five years is just how long a road it is from good results in a lab to disruption of current Li batteries.
If a big name scientist unveiled a new/better way (like aluminum air), press would jump on the news.

This June 2016 article in Bloomberg Business Week is great. It cover's every aspect of metals needed for Li ion cells we've been discussing on forum. Highlights:

1. Macquarie Research predicts a global lithium shortage of 46,000 tons, equal to 16% of total demand by 2021.
2. Elon Musk has said that the main determinant of cell cost is the price of nickel in the form they need. Luckily, the price of
nickel has fallen more than 50% this year due to some producing countries boosting supplies. It appears the world has much reserve mining and processing capacity.
3. Tesla doesn't use much cobalt in its batteries, and JB has said they are trying to get rid of what they do use, by substituting nickel in its place.
Elon Musk Is Squaring Off Against China for the Future of Tesla

 

[wdolson]

Lithium-air batteries have great potential. Could eventually store 10 x the energy as Tesla's best at this stage of refinement.
One thing we've learned over past five years is just how long a road it is from good results in a lab to disruption of current Li batteries.
If a big name scientist unveiled a new/better way (like aluminum air), press would jump on the news.

This June 2016 article in Bloomberg Business Week is great. It cover's every aspect of metals needed for Li ion cells we've been discussing on forum. Highlights:

1. Macquarie Research predicts a global lithium shortage of 46,000 tons, equal to 16% of total demand by 2021.
2. Elon Musk has said that the main determinant of cell cost is the price of nickel in the form they need. Luckily, the price of
nickel has fallen more than 50% this year due to some producing countries boosting supplies. It appears the world has much reserve mining and processing capacity.
3. Tesla doesn't use much cobalt in its batteries, and JB has said they are trying to get rid of what they do use, by substituting nickel in its place.
Elon Musk Is Squaring Off Against China for the Future of Tesla

They may have already reduced the cobalt in the batteries. I've read some older material that said the batteries were 6% cobalt and 2% lithium. I forget how much nickel the original cells used.

 

[neroden]

3. Tesla doesn't use much cobalt in its batteries, and JB has said they are trying to get rid of what they do use, by substituting nickel in its place.
Elon Musk Is Squaring Off Against China for the Future of Tesla

Very useful information. Almost all nickel mines generate some cobalt. If they can get the cobalt down to a level where the cobalt/nickel ratio is less than the ratio coming out of the nickel mines, they'll be in good shape for cobalt sourcing long-term.

 

[kenliles]

deleted to avoid inference that Elon would be interested somehow in merging Tesla and SpaceX;
in hell or heaven
I was hoping the parallels would be self evident... apparently not

 

[neroden]

Can the mods move that to another thread? There's no way in hell Musk is merging his space travel program with Tesla (unless he figures out how to make electric spacecraft) so it has no impact on the long-term fundamentals of Tesla. SpaceX thread, maybe?

 

[MitchJi]

Very useful information. Almost all nickel mines generate some cobalt. If they can get the cobalt down to a level where the cobalt/nickel ratio is less than the ratio coming out of the nickel mines, they'll be in good shape for cobalt sourcing long-term.

That depends on the overall demand for cobalt. For example if all nickel mines produced some gold the price of gold would not depend on the ratio of gold to nickel production.

 

[neroden]

That depends on the overall demand for cobalt. For example if all nickel mines produced some gold the price of gold would not depend on the ratio of gold to nickel production.

Obviously, but there are some separate cobalt mines. the main demand is for superalloys which is a fairly small area. (Though the stupid nuclear power plants waste lots of cobalt too, IIRC.)

 

[kenliles]

Here's the

Can the mods move that to another thread? There's no way in hell Musk is merging his space travel program with Tesla (unless he figures out how to make electric spacecraft) so it has no impact on the long-term fundamentals of Tesla. SpaceX thread, maybe?

My apologies if the post of the SpaceX goal expressed by Elon today implied merging his space travel program with Tesla. I meant to convey a wholly different picture.

I excercise a different investment philosophy for Tesla (as lead by Musk) -
Was very successful with APPL assigning dominant value to what Jobs was doing at NeXT and then Pixar concurrent with Apple; as the visionary/dynamic cross to both at the same time (ala SpaceX/Tesla)-
It provided long-long hold investment philosophy that survived many market doubters and events (including his death) - that paid off multi-fold. But required long term fundamentals to be inexorably defined by his visionary rather than the 'company's' more narrowly defined immediate mission.
[i.e. Allowed confidence in predictions of the various product integrations of media player, his use of NeXT Mach OS to deliver Cloud services, iTunes to deliver media content, etc.]

I see Tesla as a parallel investment thesis that ('abnormally') is defined by what Musk envisions as the definition of it's long term fundamentals;
What he expects of himself and those around him.

The SpaceX fueling stations across the Solar System described (opposing the current view of a mission to Mars) instruct my Tesla investment, assigning long term fundamental confidence in Tesla charging network parallels (and some other ideas I won't indulge in this post).

I think, rightly or wrongly, his primary passion is SpaceX and my failure is the inability (given my investment thesis) to separate that from Tesla long term fundamentals; given the common architect of product-technology-vision-implementation-strategy.

I won't be able to change this investment thesis of course, but will endeavor to keep my posts less cross correlated