Short-Term TSLA Price Movements - 2016

[vgrinshpun]

True. Shhhh. BTW. There is another detail of Tesla Energy that is non-obvious. The cash flow implications and cell purchasing and inventory efficiencies it delivers to the business as a whole - which are stellar.

As for Model X - its all good. The good news and the worrying news. It will be fine when it needs to be and it will worry people beforehand. Nice and predictable. My biggest worry about a Model X is that I might really want one. The big difference being that I would never rush out and buy the first of a new car so I have no reason to care about early adopter issues. Believe me I am more mainstream and conservative than anyone that has ever encountered an issue with a Tesla product and there are loads more of me in this respect than there is of you. The main bulk of customers are the silent majority - always true of the early days of any new technology.

Did you just shoosh me... AGAIN??



Another implication of this that I think Tesla Energy is now on track to achieve level of gross dollar profit per kWh similar to the cars, while the net profit will likely DWARF their automotive profit. This is what I've speculated long time ago (before the Tesla Energy reveal) and why I was thoroughly disappointed to see Elon tweeting $250/kWh PowerPack price following the reveal. That is why I am now very happy to see them pricing PowerPacks at $470/kWh.

Here is how math works - this is just a napkin math to demonstrate the concept, so please do not rash to comment on this number or that (you know who you are...), just try to get the big picture!

Model S (future) ASP = $90,000
Model S (future) GM = 30%
Model S (future) GP: $90,000 x 0.3 = $27,000
Model S (future) GP per kWh $27,000 / 90kWh = $300/kWh

PowerPack (future) cost = $250/kWh x 0.7 = $175/kWh
PowerPack (future) price = $470/kWh
Power Pack (future) GP per kwH $470/kWh-$175/kWh = $295/kWh

Now, let's consider the following:

• Huge R&D required for cars vs. small incremental R&D for PowerPacks (most of R&D is already completed as required to develop cars)
• Sizable SG&A expenses for cars (service centers, stores, Superchargers...) vs. small incremental SG&A for PowerPacks
• Sizable risk associated with scaling-up of automobile production (supplier issues, complexity of manufacturing, etc..) vs... OK, you get the picture...

This is very good news.

On a different subject, there is zero shares available to borrow for short selling at Fidelity...

 

[esk8mw]

Did you just shoosh me... AGAIN??



Another implication of this that I think Tesla Energy is now on track to achieve level of gross dollar profit per kWh similar to the cars, while the net profit will likely DWARF their automotive profit. This is what I've speculated long time ago (before the Tesla Energy reveal) and why I was thoroughly disappointed to see Elon tweeting $250/kWh PowerPack price following the reveal. That is why I am now very happy to see them pricing PowerPacks at $470/kWh.

Here is how math works - this is just a napkin math to demonstrate the concept, so please do not rash to comment on this number or that (you know who you are...), just try to get the big picture!

Model S (future) ASP = $90,000
Model S (future) GM = 30%
Model S (future) GP: $90,000 x 0.3 = $27,000
Model S (future) GP per kWh $27,000 / 90kWh = $300/kWh

PowerPack (future) cost = $250/kWh x 0.7 = $175/kWh
PowerPack (future) price = $470/kWh
Power Pack (future) GP per kwH $470/kWh-$175/kWh = $295/kWh

Now, let's consider the following:

• Huge R&D required for cars vs. small incremental R&D for PowerPacks (most of R&D is already completed as required to develop cars)
• Sizable SG&A expenses for cars (service centers, stores, Superchargers...) vs. small incremental SG&A for PowerPacks
• Sizable risk associated with scaling-up of automobile production (supplier issues, complexity of manufacturing, etc..) vs... OK, you get the picture...

This is very good news.

On a different subject, there is zero shares available to borrow for short selling at Fidelity...

Excellent analysis. Also, no shares available to short at Optionshouse, either.

 

[Curt Renz]

Also, no shares available to short at Optionshouse, either.

More Tesla shareholders must be doing as I have done, and have placed GTC (good-till-cancelled) orders to sell at 50% above the current price. That should make those shares unavailable for borrowing by short sellers.

 

[Oil4AsphaultOnly]

Understanding that the powerpack is priced below their nearest competitor, the $470/kwh pricing still seems strange to me. I could've sworn that Musk's statement of $250/kwh (during the conference call) was the customer's price for utility-scale storage (something well above 5.4MWh)? And without a link to back this up, it's just supposition on my part.

However, this does mean the powerpack is more expensive than the powerwall ... which doesn't make sense! Is their website listing retail pricing? And that you'd have to call to get better than that? Or was there a typo and it was meant to be $64k instead of $94k for 2 powerpacks?!

 

[Hogfighter]

At the same time didn't they say they were planning on combining S and X into one assembly line (BIW)? In the last CC they refused to talk about the production set up and this combination. As far as we know there is an S BIW line capable of 1000+ per week and an X line that is supposedly at 750 ramping up to 1000, and it is possibly this line that is capable of the 2000 at full production rate.

