Short-Term TSLA Price Movements - 2016

[SBenson]

Also disingenuous of you with a good smattering of purposely being obtuse. Unless of course you'd care to admit that you have virtually no reading comprehension skills whatsoever?

This time I don't even have to read beyond the first two words of the excerpt: OUR GOAL for service... The excerpt doesn't say today or tomorrow or Q22016 is when our service will be 'invisible'. Indeed, there's no date or timeline at all, it's simply a statement of (they) think there's a real opportunity to revolutionize the way service works. Kind of like it's been their goal since 2003 to accelerate the advent of sustainable transport. Think of invisible service on a similar timeline then come back in a decade or so and we'll discuss what they have or have not accomplished in that regard.

I understand that you despise everything about Elon Musk and what he stands for. I understand that you want everyone else to feel as you do on the subject. And I understand that it's beyond your current abilities to behave in a respectful, honest manner when discussing anything related to the topic, but do try. It'll get you brownie points for when you're proven wrong.

Krugerrand, I understand you are an ultra-fan and an ultra-bull. But no need to be so disparaging. Really.

You say Musk or Tesla didn't promise anything just vaguely stated their ambitions. But then that is the case with everything they say. Even the idea of revolutionizing manufacturing. It's merely a goal or worse vision, with no specific timeline or metrics or milestones or anything. And hence we can't hold them accountable to it. So why are bulls getting excited about this? and why are bulls wondering why market is not pricing in such a tremendous opportunity? The reason is simple, just as you say, it's all "talk". It doesn't mean any of that gets done in any kind of known timeframe.

Hope you get the point now. You can't have it both ways.

 

[techmaven]

Ok... so if the Gigafactory comes online with first cell production in 2016, I assume all the initial cells are built for Tesla Energy. I also assume that the cells built for automotive and the cells built for Tesla Energy are often not the same. Tesla can choose to use cells built for automotive for peak shaving in Tesla Energy products, but not for daily cycling. I suspect most of the PowerPacks are built for peak shaving at the moment.

So let's assume that 20 GWh of capacity for the pilot phase is coming online in 2017. Let's say it takes 6 months to ramp to full capacity. That's say, 4 GWh of production in the first 6 months, 10 GWh of production in the 2nd half of the year. To build 100,000 Model 3's, they need about 6 GWh, starting in August of 2017 at low volumes and ramping to the end of 2017. At best, they need 12 GWh of cells if they are to build 200,000. I am assuming they stockpile Gigafactory output of Model 3 packs, but they'll know what allocations to make as they get closer to the start of production.

What is interesting is that if the TE products are sold at $250/kWh, and their all in cost is $170/kWh, the gross margin is 32%. If the 14 GWh of cell production is completely devoted to TE, they make $980 million in gross profit.

If they devote 12 GWh to Model 3, then the gross profit of the Model 3 including the battery pack is much lower since the gross margin is likely in the 10-15% initially. Note that they have very little additional capex spend on the Gigafactory necessary to achieve end of 2018 run-rate for Model 3 production of 300-350k vehicles.

In other words, they stand to make more than $500 million extra in gross profit selling Tesla Energy products rather than cars.

Also interesting is that they originally expected to spend $250 million on the Gigafactory in 2016 (2015 annual report). That's enough to finish the pilot phase and add some renewable energy. They spent $51.8 million in Q1 on the Gigafactory and is likely within $50-100 million to finish the phase and would spend the rest of the $100 million on renewable energy for the site. However, the Q1 10-Q changed the expected spend to $520 million. Initially, I thought that this was for accelerated Model 3 introduction. But they don't need to spend that for the Model 3 the pilot phase is enough by itself. However, maybe the story is actually flipped around... the pilot phase isn't for the Model 3... it's for Tesla Energy. The 2nd phase is for Model 3.

Obviously the 2nd phase hinges on Panasonic being willing to invest another $1.6 billion into the Gigafactory in 2017.

In any case, if you take 14 GWh, remove say, 10 GWh for Model 3 to assume they hit 150,000 higher capacity pack vehicles, then we're talking 4 GWh for Tesla Energy. That's $280 million in gross profit.

