Short-Term TSLA Price Movements - 2016

[vgrinshpun]

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.

The pricing quoted by Elon was for utiltiy scale projects, obviously using PowerPacks

 

[Yggdrasill]

The pricing quoted by Elon was for utiltiy scale projects, obviously using PowerWalls.

I see that now. (I assume you meant "Powerpack".)

I can only assume Musk misspoke. I tried to find out what it said in the press kit back in May 2015, but no luck.

 

[vgrinshpun]

I see that now. (I assume you meant "Powerpack".)

I can only assume Musk misspoke. I tried to find out what it said in the presskit back in May 2015, but no luck.

Not likely. This number was quoted in several analysts reports and was widely discussed at the time.

This price was not included in the press kit.

 

[Yggdrasill]

Not likely. This number was quoted in several analysts reports and was widely discussed at the time.

Well, if true, that's good news. It means the NCA packs should have a cost around 150 USD/kWh. (It was said *below* 190 USD/kWh.)

 

[stealthology]

Elon mentioned that even if the merge does not happen, SCTY will still be doing fine alone

Where did Elon mention this? Thanks.

 

[Gerardf]

I agree with Vlad that Tesla will make a very high margin on the TE for the next years.
I agree with Dave that this will encourage big players to start investing big in increasing production, what will drive the price down.

However, bringing the price down will grow the energy storage market size way faster than the production buildout CAN ramp. And higher production will bring costs down even further, leading to even more demand.

In an earlier post in this thread I explained this as well in answering to schonelucht, also refering to the Oncor analysis. Prices below 500 are already the tipping point for the energy utility market.
https://teslamotorsclub.com/tmc/posts/1686633/

http://www.brattle.com/system/news/..._Distributed_Electricity_Storage_in_Texas.pdf

To make thing 'worse' (better !) the BEV market has reached the tipping point at the same time. The car manufacturers will compete for cells offering multi-year guaranteed volumes, as they can not afford to have a cell shortage in their JIT production.

There will be higher demand than production in the market for many years (decades ?) to come, with healthy margin for everyone.

I predict we will see an explosion of cell factories to be build. Anybody remember GF-as-a-product ?
And I also predict it will be impossible for all these factories to fulfill cell, pack and system demand for many, many years to come, no matter how fast they try to build out production.

I think Tesla increased PowerPack pricing simply because they could not figure out how to ramp cell production fast enough for the demand they got at the 250/kWh price point. At that price they might have seen an interest from the market that made the 400k M3 reservations look only so-so. Thus, now with the high TE margin they can start to solve that and fund 3x bigger GF Buildout.. And the next Gigafactor(y)(ies)


P.S. And having a solar panel gigafactory will help offering total energy solutions to the utility market as well.

 

[AlMc]

Just got up on the east coast....VERY good and interesting/informative discussion kept on topic and between people respectful of the participants even though they had opposing positions

^^^^THIS IS WHY I COME TO TMC^^^^^ We learn from each other while not bashing each other

Thanks guys...especially those who were up much past normal bedtimes

 

[PaulRocket]

Very interesting line in this article:
What to expect now that SolarCity has the keys to RiverBend - Strictly Business

"The initial production will involve about a quarter of the plant’s stated capacity – around 250 megawatts – and will be focused on a new solar roofing product that SolarCity is expected to unveil in the coming weeks."

 

[pGo]

I see that now. (I assume you meant "Powerpack".)

I can only assume Musk misspoke. I tried to find out what it said in the press kit back in May 2015, but no luck.

Utility scale means this is power packs, no? Individual Power wall is being sold at a higher price. It is not clear if tesla is already willing to sell at $250/kWh or that will happen after cells are made in GF. Regardless, the cost upper limit may be around $150-170/kWh and at $250, it is still a good margin.

I loved reading past few pages of discussion and hope it continues. Much more balanced. My thought is that it is in Tesla's best interest to have battery cells become commodity. To develop this market and sell 10s of millions of EVs a year, everything in the supply chain must be able to absorb demand and actually outpace it. And that's Tesla's goal. Unlike China became anchor at reducing solar cell prices, this time around it will be Tesla who will be able to reduce battery cell prices at will due to heavy automation and technological lead. If I am projecting TE for longer than a few years, I would use 15-18% GM. I think it's not bad considering the beneficiaries will be the EVs.

 

[Drax7]

Neroden has warned us about SCTY's financials, and I agree with his views.
The mismatch of maturities Is very risky. SCTY does not have a margin of safety,
And We know stuff happens, and it happens a lot.

I have not followed SCTY, though David T emphatically states that he does
not trust the management. David T has always been on Tesla's side, and
I do not question his motives.

However, if you don't trust the management of a business,
the rest does not matter. Nonetheless, I have to believe
That Elon trusts his cousins, though the economics of the
Business are not working and they had to resort to risky stuff.