It has been awhile since they quoted that 1600-1800 number, things may have changed.

Thanks to all for giving their thoughts on 2016 delivery guidance. It does look, especially with the refresh of the S and healthy demand, that there is still a path to 80,000 deliveries for 2016. It does, however, seem that things have changed somewhat in the past few weeks regarding X deliveries, and Tesla is putting themselves in a bit of a corner (especially since they missed in Q1).

I'm trading conservatively until after the ER and CC in early May, however. Best of luck to everyone.

 

[vgrinshpun]

Did you just shoosh me... AGAIN??



Another implication of this that I think Tesla Energy is now on track to achieve level of gross dollar profit per kWh similar to the cars, while the net profit will likely DWARF their automotive profit. This is what I've speculated long time ago (before the Tesla Energy reveal) and why I was thoroughly disappointed to see Elon tweeting $250/kWh PowerPack price following the reveal. That is why I am now very happy to see them pricing PowerPacks at $470/kWh.

Here is how math works - this is just a napkin math to demonstrate the concept, so please do not rash to comment on this number or that (you know who you are...), just try to get the big picture!

Model S (future) ASP = $90,000
Model S (future) GM = 30%
Model S (future) GP: $90,000 x 0.3 = $27,000
Model S (future) GP per kWh $27,000 / 90kWh = $300/kWh

PowerPack (future) cost = $250/kWh x 0.7 = $175/kWh
PowerPack (future) price = $470/kWh
Power Pack (future) GP per kwH $470/kWh-$175/kWh = $295/kWh

Now, let's consider the following:

• Huge R&D required for cars vs. small incremental R&D for PowerPacks (most of R&D is already completed as required to develop cars)
• Sizable SG&A expenses for cars (service centers, stores, Superchargers...) vs. small incremental SG&A for PowerPacks
• Sizable risk associated with scaling-up of automobile production (supplier issues, complexity of manufacturing, etc..) vs... OK, you get the picture...

This is very good news.

On a different subject, there is zero shares available to borrow for short selling at Fidelity...

It appears that on the heels of the blow-out in Model 3 reservations, while everybody is now worrying about where is the money for additional automotive plants will come, Elon just pulled a huge fat bunny out of the hat. Let's do some additional napkin math...

Let's conservatively assume that PowerPacks business will require $45/kWh (25% of top of $175/kWh) for operational expenses. This leaves $295/kWh - $45/kWh = $250/kWh for net profit.

Let's also assume that Tesla, following the launch of GF production later this year will be able to sell in 2017, prior to manufacturing Model 3, 5GWh of PowerPacks.

So Tesla Energy should be able to bring 5M kWh x $250/kWh = $1.25B of cash in 2017.

 

[vgrinshpun]

Understanding that the powerpack is priced below their nearest competitor, the $470/kwh pricing still seems strange to me. I could've sworn that Musk's statement of $250/kwh (during the conference call) was the customer's price for utility-scale storage (something well above 5.4MWh)? And without a link to back this up, it's just supposition on my part.

However, this does mean the powerpack is more expensive than the powerwall ... which doesn't make sense! Is their website listing retail pricing? And that you'd have to call to get better than that? Or was there a typo and it was meant to be $64k instead of $94k for 2 powerpacks?!

Elon did tweet $250/kWh pricing for the PowerWall following the reveal. Please read my posts up-thread for my take take on the significance of $250 vs $470/kWh.

Also, the PowerWall pricing is very similar to PowerWall, $468.75/kWh to be precise.

 

[Johan]

@vgrinshpun: that's my kind of napkin math. In reality to move volumes like 5 GWh worth of stationary storage in a year they would have to do quite a few very large projects (the market isn't yet mature for thousands of smaller projects) and likely come down a bit on pricing. But nevertheless, my kind of napkin math

 

[Rarity]

Gotta wonder what the demand is at $470/kWh.

 

[vgrinshpun]

Looks like market starting to dig this Tesla Energy development - we are about to break through $250, coming from the day lows of $245.71. I, hovewer, think that the true scale of what just happened will require few days for reflection...

 

[Rafael]

It appears that on the heels of the blow-out in Model 3 reservations, while everybody is now worrying about where is the money for additional automotive plants will come, Elon just pulled a huge fat bunny out of the hat. Let's do some additional napkin math...

Let's conservatively assume that PowerPacks business will require $45/kWh (25% of top of $175/kWh) for operational expenses. This leaves $295/kWh - $45/kWh = $250/kWh for net profit.

Let's also assume that Tesla, following the launch of GF production later this year will be able to sell in 2017, prior to manufacturing Model 3, 5GWh of PowerPacks.

So Tesla Energy should be able to bring 5M kWh x $250/kWh = $1.25B of cash in 2017.

With this pricing I can't see the Power Packs making economic sense for the customers except in some special circumstances (very high electricity rates/weak grid). For example in the Finland the utilities pay about 4 cents per kWh as far as I know.

