The battery energy storage market is a nascent market. Being the market leader in a nascent market doesn't mean much since the market is just starting to take off. So assuming since Tesla is the market leader now and it has aggressive plans, that ensures it will be the market leader in the future... this is incorrect. A lot can happen in new and growing markets. Again, Tesla has the edge due to its early start but their success (and/or market domination) is far from guaranteed.
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The battery energy storage market is a nascent market. Being the market leader in a nascent market doesn't mean much since the market is just starting to take off. So assuming since Tesla is the market leader now and it has aggressive plans, that ensures it will be the market leader in the future... this is incorrect. A lot can happen in new and growing markets. Again, Tesla has the edge due to its early start but their success (and/or market domination) is far from guaranteed.
The proof of that pudding is going to come in Q4 financial statement under other services revenue and costs of goods. It's going to be quite easy to filter out. Anything else is speculation.
I am not sure what you mean by market leader. Right now they are not the leader as far as installed capacity is concerned. They are a leader in pricing and the battery pack technology.
I think that the argument got flipped. I never said that that their success is guaranteed. I objected to your conclusion that competition is upon them. There is just no data to support this. You also seem to be *sure* that competition will catch up. I just do not understand the basis for it. If Tesla is technological and price leader, is widely acknowledged moving faster than anybody else and have most aggressive plans to scale up production how is it certain that competition will catch up?
You'll probably have to wait a little longer, $190/kWh price is at the essentially fully ramped up production in Fremont. I do not think you can expect the same level of efficiency in the first month of production at the GF.
Just to mention one factor people seem to be forgetting. Under 190 USD/kWh was for vehicle packs, using the energy dense NCA chemistry.
Tesla Energy uses the NMC chemistry, with ~40% lower energy density. That means Tesla energy should cost something like 190 / 0.6 = 316 USD/kWh.
EDIT: A bit more detailed calculations:
Assuming 170 USD/kWh on the module level, with NCA, that means a vehicle battery module should cost 914 USD. This is for 5.375 kWh.
But with NMC, this module will only have 3.2 kWh. So 914 USD / 3.2 kWh = 286 USD/kWh.
For a 6.4 kWh Tesla Energy pod, you have two modules, plus a BMS, cooling pump, battery pack enclosure, etc. Assuming this is 300 USD, each pod will cost 914 USD x 2 + 300 USD = 2128 USD.
That's for 6.4 kWh, so 2128 USD / 6.4 kWh = 332 USD/kWh.
Tesla Energy uses the NMC chemistry, with ~40% lower energy density. That means Tesla energy should cost something like 190 / 0.6 = 316 USD/kWh.
EDIT: A bit more detailed calculations:
Assuming 170 USD/kWh on the module level, with NCA, that means a vehicle battery module should cost 914 USD. This is for 5.375 kWh.
But with NMC, this module will only have 3.2 kWh. So 914 USD / 3.2 kWh = 286 USD/kWh.
For a 6.4 kWh Tesla Energy pod, you have two modules, plus a BMS, cooling pump, battery pack enclosure, etc. Assuming this is 300 USD, each pod will cost 914 USD x 2 + 300 USD = 2128 USD.
That's for 6.4 kWh, so 2128 USD / 6.4 kWh = 332 USD/kWh.
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The energy storage market is too large for Tesla not to have eventual formidable competition and for margins not to be driven lower (than your stated 50%+). Again to clarify, I see Tesla as the market leader in the future but there will be other competitive players.
Maybe I'll try to be more specific. Let's say Tesla charges 50% margins on their BES. Its just too high of a margin to not entice startups and other new entrants. The new entrant secures cells but at a cost that's lets say is 20% higher than Tesla's costs. But they opt to only take a 5% margin because they're funded by deep pockets. They can offer their system for 25% less than Tesla's system. Of course this is assuming they can make a BES as good as Tesla's. Now Tesla is forced to lose their price to at least match the new entrants price. So Tesla'a margin drops to 25%. This is how Tesla's margins get lowered. Again, this is just an example and I don't have time to fully flush it out since I need to go to bed. But the gist of it was I was refuting your assumption that Tesla could continue to charge 50%+ margins for a significant duration and not see competition come in and lower those margins.
3Victoria
Active Member
1. I believe that Tesla / Panasonic have done chemistry development that makes their cells better than the competition, at least for car use.
2. I think they were approaching other battery companies for cells to support their TE ramp up in advance of GF production.
There are many risks to Tesla and Tesla/SCTY, with varying probabilities. Each of us have to assess whether the risk of failure is worth the chance of success. In many cases one does not have sufficient knowledge of the risks nor a good model to quantify that risk. Sometimes one has to go by a gut feeling. I think SCTY has not been run in the safest manner and has significant risk if interest rates rise, which seems likely. However, I think this can be mitigated by reducing costs and a change to the business plan. I think EM will make those changes, and the SCTY acquisition will be a net benefit to Tesla.
2. I think they were approaching other battery companies for cells to support their TE ramp up in advance of GF production.
There are many risks to Tesla and Tesla/SCTY, with varying probabilities. Each of us have to assess whether the risk of failure is worth the chance of success. In many cases one does not have sufficient knowledge of the risks nor a good model to quantify that risk. Sometimes one has to go by a gut feeling. I think SCTY has not been run in the safest manner and has significant risk if interest rates rise, which seems likely. However, I think this can be mitigated by reducing costs and a change to the business plan. I think EM will make those changes, and the SCTY acquisition will be a net benefit to Tesla.