Most manufactures of solar panels (spwr and fslr) are borderline surviving .
The industry at large has no pricing power, and that should be a non starter.
If tesla/solarcity are able to differentiate their product, and add a compelling value proposition,
Then there may be something there.

Even if the no brainer rationale for the merger were true, it's not clear the
Cross selling will pan out. The solar panel/ power wall one stop shopping combination
Might encounter limited demand at the residential level unless it offers a very strong value
Proposition to the consumer.

The product and service must be very compelling and an obvious
no brainer proposition to the end user.
Such as lower monthly costs, enhanced esthetics that add value of the property, a quick
Payback period, easy installation and service, etc..

If Elon believes there is something there, i have to give him the benefit of the
Doubt.

 

[AlMc]

@Drax7; Good synopsis. I have never been a fan of this merger, especially the timing of it. Issuing more stock and taking on more debt and a company utilizing cash at a similar rate to your own growing company, despite being considerably smaller seems like a 'no brainer' to me. I do not have the financial analytical *chops* of many here and can't recite figures verbatim but I do not like it, especially at this time in TM's history.

It may turn out to be a brilliant move but, IMO, the only thing Solar City has to offer TM is the Buffalo Factory which appears will not be online until late 2017 as pointed out by @PaulRockets link; What to expect now that SolarCity has the keys to RiverBend - Strictly Business

 

[MitchJi]

Well, if true, that's good news. It means the NCA packs should have a cost around 150 USD/kWh. (It was said *below* 190 USD/kWh.)

My analysis, based on the announced Powerpack pricing was that the maximum cost to Tesla for car packs was $170 per kWh. The Powerpacks designed for backups use cells that are "very similar" to the car packs. I can dig out the information on announced prices if anyone wants me to. Elon said at the time that there was a lot of interest in those packs from utilities to replace peaker plants. At the announced prices they were competitive with peskers, a little cheaper actually, but using batteries strictly to replace peakers makes no sense, although I'm not sure that the utilities have figured that out. Natural gas peakers are only fired up a handful of times per year because the using them costs so much. Power generated from batteries, once you have them in place, costs about the same as the cost to charge them. So if you know that you won't need them for traditional peak use on a particular day, it makes sense to use them for daily peaks.

Anybody remember GF-as-a-product ?

When Elon talks about automotive production lines as-a-product he means designing and building the line with the same care, or more care than the cars they produce. Normally car factories are built using parts from catalogs. Elon specifically compared that to building a car using parts from existing cars, which would be a mess. So I'm not sure that he meant mass production of GF's when he used that phrase.

Will the M3 production line that means customized robots etc. I believe that most of the reason for starting with alien dreadnaut V0.5 instead of going directly to V1, V2 or even V3 isn't because they don't know how to get there, but it would take more time to do that.

That's part of the reason that Tesla and Elon want to get involved in the SCTY production line design now. Al, it is scheduled to be in use sooner than the end of 2917, and there's good reasons for Tesla not to wait until it's ready.

Here's what to expect between now and when the first solar panels roll out of the plant, likely in June.

December 2016 to January 2017

As the finishing work wraps up at the factory, SolarCity plans to start moving in the solar panel production equipment.

About two-thirds of the equipment that will go into the plant already has been ordered, said Joseph Mendelson, SolarCity’s director of policy & electricity markets.

But the ultimate design and layout of the factory has been changing. SolarCity has been experimenting with various production designs and layouts at its pilot factory in Fremont, Calif., and the thing
s that SolarCity’s engineers are learning there is shaping the way the Buffalo factory will operate, Mendelson said.

Those changes could lead to a significant increase in the capacity of the Buffalo factory, Peter Rive, SolarCity’s chief technology officer, said last month without disclosing how much output could rise. The factory’s stated capacity will allow it to produce about 9,000 to 10,000 panels a day, with a combined annual generating capacity of about 1,000 megawatts of electricity.

“It’s a combination of equipment changes and process changes,” James said. “This plant was designed two years ago. In the two years, our research and development folks have been working on making the equipment more efficient, making the processes more efficient. We’re trying to roll some of that into the factory so we give ourselves some room to grow.”

It's the same reason that the first part of the GF took so long and cost so much, and now the additional phases are being completed much faster, and for less money.

 

[anticitizen13.7]

Neroden has warned us about SCTY's financials, and I agree with his views.
The mismatch of maturities Is very risky. SCTY does not have a margin of safety,
And We know stuff happens, and it happens a lot.

@Drax7; Good synopsis. I have never been a fan of this merger, especially the timing of it. Issuing more stock and taking on more debt and a company utilizing cash at a similar rate to your own growing company, despite being considerably smaller seems like a 'no brainer' to me. I do not have the financial analytical *chops* of many here and can't recite figures verbatim but I do not like it, especially at this time in TM's history.

