Short-Term TSLA Price Movements - 2016

[Rarity]

The 168.5 megawatt figure might be using the old TE prices. As the underlying Proxy shows, TE expects to recognize $44 million in revenue from SolarCity during 2016.

In December 2015, we entered into a master supply agreement with SolarCity that governs SolarCity’s purchase of second-generation energy storage systems from us pursuant to purchase orders issued during 2015, and creates a framework under which SolarCity may purchase further Tesla energy storage products in 2016. We recognized approximately $4.9 million in revenue from SolarCity during fiscal year 2015 for sales of energy storage products governed by this master supply agreement, and anticipate recognizing approximately $44.0 million in such revenues during fiscal year 2016.

Also in December 2015, pursuant to a competitively bid process, we selected and entered into three power purchase agreements with SolarCity, pursuant to which SolarCity will design, build, own and operate solar panel systems at three of our facilities in California, and Tesla will purchase electricity generated by those systems for use at those facilities, at costs that are expected to be lower than would be available from the applicable public utility company. Two of such agreements have terms of ten years, and one such agreement has a term of 20 years, in each case corresponding to the lease term of each facility, and we estimate that the total amounts payable by Tesla over their respective terms will be approximately $2.0 million, $2.4 million and $8.4 million, respectively.

 

[Ulmo]

I'm seeing a lot of news chatter about Lithium being a good investment due to increased battery making for EV's, but I recall posts here saying that Lithium is easy to produce, with a lot of competition, sources, etc., so it is not really a great market for unbounded profitability, since it is so competitive.

Part of the discussion here is that the business sources for Lithium is the tip of the iceberg of physical sources; there's plenty of Mother Earth supply of it, and plenty of ways to get at it, and so the way I see it, the market availability just represents whatever has been skimmed off the top at the moment using many various means, and that will continue to get more and more efficient, not less efficient, at least for a while, unlike oil, which has been exploring ways to get at more difficult locations for a while now to arbitrage war and other threats. In fact, that's one of the core advantages of EV's to begin with, as I have claimed many times.

So, in essence, my opinion is that lithium availability is not a plus for lithium suppliers stock-wise (except of course for successful execution by successful lithium providers), but is a plus for successful EV companies due to its good availability.

 

[FredTMC]

On the plus side, put another way - GS raised their disruptive probability to 1.4 times their prior estimate.

On the minus side, its only Goldman Sachs. They are no Standpoint research so I doubt this will get as much airtime on financial media.

TSLA showing lots of strength today (again). GS PT increase certainly helps.

 

[durkie]

I think that the PowerPack pricing reveal will prove to be a huge catalyst for the SP. The remarkable difference in price quoted by Elon about a year ago ($250/kWh) and actual price of PowerPacks included on the Energy page of the Tesla's website ($470) is an indication of a very significant change in strategy. As I speculated up-thread, it seems that the strategy now is to have approximately the same gross margin per the kWh of batteries for TE as for Tesla Automotive (TA).

The implications of this are huge. During the Q1 2015 ER call both Elon and JB alluded to the fact that the demand for batteries for TE could be at least equal to the demand for TA, and, based on this, they are considering increasing their planned GF 1 production by at least 50%.

There is a hugely important conclusion from the above, namely that value of TE business is at least equal to the value of TA business, and it is NOT currently priced into the SP.

I think that TE conversation will dominate the Q1 ER call. I also think that Friday's run-up was due to the PowerPack pricing reveal, and we will see more of the same next week.

I totally agree (and hope) that TE could be as big or bigger than TA, but do you know if the 50% increase is the 35GWh cells / 50 GWh pack figure for GF1, or are we now talking like 52.5 GWh of cells and 75 GWh pack production?

If GF1 is still going to produce 35GWh of cells and 50GWh of packs (with Panasonic is supplying the missing 15GWh of cells I suppose) by 2020, then 500,000 model 3's claims the 35GWh of cells right there (assuming 70kWh packs in the model 3). It seems entirely plausible that the model S/X could easily claim the remaining 15GWh of packs by 2020, since they're currently consuming anywhere from 5.6 GWh (80,000 units with 70kWh packs) to 8.1 GWh (90,000 units with 90 kWh packs) of packs.