I think that incremental cost between the two types is less than 66% implied in your example.
It seems more like 22% if one looks at 10kWh and 7kWh pricing of initially introduced PowerWalls - $3,500 vs. $3,000.
Given that 10kWh chemistry was similar to the chemistry used in automotive packs, the pricing per kWh: $350 vs. $428
The Powerwall is 6.4 kWh using two pack modules, so 3.2 kWh per module. A 90 kWh Model S uses 16 modules for ~86 kWh, which works out to 5.375 kWh per module. 3.2 kWh / 5.375 kWh = ~0.6
I also added some more calculations to my post:
Assuming 170 USD/kWh on the module level, with NCA, that means a vehicle battery module should cost 914 USD. This is for 5.375 kWh.
But with NMC, this module will only have 3.2 kWh. So 914 USD / 3.2 kWh = 286 USD/kWh.
For a 6.4 kWh Tesla Energy pod, you have two modules, plus a BMS, cooling pump, pod enclosure, etc. Assuming this is 300 USD, each pod will cost 914 USD x 2 + 300 USD = 2128 USD.
That's for 6.4 kWh, so 2128 USD / 6.4 kWh = 332 USD/kWh.
On top of this is the additional hardware for the Tesla Energy products, like DC/DC converters, pack enclosures, cabling, etc, so the total cost will be higher. (Probably not by much, maybe like 5-10%.)
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The power packs have been assembled in the GF since early this year, so hardly 'first month of production'.
I need to get to bed as well, it is much later on the East coast than on the West
, but you are misquoting me.I was NOT talking about far future. My example with battery pricing was about justifying Tesla working on TE and TA concurrently in 2017 and 2018, vs. your feeling that they should stop working on TE, work on ramping Model 3 first, and then, when it is complete some time in 2018, start working on TE.
@DaveT:
The lady doth protest too much.
Your WOTs does not impress me any more since I've realised you get the basic facts just wrong. 145 price for LG cells is latest dead give away that your analysis is empty.
One wise man one said, I wish you knowledge, luck and wisdom. Knowledge to know what to do, some luck too help when knowledge isn't there and wisdom to know when it was knowLedge and when it was luck.
Your basic problem is you dont see the difficulties of scaling production and the real price of that. Oh, and you get mighty scared by the word competition.
It is 10 yeras later already, Fermi would say: where is everybody.
The lady doth protest too much.
Your WOTs does not impress me any more since I've realised you get the basic facts just wrong. 145 price for LG cells is latest dead give away that your analysis is empty.
One wise man one said, I wish you knowledge, luck and wisdom. Knowledge to know what to do, some luck too help when knowledge isn't there and wisdom to know when it was knowLedge and when it was luck.
Your basic problem is you dont see the difficulties of scaling production and the real price of that. Oh, and you get mighty scared by the word competition.
It is 10 yeras later already, Fermi would say: where is everybody.
This makes no sense. What does density got to do with cost?
By density, it should mean kWh/area or kWh/weight. If Tesla's NMC is less energy dense than NCA, then all that imply is that NMC is either heavier and/or bulkier than NCA. What has it got to do with cost?
If you are thinking about cost of raw materials, think again. These chemistries are different, so you can't compare. The only way to compare is to get complete bottomup details of all cost components and then compare. No one, including Tesla reveals that. The only thing I trust is the official Tesla's statement of $190/kWh at the pack level. I think you are mixing it all up and coming to wrong conclusions.
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To try to figure out the margin, let's assume the added cost is 5% for the Powerpack and 10% for the Powerwall.
The cost of the powerwall is 2,128 x 1.1 = 2,341 USD.
(3000 USD - 2341 USD) / 3000 USD = 0.253. So, 25.3% margin.
The cost of the Powerpack is 2,128 x 16 x 1.05 = 35,750 USD.
(44,500 USD - 35,750 USD) / 44,500 USD = 0.197 So, 19.7% margin.
I find it very likely that the margin for Tesla Energy is somewhere in the 20% range.
The cell cost will be pretty much the same regardless of chemistry. You do have some variation because NMC uses Manganese, while NCA uses more Cobalt, so the raw material cost will be different. (I'm not sure which chemistry has less material cost, I don't think it's very significant.)
Whether a cell has 12 Wh or 7 Wh obviously affects the cost per kWh.
Do you recall Elon's tweet quoting the TE pricing (immediately after TE reveal)?
It was $250/kWh. He then, on one of the ER calls indicated that they will make slight profit.
MitchJi
Trying to learn kindness, patience & forgiveness
By hand in Fremont,not at the GF.
I believe his figures are incorrect, but energy density does have a huge impact on cell and pack costs. The number of cells required, the costs of which are similar for any chemistry, and the associated pack HW are directly proportional to the energy density.
But a more accurate method is to compare the prices of the two pack types initially proposed for TE, The prices were not exactly proportional to the energy density. Within about 15-20%.
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When they were thinking about making NCA based Powerwalls, that figure was probably realistic.
A NCA-based pack would cost basically the same as an NMC-based pack, or around 2341 USD. And it would have 10.7 kWh, which means a cost of 218 USD/kWh.
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