With a second phase online, that then corresponds to the 50% TE and 50% vehicle allocation they mentioned at the shareholder's meeting. So in 2018, we're talking 335,000 Model 3's, another 90,000 Model S+X, and 20 GWh of Tesla Energy products.

Looking at revenue then, we're talking:
Model 3: 335,000 * $42,000 = $14 billion
Model S + X: 90,000 * $90,000 = $8 billion
TE: $5 billion
Total: $27 billion

Margins
Model 3: 15%
Model S+X: 25%
TE: 32%

Gross Profit: $1.8 billion + $1.5 billion + $1.3 billion = $4.6 billion

Obviously, this is probably the best case scenario.

 

[Krugerrand]

Krugerrand, I understand you are an ultra-fan and an ultra-bull. But no need to be so disparaging. Really.

I believe there is a need and it's only fair he get exactly what he's dishing out, no? Or would you prefer he continue to disparage and lie about the very people who are working their butts off to make all our lives and the lives of our children and grandchildren better?

And if you'd please refrain from labelling me, that'd be great. Because I choose not to be publically negative about Tesla on this enthusiast's forum, doesn't mean I find no fault.

You say Musk or Tesla didn't promise anything just vaguely stated their ambitions.

No, I did not. I quoted from the exact excerpt that the good Dr. was using as evidence to prove that his point was in fact not valid. Just like I did with his previous post.

But then that is the case with everything they say. Even the idea of revolutionizing manufacturing. It's merely a goal or worse vision, with no specific timeline or metrics or milestones or anything. And hence we can't hold them accountable to it.

When Tesla talks guidance and such, and what they'll do this year, this quarter or next should always be considered their best guess/estimation. Elon tells us that all the time. Beyond the financial aspect of it, the rest is about goals - short term, medium term and long term. It's their intentions, what they'd like to do if they can figure it out, if all goes well etc... And when Elon specifically says "This is what we WILL do!" then take that to the bank, but understand it may not happen on the exact day he states it will because you know, boats sink, factories burn down, Mother Nature is angry with us, and there are shootouts at the Mexican border - for realz.

Not sure why you need to hold them accountable for anything. Have they not proven themselves enough already? What more must they do to convince you they are doing all they can, the best way they know how in the moment?

So why are bulls getting excited about this?

I can only speak for myself and right now I don't really have words to express how excited and optimistic I am about the future.

and why are bulls wondering why market is not pricing in such a tremendous opportunity?

I'm not. I have little faith in the market in general to understand what's happening right under their noses and I'm well aware that only money talks to them. I can be as patient waiting for the market to catch up as I have to be because I know the day is coming. It's just a matter of time.

 

[FredTMC]

Pencils down goal for 6 weeks for Model 3!

Design freeze was supposed to be end of June. Per EC

So, this sounds like a slip to me...

 

[Tenable]

A noob question, what kind of service does Model S need? What are service centers busy with?

Model S technically doesn't need any maintenance service. However, there are often little issues. My car was delivered late last year, its wonderful and I absolutely love it. However, my GPS kind of sucks.. well it seriously sucks. I brought it in to have the sensors looked it. I had a small squeak under the drivers seat that drove me insane, I had them rectify that. It can be as minor as these issues or something thats gone amiss with any number of other things.

 

[CButterK]

Exclusive: Tesla Takes Delivery Of 1.74 Million Samsung Battery Cells

Hmm... Tesla buying 18650 cells from Samsung, not the new 20700 cell design. So these I speculate, are not the additive to Gigafactory production. So... Is this to supplement current Panasonic production rate for the Model S/X and TE? Is TE Biz taking off so fast that TE needed additional cells beyond what Panasonic can ramp up at the moment?

 

[techmaven]

Exclusive: Tesla Takes Delivery Of 1.74 Million Samsung Battery Cells

Hmm... Tesla buying 18650 cells from Samsung, not the new 20700 cell design. So these I speculate, are not the additive to Gigafactory production. So... Is this to supplement current Panasonic production rate for the Model S/X and TE? Is TE Biz taking off so fast that TE needed additional cells beyond what Panasonic can ramp up at the moment?

These are apparently 2200 mAh LiCO cells... think Roadster cells. Probably not for new automotive use at this point, although they might work to refurbish Roadster packs. But the order is something around 250 Roadster's worth of cells. Seems a bit big, but maybe. Might be for the big Hawaii Solarcity Tesla Energy project that Musk mentioned is kicking off soon.