So where does the battery business fit in? It seems like they're production constrained on batteries and the PowerPack price increase reflects that: batteries are precious and it doesn't make sense to divert a portion of them in to powerpacks at a much lower margin versus putting them in a car.

If we're now talking 52.5GWh cells / 75 GWh packs, then it seems like the price of GF1 just increased by a lot and I don't know if that's been disclosed yet either.

Shortly after announcing the powerwall and powerpack, they mentioned that demand was super high and they sold out their entire capacity a year in advance or something along those lines. I imagine almost doubling the price of the powerpack will have a sharp negative impact on that and hopefully their existing reservations get grandfathered in at the original price.

 

[MitchJi]

There have been some recent comments about the viability of lead-acid batteries lately. This is a post from earlier in this thread that's relevant:

Lead batteries are not a good option:
Short-Term TSLA Price Movements - 2016

I doubt the market still sticks to lead-acid.
Tesla Powerwall Imergy | CleanTechnica

Note that I’ve actually left out “competing” lithium-ion and lead-acid batteries in the residential section. Basically, even at a glance, it’s clear that they don’t compete with the Powerwall, so I didn’t bother finding all of the specs and doing the calculations.

There is a very large market for large UPS's (e.g. Data centers). The author of the post below worked as a datacenter engineer for Microsoft:

Dedicated rooms to monitor and vent unsafe H2 levels. Acidic fumes that tend to destroy most things in the same room with them. Regular failures by design of a lead-acid cell, realistic shallow cycle capacity of 20-30% of name-plate. In exchange for all these absurd drawbacks and faults of lead-acid, you end up paying a premium over the clean compact and high efficiency Tesla battery.

The Tesla pack costs you less money up front, doesn't require sacrificing a room of your house to acid-fumes, and includes it's own DC/DC converter electronics to enable you to feed it the input from solar cells directly and have it manage itself and supply the voltage bus out directly to your AC inverter (or whatever thing you were wanting to power with it).

Lead's last hold-out function was stationary UPS supplies due to cost. Now with this pack having a lower system cost than lead, it seems the last useful function for lead-acid is boat anchors.
And why I recommended the modern sealed version, AGM or Gel or otherwise, because, well they're sealed and noxious fumes, etc, are not an issue.
Learn about lead acid. Sealed ones are a joke for longevity.

I spent 5 years in the datacenter UPS industry at the MWh scale, with everything deployed in big installations being lead-acid. I can tell you if your definition of "it works" includes repeated random and regular cell failures, never delivering even 50% of the claims with respect to the ability to extract useful energy from them, constant vampire current needs to keep them charged (many 10's of kW 24-7 in big installations), complete replacement after every couple years, and destroying virtually anything they share a room with from acid fumes than yes, "it works."

The industry standard there is 2,000-4,000Ah 2V flooded lead-acid cells, which they pay an extra big premium for to be carefully screened and binned. You tediously measure specific gravity on the electrolyte of all the new cells before and after installation at full charge, you observe the float balance is perfect between the cells in the string, and that you're running them at exactly the mfg's specs for longest service life. You are running them in a temp and humidity controlled room, mounted in stationary racks with minimal vibration. Then, randomly a cell in the string dies of infant mortality (every other cell shows no issues). They pay another few hundred grand to replace everything with all brand new cells (because the cell mfg's don't recommend having different aged cells in a string together), in a year or two, one dies and you start over. Repeat this cycle indefinitely. AFAIK, that is still the current state of the art in lead for UPS backup as I know it from wasting years of my life dabbling in it.

I realize that during the times a lead acid battery isn't being replaced or maintained or cleaned or tested that it does work as a very disappointing and lossy battery that can make a big UPS system work, and that people have been putting up with them for so long that the industry is used to the exceptionally poor performance and keeps buying them. My hope is that this Tesla battery will end the cycle of making throw-away lead batteries that are just waiting to fail by design.