 

[SBenson]

I think the Model X program and the concern about the Model X program are both on a nominal trajectory thesis wise.

Cool, good to know...

 

[jhm]

I love these new prices on Powerpacks. As long as Tesla is supply constrained for battery packs, they can charge pretty much whatever they want. Years ago, I think I made the argument that margins should be high on stationary batteries. Let me update that. Fast forward to 2018 and Tesla cannot make Model 3s fast enough. They may find themselves in a situation where they must choose between making more Model 3 or more Powerpacks. At that point, the gross margin made on a Model 3 divided by kWh of it battery becomes the minimum gross margin per kWh for Powerpacks. This has nothing to do with the cost of making batteries. It is simply a matter of optimizing profit per finite Gigafactory capacity.

So my interpretation is that Tesla has bumped the price of a Powerpack from $25k to $47k because they can and quite possibly because they must. The demand coming from Model 3 may well book Gigafactory capacity to an extent that selling a Powerpack for less could impose an opportunity cost in selling autos.

If this is correct, then the critical issue for driving down the price of Powerpacks is to build out more Gigafactory capacity. Remember years ago when being battery constrained limited Model S production? Now being battery constrained means higher Tesla Energy prices, which is not a bad problem to have. Higher margins on Powerpacks will simply mean a faster payback on Gigafactories.

 

[esk8mw]

Looks like market starting to dig this Tesla Energy development - we are about to break through $250, coming from the day lows of $245.71. I, hovewer, think that the true scale of what just happened will require few days for reflection...

If you are a short-term trader, this might be one of those days where you buy at the money calls expiring next week right around the close today. Volume is pretty low and max pain is at 247.50 today, so there will likely be an effort to keep the price at 247.50, +/-2.50. I also agree that the TE news will take some time to sink in. It could run up next week once the options expiry limiter is removed.

Grain of salt though, my short-term TSLA trades have been mediocre at best over the past couple weeks.

 

[eloder]

With this pricing I can't see the Power Packs making economic sense for the customers except in some special circumstances (very high electricity rates/weak grid). For example in the Finland the utilities pay about 4 cents per kWh as far as I know.

There's already a multi-billion dollar lead acid battery busines out there for many industries--cellular providers, data centers, web/cloud services, peaker plants... huge list. This price tremendously undercuts the existing market by a huge margin, will last longer, and has a lot more benefits such as not needing to dedicate entire rooms and teams to dangerous material handling.

I've always said the residential case doesn't make senses for a while, but the business case makes senses immediately and dozens of smart busuinesses will catch on.

 

[vgrinshpun]

Gotta wonder what the demand is at $470/kWh.

I would venture to say that it is at or above of what Tesla could produce.

If history is of any significance here, Tesla were always too conservative on the demand side. They originally put production capacity to cover global sales of 40K Model S and X per year, only to increase it three-fold last year. They also obviously underestimated real demand for Model 3.

If we are willing to extend any assumption of intelligence and shrewdness to Elon and team, I got to think that setting the $470/kWh price is a thoroughly calculated step indicating that demand is there.

This development also puts in perspective Tesla hiring former GE executive to head Tesla Energy sales.

 

[jhm]

Elon did tweet $250/kWh pricing for the PowerWall following the reveal. Please read my posts up-thread for my take take on the significance of $250 vs $470/kWh.

Also, the PowerWall pricing is very similar to PowerWall, $468.75/kWh to be precise.
View attachment 173450

Right. Another implication of being constrained in GF capacity is that the GM/kWh needs to be the same for all Tesla Energy products. So if the packaging cost is proportional to the kWh, then Powerwalls and Powerpacks should have about the same price per kWh.

This also removes some of the scale advantage that utilities may have over residential batter owners, at least comparable unit pricing from Tesla. So I think this is good news for those of us who root for distributed energy, but this is another topic for the SolarCity thread.

 

[jhm]

Wow, I am feeling very bullish on Tesla Energy. Doubling your price shows enormous confidence going into an explosive market. Bears, of course, will try to argue that Tesla had to raise their prices because they can't achieve the cost reductions promise. But then you'd have to imagine that Tesla's cost for a Powerpack is at near $470/kWh, which does not make any sense at all. Tesla is clearly adding margin to the price because they can, and that is a huge bullish move.

 

[Rarity]

There's already a multi-billion dollar lead acid battery busines out there for many industries--cellular providers, data centers, web/cloud services, peaker plants... huge list.

How many billions? 1 billion a year? 10 billion a year?

 

[Tslynk67]

More Tesla shareholders must be doing as I have done, and have placed GTC (good-till-cancelled) orders to sell at 50% above the current price. That should make those shares unavailable for borrowing by short sellers.

So as my shares are just sitting there, someone might be gambling with them?

I should set the same order then, but not at 50% higher - that's too risky, I'm looking to sell around $650