 

[EinSV]

To put it another way, something is se

Ok... so if the Gigafactory comes online with first cell production in 2016, I assume all the initial cells are built for Tesla Energy. I also assume that the cells built for automotive and the cells built for Tesla Energy are often not the same. Tesla can choose to use cells built for automotive for peak shaving in Tesla Energy products, but not for daily cycling. I suspect most of the PowerPacks are built for peak shaving at the moment.

So let's assume that 20 GWh of capacity for the pilot phase is coming online in 2017. Let's say it takes 6 months to ramp to full capacity. That's say, 4 GWh of production in the first 6 months, 10 GWh of production in the 2nd half of the year. To build 100,000 Model 3's, they need about 6 GWh, starting in August of 2017 at low volumes and ramping to the end of 2017. At best, they need 12 GWh of cells if they are to build 200,000. I am assuming they stockpile Gigafactory output of Model 3 packs, but they'll know what allocations to make as they get closer to the start of production.

What is interesting is that if the TE products are sold at $250/kWh, and their all in cost is $170/kWh, the gross margin is 32%. If the 14 GWh of cell production is completely devoted to TE, they make $980 million in gross profit.

If they devote 12 GWh to Model 3, then the gross profit of the Model 3 including the battery pack is much lower since the gross margin is likely in the 10-15% initially. Note that they have very little additional capex spend on the Gigafactory necessary to achieve end of 2018 run-rate for Model 3 production of 300-350k vehicles.

In other words, they stand to make more than $500 million extra in gross profit selling Tesla Energy products rather than cars.

Also interesting is that they originally expected to spend $250 million on the Gigafactory in 2016 (2015 annual report). That's enough to finish the pilot phase and add some renewable energy. They spent $51.8 million in Q1 on the Gigafactory and is likely within $50-100 million to finish the phase and would spend the rest of the $100 million on renewable energy for the site. However, the Q1 10-Q changed the expected spend to $520 million. Initially, I thought that this was for accelerated Model 3 introduction. But they don't need to spend that for the Model 3 the pilot phase is enough by itself. However, maybe the story is actually flipped around... the pilot phase isn't for the Model 3... it's for Tesla Energy. The 2nd phase is for Model 3.

Obviously the 2nd phase hinges on Panasonic being willing to invest another $1.6 billion into the Gigafactory in 2017.

In any case, if you take 14 GWh, remove say, 10 GWh for Model 3 to assume they hit 150,000 higher capacity pack vehicles, then we're talking 4 GWh for Tesla Energy. That's $280 million in gross profit.

With a second phase online, that then corresponds to the 50% TE and 50% vehicle allocation they mentioned at the shareholder's meeting. So in 2018, we're talking 335,000 Model 3's, another 90,000 Model S+X, and 20 GWh of Tesla Energy products.

Looking at revenue then, we're talking:
Model 3: 335,000 * $42,000 = $14 billion
Model S + X: 90,000 * $90,000 = $8 billion
TE: $5 billion
Total: $27 billion

Margins
Model 3: 15%
Model S+X: 25%
TE: 32%

Gross Profit: $1.8 billion + $1.5 billion + $1.3 billion = $4.6 billion

Obviously, this is probably the best case scenario.

Thanks @techmaven. Your analysis is more detailed and sensible than anything I have seen from Wall Street, which seems to be asleep at the wheel on TE (w/o autopilot!). One minor quibble -- I would not call 2018 estimates that include essentially no growth for S/X from 2016 guidance, a 50% price cut on TE products, and falling short of 2018 vehicle estimates "a best case scenario." But that really doesn't matter since Wall Street is not yet taking TE seriously, even though it should start making a significant impact on the bottom line w/n 12 months or so.

 

[Gerasimental]

Exclusive: Tesla Takes Delivery Of 1.74 Million Samsung Battery Cells

Hmm... Tesla buying 18650 cells from Samsung, not the new 20700 cell design. So these I speculate, are not the additive to Gigafactory production. So... Is this to supplement current Panasonic production rate for the Model S/X and TE? Is TE Biz taking off so fast that TE needed additional cells beyond what Panasonic can ramp up at the moment?