 

[motobaleno]

I just watched a video how a model X beat a Ferrari F430 in drag racing and roll racing. That's a 7-seats SUV weights almost 3 tons, beat an expensive 2-seat race car. I don't need to mention the huge difference in safety, utility, autopilot, etc.
In the Standpoint video, there was a famous fund manager, who manages $40B, said he buys Ferrari stock (P/E 28) because he heard an used Ferrari sold for huge amount of money, and a few other reasons. The Ferrari age is clearly coming to an end. The Ferrari owner saw what's coming, that's probably why he listed the company to get rid of some shares. These ICE super cars are having hard time racing against Tesla's SUV, imagine what happens when the new Tesla Roadster comes out.

racing has very little to do with accelerating along a straight otherwise in F1 you would race using a jet!
who loves sports car use them in a track. A sport car must be fast through a corner more than along a straight.
do you know any laptime of tesla cars?
do you think that you will beat a ferrari?
there are very few serious lap times available for tesla: the S on willow spring is as fast as a ford focus...

 

[MitchJi]

o where does the battery business fit in? It seems like they're production constrained on batteries and the PowerPack price increase reflects that: batteries are precious and it doesn't make sense to divert a portion of them in to powerpacks at a much lower margin versus putting them in a car.

Before the increase the margins were similar to the cars.

 

[ludicrousspeed]

For those not familiar with Goldman Sachs methodology in their original report, they came up with five scenarios for the future Tesla business and assigned probabilities for each scenario as a weight factors to arrive at their PT.

Goldman is seriously misinformed if they think that in 2025 there's a 50% chance of $50B in revenue and 25% chance of $33B in revenue. In automotive sales revenues? Maybe. Everything else included? Low chance.

 

[durkie]

Before the increase the margins were similar to the cars.

Ah you're right. Why do you think they increased the price so dramatically?

 

[EarlyAdopter]

Ah you're right. Why do you think they increased the price so dramatically?

First law of economics - because they could.

 

[vgrinshpun]

Goldman is seriously misinformed if they think that in 2025 there's a 50% chance of $50B in revenue and 25% chance of $33B in revenue. In automotive sales revenues? Maybe. Everything else included? Low chance.

Well, that was the reason I thought that having the page from their report would be useful in augmenting their SP by applying more realistic probabilities...

 

[vgrinshpun]

I totally agree (and hope) that TE could be as big or bigger than TA, but do you know if the 50% increase is the 35GWh cells / 50 GWh pack figure for GF1, or are we now talking like 52.5 GWh of cells and 75 GWh pack production?

If GF1 is still going to produce 35GWh of cells and 50GWh of packs (with Panasonic is supplying the missing 15GWh of cells I suppose) by 2020, then 500,000 model 3's claims the 35GWh of cells right there (assuming 70kWh packs in the model 3). It seems entirely plausible that the model S/X could easily claim the remaining 15GWh of packs by 2020, since they're currently consuming anywhere from 5.6 GWh (80,000 units with 70kWh packs) to 8.1 GWh (90,000 units with 90 kWh packs) of packs.

So where does the battery business fit in? It seems like they're production constrained on batteries and the PowerPack price increase reflects that: batteries are precious and it doesn't make sense to divert a portion of them in to powerpacks at a much lower margin versus putting them in a car.

If we're now talking 52.5GWh cells / 75 GWh packs, then it seems like the price of GF1 just increased by a lot and I don't know if that's been disclosed yet either.

Shortly after announcing the powerwall and powerpack, they mentioned that demand was super high and they sold out their entire capacity a year in advance or something along those lines. I imagine almost doubling the price of the powerpack will have a sharp negative impact on that and hopefully their existing reservations get grandfathered in at the original price.