I went back to one of my posts earlier this summer on this subject: SolarCity Bailout Analysis

Of concern was SolarCity's near term debt, which was listed in its Quarterly Report as: 375M due in Dec 2016- Dec 2017, 230M due in Nov 2018, and 566M due in Nov 2019.

SolarCity raised 305M last week: SolarCity raises $305 million in deal advised by Soros' firm, in what appears to be a move to reduce concerns over the debts due at the end of this year through next year.

Has Tesla publicly disclosed how it will reduce the costs of the SolarCity business? I recall that Tesla would be able to reduce sales costs by consolidating SolarCity sales operations with Tesla stores, but I do not know much more beyond that.

Basically, I'd want to know: What is SolarCity doing now that is costing it too much $, and what will Tesla do to change the situation?

 

[anticitizen13.7]

Is that characteristic of the recently announced "brains" for AP?

I don't know.

nVidia's DrivePX2 has power consumption of 250 Watts, and needs active liquid cooling. That's very power hungry. My analysis here: What other tech stock to consider?

DrivePX2 is more comprehensive than Mobileye EyeQ though, so the two cannot be directly compared.

 

[ggr]

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.

Somewhere in there you have assumed a direct, 1:1 relationship between energy density and monetary density. I don't understand this area, but I haven't seen this justified anywhere. Surely people use NMC because it is cheaper on some basis than NCA?

 

[ggr]

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.

Your explanation is well supported by historical examples. Margins in a commoditized market are always low, and the "race to the bottom" is well known. The question becomes, how long? That is, how much head start does Tesla have?

Another factor is that Tesla Energy wants to be end-to-end. Pour raw materials in one end, ship out pre-fab BES at the other, install at customer. The other players all have at least two different major players (cells, and battery packaging) each of which wants its own margin. If the players each want a 3% margin, Tesla Energy gets to have a 6% margin for the identical product.

 

[MitchJi]

Just because we don't know all of the reasons doesn't mean that they don't exist. Elon said on the second SCTY explanation call that every institutional investor he explained it to is in favor of the acquisition. What didn't he tell the rest of us? One thing is probably new product information. Doesn't want to Osborn the current TE and SCTY products.

I initially thought that the supercharger network, the Gigafactory, and the using lithium batteries for storage (too expensive), were bad ideas. Now I believe that they are all crucial parts of Tesla's prospects going forward. This time I'm willing to give Elon the benefit of the doubt. I think that most of you should do the same.

With the previous decisions we understood a bigger percentage of the reasons than any of us do for the SCTY acquisition.

DaveT and Al, don't you think that if Elon's personal explaination convinced every institutional fund manager that if you had access to the same information that it would probably either change your mind or at the very least substantially reduce your opposition to the deal. Isn't it hubris to believe that your understanding is superior when you don't have complete access to all of the relevant information?

 

[Yggdrasill]

Somewhere in there you have assumed a direct, 1:1 relationship between energy density and monetary density. I don't understand this area, but I haven't seen this justified anywhere. Surely people use NMC because it is cheaper on some basis than NCA?

NMC is popular because it has excellent durability and it's very stable which means it's less prone to fire and it handles heat well. Maybe the prismatic NMC cells can get a cost per kWh closer to NCA 18650-cells, but comparing NMC 18650-cells to NCA 18650-cells, the cost per cell will be almost identical. And with 67% more energy storage capacity in a NCA cell, the cost per kWh will be roughly 67% higher for NMC.

You use the same membranes, same electrolyte, pretty much the same anode, same metal sylinder, same production equipment, same people, etc. The only real difference is the cathode, where you use Manganese instead of Cobalt and Aluminium. I don't believe the raw material cost is significantly different.

 

[MitchJi]

Somewhere in there you have assumed a direct, 1:1 relationship between energy density and monetary density. I don't understand this area, but I haven't seen this justified anywhere. Surely people use NMC because it is cheaper on some basis than NCA?

The relationship between energy density and price was definitely not exactly proportional with the powerwall prices.

 

[Intl Professor]

I don't know.

nVidia's DrivePX2 has power consumption of 250 Watts, and needs active liquid cooling. That's very power hungry. My analysis here: What other tech stock to consider?

DrivePX2 is more comprehensive than Mobileye EyeQ though, so the two cannot be directly compared.

Thanks much. I see from the following NVIDIA claims only 10 watt consumption on their website. Are we talking about a different gadget?

Autonomous Car Development Platform from NVIDIA DRIVE PX2

I'm beginning to think the application for Tesla to improve visual AP is duplicative of what Nvidia is proposing here, so I am off base on collaboration since Tesla seems to have developed similar "deep learning" for AP in house with the vast data set. Do I understand this correctly now?

Many thanks for your help.