These SDI cells have a much lower energy density. I'm fairly sure they're for TE.

 

[schonelucht]

Those cells are a for about 15MWh of storage. Anyone knows if there are regular shipments like this or if it was a one off?

 

[EarlyAdopter]

See link, Estimates for Tesla Model S up 55% vs May 2015, up 93% for the year:

GM sales drop 18% in May, Ford down 5.9%, FCA up 1.1%

It could be that we are seeing the effect of Model 3 reservations drying up some demand for ICE cars.

Somebody should run the numbers and figure out how many cars those drop in sales equals. I wonder how many down months GM and Ford will see to equal 400,000 new car buyers disappearing from the market.

 

[techmaven]

To put it another way, something is se


Thanks @techmaven. Your analysis is more detailed and sensible than anything I have seen from Wall Street, which seems to be asleep at the wheel on TE (w/o autopilot!). One minor quibble -- I would not call 2018 estimates that include essentially no growth for S/X from 2016 guidance, a 50% price cut on TE products, and falling short of 2018 vehicle estimates "a best case scenario." But that really doesn't matter since Wall Street is not yet taking TE seriously, even though it should start making a significant impact on the bottom line w/n 12 months or so.

Two reasons for the flat S/X in my scenario. One is that I am assuming that Tesla isn't going to redesign the Model S+X pack ahead of the Model 3 to use Gigafactory cells. As a result, they use Panasonic's cells. Second, they are likely to build two new assembly lines for Model 3 production and I am assuming they leave the current production line (BiW, general assembly) for S+X alone for now. As a result, they can't build more than 100,000 S+X a year going into 2018. Besides, it isn't clear that the demand for S+X is much more than that anyways, certainly not when the Model 3 is shipping. I would guess at this point that the X would dominate the S+X production line and quite a few people will opt for the 3 over the S.

As for the price cuts on the Tesla Energy products, I am assuming that the original price point of the PowerPack at $250/kWh is really where they want to be... and they just didn't get there right now. After all, one has to look at the demand curve and I'm not sure they can move 20 GWh at $470/kWh, and so 20 GWh at $250/kWh is far more likely. We're talking amazingly historic levels of lithium ion battery stationary storage.

I am not exactly clear on the differences between the cells in the PowerPack versus the vehicles - we know they are both NCA, but beyond that we don't know. The PowerWall is NMC. At the moment I am guessing that they have to allocate the Osaka plants ahead of time between TE and vehicle cells. Which jives with Panasonic's recent comments about Tesla's Model X delays - if it were the exact same cells, Tesla can merely stuff more of those cells into TE products versus vehicle products. But if the cells aren't the same and they have to pre-allocate, then if Tesla ordered a slew of cells for the X and then couldn't ship them, they get a bit back logged and that hurts Panasonic in the short term. Unclear how the backlog works there from a financial perspective.

I call it the best case scenario because it is optimistic, but not wildly so, across a wide variety of fronts. Sure, they could sell more here or there, but would that cause gross margin to suffer? It is unlikely they win optimistically across the board on all their efforts, hence I call it a best case scenario, but certainly it isn't the absolute best case that could happen.

 

[CButterK]

These are apparently 2200 mAh LiCO cells... think Roadster cells. Probably not for new automotive use at this point, although they might work to refurbish Roadster packs. But the order is something around 250 Roadster's worth of cells. Seems a bit big, but maybe. Might be for the big Hawaii Solarcity Tesla Energy project that Musk mentioned is kicking off soon.

reading further, lower capacity and much higher weight. It would be counter intuitive to utilize it for the Roadster. I vote TE.

 

[schonelucht]

Those cells are a for about 15MWh of storage. Anyone knows if there are regular shipments like this or if it was a one off?

Apparently there was a third shipment as well on May 15. That's cells for roughly 0.6MWh/15MWh/2.5MWh total capacity.