The exchange on the subject of increased GF production between Andrea James, Elon and JB Straubel took place during the Q1 2015 ER. Just to make it clear, the discussion was more like kicking the idea of the increase of production around, rather than revealing specific plans. My interpretation of JB's response is that GF output could probably be increased by at least by 50% from the 35GWh cells / 50GWh packs to 56.25GWh cells / 70GWh packs. Given that increase was totally attributed to the increase in anticipated BES demand, I think that this means that overall pack production will be split evenly between the TE and TA, i.e. 35GWh each.

As for the batteries for the MS/MX, you have to remember that the original 4 year agreement with Panasonic remains in force, i.e. Tesla still required to buy cells from the Panasonic factories in Japan, which is totally logical, as Panasonic would not agree to invest in the GF1 otherwise.

 

[Ulmo]

Virtual Reality environment not care about underlying vehicles

Has comments from big competitor to Tesla in China. His product view looks more compelling to me than even Tesla's or Apple's at this point.

 

[doctoxics]

Apple is outdated, billionaire Chinese tech rival says



What makes this more painful for Tesla is that this comment was being used to demonstrate that Apple was behind by copying Tesla and incrementally improving on Tesla's design rather than looking at it from a virtual* virtual reality experience point of view (what I infer reading between the lines of what he's saying). Essentially, Tesla is used as the example of what Apple is better than, and not "better enough" -- which puts Tesla in third place in that ranking.

Here's a post I made about his Apple comments: I rarely agree with Chinese, but this time, I do, re: Apple, innovation, apps vs open ecosystem • /r/apple

This Chinese guy is really smart, and I agree with a lot of stuff he says. I never knew he existed until now.

* I said "virtual virtual" to get across the point that VR should seamlessly float across devices, not tied to a particular device, even though I don't think there's ever a reason for anybody to use the phrase "virtual virtual" again, since I think this should be well understood in the future.

No pain here. Talk is cheap. Let's see the products. We have heard dozens of similar boasts without seeing a significant challenge to Tesla.

 

[MitchJi]

As for the batteries for the MS/MX, you have to remember that the original 4 year agreement with Panasonic remains in force, i.e. Tesla still required to buy cells from the Panasonic factories in Japan, which is totally logical, as Panasonic would not agree to invest in the GF1 otherwise.

I guess that explains why Tesla never mentions the MS-MX when they talk about the GF .

When did the four years begin?

 

[Ulmo]

No pain here. Talk is cheap. Let's see the products. We have heard dozens of similar boasts without seeing a significant challenge to Tesla.

Fair point. I just thought of that myself: the Chinese have been like SG-1's Goa'uld, stealing everything they know. The question remains whether or not they can now seamlessly take this understanding and continue on their own. They are so efficient at stealing, that it may be indistinguishable from original innovation, at which point there lies the danger: that they might be able to start doing original innovation without competition noticing, and by then, competition falls behind, and at this level, rapidly.

But for now, Tesla is shipping EV's. Where the virtual pods of the future go, we don't know, but SpaceX+Tesla is sure to see being a part, if they succeed or not, and right now, they have everything going for them.

 

[The Blue Owl]

No pain here. Talk is cheap. Let's see the products.

Indeed. He had me at "we hope to surpass Tesla".

 

[Drax7]

the press with their tesla sucks articles, or else this EV will kill tesla,
has been going on for years. Actually a precondition for success is the
press being against, as postulated by the motley fools years ago.

 

[Ulmo]

wow everything popped there for a moment ... SPY, QQQ, TSLA, SBUX, GOOG. If I had looked up at my screen instead of writing that post, I would have made around ... let's see .... at least $100, or up to $400. Boo.

 

[jhm]

So the MS 90D goes for $90k, or $1000/kWh. Assuming a target GM 25%, that's $250/kWh gross profit. Now suppose the Powerpack costs $220/kWh to produce, what was to be a 12% margin when priced at $250. But $250 + $220 is now a price of $470/kWh and a 53% GM on Powerpacks.

That's the simple math that equates gross profit for both the Powerpack and MS 90D. The SG&A costs of selling cars has got to be much higher than for Powerpacks. So it looks like Tesla could be more profitable selling one Powerpack than selling an average Model S or Model X.