Long-Term Fundamentals of Tesla Motors (TSLA)

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I think Elon's original goal of a sub $50k family size sedan is still on target (inflation adjusted). In other words I think he was aiming for the BMW 5-series and Mercedes E-class, not the 7 series and the S-class. The question is - which is the way forward?

Even today the 528i starts at $49,500 with the M5 starting at $92,900 (and going up of course with options).

 

[SteveG3]

Reducing prices is a bridge too far IMO, particularly when comparably priced Teslas are not comparably equipped.

Rob I hear your opinion. As you know I see it a little differently, but mine is just an opinion as well.

I do think as they lower their production costs, they'll more increase battery size and vehicle range to increase value for the customer than lower prices. However, I think this is because they want to produce cars with more range, not because they think lowering prices would be "a bridge too far." That's why I think it's possible as they reset what battery sizes they offer there may be instances where some battery sizes go up while one of the battery sizes carries over unchanged but offered at a lower price. That was my hypothetical of going from 60 kWh to 70 kWh holding the price, adding a 100 kWh, and keeping the 85 kWh available at a lower price. In that scenario it would only make sense to drop the price on the 85 kWh a little, to keep it's relative pricing in line with the other battery packs.

Regardless of whether or not Tesla is opposed to ever lowering the price of these cars, the underlying driver we're looking at is the same and beneficial for all of us investors... for many years to come these cars will become even more and more compelling to consumers.

 

[Benz]

"Provided that we execute well and there are no serious macroeconomic shocks,
Tesla’s annualized delivery rate should exceed 100,000 units by the end of next year."

Elon Musk:"1,000 S + 1,000 X per week at the end of 2015".

 

[Benz]

Body shop will be upgraded and will have a capacity of 2,500+ cars per week, sometime in Q1 2015!!!

Paint shop will be upgraded too.

 

[Benz]

Elon Musk about battery constrain:

Without the Gigafactory annual production can reach 150,000 - 200,000 cars.

That's nice to know.

 

[mrdoubleb]

Elon Musk about battery constrain:

Without the Gigafactory annual production can reach 150,000 - 200,000 cars.

That's nice to know.

Pana must be ramping nice... Before they had difficulties supplying cells for 20k cars, now we are talking 10x that much in a few years.

 

[Cattledog]

I like this following snippet from the linked article:

For that reason, many industry analysts believe the grid storage market is on the cusp of huge growth. A 2012 study from Lux Research Inc., "Grid Storage Under the Microscope: Using Local Knowledge to Forecast Global Demand," predicted the market for grid storage would grow 40X over the next few years, reaching $113.5 billion in 2017.

Design News - Electronic News & Comment - Lithium-Ion Batteries to Provide Grid Support in Hawaii

Same article evme posted in the Gigafactory thread.

 

[FredTMC]

I assume you meant to type "85" instead of "80"? Or was he factoring in a estimate of the amount of battery capacity that the firmware keeps "hidden" in reserve?

I also question the accuracy of his current battery capacity measurement of 70kWh. I suspect it's a difficult thing to measure unless you are a Tesla engineer who has access to firmware functions that we as owners do not have access to.

sorry for for delayed response. Was in cabo.

yes, I really mean 80kwh of energy supplied as measured by the trip meter. This was the amount of energy his brand new 85 kWh car would deliver from a completely full range charge and driving car all the way down to zero miles left of rated range. Yes. There is a battery reserve of course and as we know the car protects the battery by not releasing that last little bit of energy (~5kwh)

I really like his way of measuring battery loss over time. Basically, with 75k on the odo, he performed the same test: drove car from full range charge down to zero rated range. The car only delivers 70 kWh of energy now whereas it delivered 80kwh when the car was new.

- - - Updated - - -

The trouble with this is that the size of the "reserve" below "zero miles" was not necessarily constant. Wasn't there at least one firmware update that increased the size of the reserve? Driving until the car actually runs out of charge would seem to enable a more accurate measurement of total battery capacity (not that I'd want to do it).

In any case, 12% loss after 75K miles isn't that great, but it's not terrible, and is probably significantly worse than average. Even at that rate of loss, the original battery pack should continue to be quite useful at 200K miles and beyond.

You're right. I seem to recall discussions that TM may have changed the amount of reserve energy that is really left in the battery when the car is displaying zero rated range remaining. That being said, I highly doubt that the amount of reserve was reduced by more than 1kwh. Therefore, it's possible he really only only has a capacity loss of 9kwh instead of 10kwh. Regardless, I concur this this amount of range loss (11% or 12%) is a little higher than we would have hoped for. But it's not horrible. As I mentioned, the owner said that he definitely isn't easy on the battery. He does a lot of full charges and runs the battery to low SOC often.

Cheers

 

[JRP3]

We also don't know if what the car is allowing to be used accurately represents the actual capacity. People have "recovered" "lost" capacity by letting the car sit plugged in fully charged for extended periods.

 

[Hogfighter]

There were some big announcements in TSLA’s latest earnings report and conference call. Essentially, they indicated that production for next year will be much higher than this year. Analysts are predicting around 60,000 cars in 2015. However, an L.A. Times article stated that they will produce 100,000 cars in 2015....and followed up that number by later confirming with Tesla that this is correct.

100,000 cars with an average price of $90k (fairly conservative, since Model X will be out next year as well) would put next year’s revenue at $9 billion. They already have a profit margin of close to 28% (and have plans to increase that margin in the future). With a market cap today of $29 billion, that’s roughly 3 times next year’s sales. To put that in context, Google is at 6 ½ times sales with revenue only increasing around 25%. Big MO is at 3 times sales with flat yearly revenue.

When considering that TSLA is doubling its revenue every year for the next several years, their current market cap of $29 billion is too low (just over 3x). Presently TSLA trades with a market cap of 10 times this year’s sales. Even if we ‘split the difference’ between this year’s and next year’s Price/Sales ratio, we come up with a P/S ratio of 6.5. 6.5 times 9 billion is 58.5 billion, or in another manner of speaking, roughly double the current stock price.

If the current P/S holds through next year, the market cap would be $90 billion, or triple today's stock price.

 

[AudubonB]

Whoa - careful, there. My read of the release, the LA Times article AND its follow-up correction is that TM revealed it plans to be operating at the 100K/yr RATE by the end of the year. That is a very different statement from saying they plan to produce​ that many autos next year.

 

[DaveT]

There were some big announcements in TSLA’s latest earnings report and conference call. Essentially, they indicated that production for next year will be much higher than this year. Analysts are predicting around 60,000 cars in 2015. However, an L.A. Times article stated that they will produce 100,000 cars in 2015....and followed up that number by later confirming with Tesla that this is correct.

100,000 cars with an average price of $90k (fairly conservative, since Model X will be out next year as well) would put next year’s revenue at $9 billion. They already have a profit margin of close to 28% (and have plans to increase that margin in the future). With a market cap today of $29 billion, that’s roughly 3 times next year’s sales. To put that in context, Google is at 6 ½ times sales with revenue only increasing around 25%. Big MO is at 3 times sales with flat yearly revenue.

When considering that TSLA is doubling its revenue every year for the next several years, their current market cap of $29 billion is too low (just over 3x). Presently TSLA trades with a market cap of 10 times this year’s sales. Even if we ‘split the difference’ between this year’s and next year’s Price/Sales ratio, we come up with a P/S ratio of 6.5. 6.5 times 9 billion is 58.5 billion, or in another manner of speaking, roughly double the current stock price.

If the current P/S holds through next year, the market cap would be $90 billion, or triple today's stock price.

First, Tesla will not sell 100k vehicles next year. Think more on the lines of 70k vehicles in 2015. Also, Tesla won't hold a 10x P/S ratio (look for it to trend toward 4-7x P/S over the next couple years). And further, to bring in GOOG's P/S ratio isn't fair since GOOG has 63% gross margin. That's why GOOG has a super high P/S ratio comparatively. On the other end, you could bring in GM's P/S ratio (or Ford or any other auto manufacturer) to bring some balance here. Lastly, IMO I don't think P/S is a very good way to try to establish valuation since each company is at a different part of their growth trajectory and each company's margins differ as well.

 

[Raffy.Roma]

@DaveT

I also read that Elon mentioned 100k vehicles next year.

 

[FANGO]

@DaveT

I also read that Elon mentioned 100k vehicles next year.

He didn't

 

[AlMc]

@DaveT

I also read that Elon mentioned 100k vehicles next year.

If someone confirms this with TM communications please post as I will mortgage the house and buy TSLA.....( half kidding/half serious)

It is not the way I heard it or took it. I understood him to say they were exiting 2015 (Dec 31, 2015) being able to produce at a Rate that would be equivalent to building enough cars per week to make 100,000 vehicles IF they continued at that rate. They will enter 2015 producing about 1,000 cars/week and exit 2015 at 2,000/week. So, I think 60-70K guidance.

I hope I am wrong and you are correct.

 

[DaveT]

@DaveT

I also read that Elon mentioned 100k vehicles next year.

In the conference call Elon mentioned a minimum of 60k vehicles delivered in 2015.

 

[ecarfan]

During the call it was stated that by the end of 2015 Tesla would be building vehicles at a RATE of around 100k PER YEAR.

It was never stated that Tesla would build 100K vehicles during the 2015 calendar year.

Listen to the call. It's available for anyone to listen to.

 

[Raffy.Roma]

During the call it was stated that by the end of 2015 Tesla would be building vehicles at a RATE of around 100k PER YEAR.

It was never stated that Tesla would build 100K vehicles during the 2015 calendar year.

Listen to the call. It's available for anyone to listen to.

Sorry I didn't manage to get the difference between rate and production because I just gave a fast look to the article that mentioned this matter.

 

[FANGO]

Sorry I didn't manage to get the difference between rate and production because I just gave a fast look to the article that mentioned this matter.

Yeah, many articles have gotten it wrong unfortunately. Luckily I don't think the misconception will be widespread enough to cause damage...or at least I hope it won't.

 

[Jack6591]

Let's Do Elon's Math

Tesla s Math | MUSINGS

Great Musings!