 

[techmaven]

50% price cut on TE products

Oh, one more thing. I chose to model $250/kWh because that's the original price point. However, Tesla can choose any number of price points between $470/kWh and $250/kWh. And the gross profit goes up dramatically of course with the higher price points. I am guessing that the average price for TE products is $250/kWh for 2018, but certainly in 2017, the likely initial price for Gigafactory TE products is much higher. I think it would be fair to guess a $350-400/kWh average price in 2017. It would depend on the amount of cell supply available. In other words, if Tesla was trying to move 14 GWh, I'd choose a lower price point, closer to $250/kWh. If they want to move 2 GWh, then I'd choose a much higher price point, like $400/kWh.

 

[MitchJi]

Not including TE.


They are making over 15% now, according to both Elon and JB. But the GF producd cells were supposed to be at least 35% cheaper. I used the past tense because I don't think it's possible for the GF to drastically increase the production and not substantially decrease their costs. The cells are probably about 80% of the cost of the TE products and 20-30% is reasonable for the additional savings so margins of at least 40% seem likely.

This appears to be the major unanswered question. Maybe DaveT can get an answer from Tesla IR?

Yes!! My question essentially answered. Looks like 'reveal 2' will be autonomous driving 2.0 in model3

IMO the most likely scenario is for full autonomy HW to be added to the MS MX first and to be included with the first M3's.

Ok... so if the Gigafactory comes online with first cell production in 2016, I assume all the initial cells are built for Tesla Energy. I also assume that the cells built for automotive and the cells built for Tesla Energy are often not the same. Tesla can choose to use cells built for automotive for peak shaving in Tesla Energy products, but not for daily cycling. I suspect most of the PowerPacks are built for peak shaving at the moment.

They had already announced that the GF cell production would start in 2916 and that the initial production is going to be for TE. The cells built for cars and TE are never the same. The car cells use a similar chemistry to the backup cells.

So let's assume that 20 GWh of capacity for the pilot phase is coming online in 2017. Let's say it takes 6 months to ramp to full capacity. That's say, 4 GWh of production in the first 6 months, 10 GWh of production in the 2nd half of the year. To build 100,000 Model 3's, they need about 6 GWh, starting in August of 2017 at low volumes and ramping to the end of 2017. At best, they need 12 GWh of cells if they are to build 200,000. I am assuming they stockpile Gigafactory output of Model 3 packs, but they'll know what allocations to make as they get closer to the start of production.

I'm sure that they plan to eventually be able to produce cells as needed for automotive use. I think they will be able to to that from the beginning. If they can't do that for the production ramp how do you think they will be able to handle the 400k in 2018?

However, maybe the story is actually flipped around... the pilot phase isn't for the Model 3... it's for Tesla Energy. The 2nd phase is for Model 3.

Yes it is. Move along folks, nothing to see here.

I don't remember exactly what Elon said about ramping TE, something like he expects it to be faster than cars? Nobody has picked up on the connection to the fact that his current estimate for cars is 500k by 2018 and one million by 2020 .

 

[Curt Renz]

"Seeking Attention" published a "news" item today about China Daily claiming that Chinese deliveries of the Models X will be moved up from early next year to the middle of this year. Shorties at Seeking Alpha are having a field day cheering what they believe is validation of lack of demand for the Model X in America.

However, Fred Lambert of Electrek writes today that the China Daily comment about Tesla Model X deliveries in China to come ahead of expectations for early next year is inaccurate. Lambert says that Electrek reported in February that Tesla disclosed Chinese deliveries of Model X are expected to begin in the second half of this year.

Link to Electrek: Electrek

 

[tinm]

Here's the entire Code conference interview with Elon:

 

[larmor]

"Seeking Attention" published a "news" item today about China Daily claiming that Chinese deliveries of the Models X will be moved up from early next year to the middle of this year. Shorties at Seeking Alpha are having a field day cheering what they believe is validation of lack of demand for the Model X in America.

However, Fred Lambert of Electrek writes today that the China Daily comment about Tesla Model X deliveries in China to come ahead of expectations for early next year is inaccurate. Lambert says that Electrek reported in February that Tesla disclosed Chinese deliveries of Model X are expected to begin in the second half of this year.

Also, earlier in the year, i think tesla mentioned Chinese deliveries may come before Europe.

 

[EinSV]

Oh, one more thing. I chose to model $250/kWh because that's the original price point. However, Tesla can choose any number of price points between $470/kWh and $250/kWh. And the gross profit goes up dramatically of course with the higher price points. I am guessing that the average price for TE products is $250/kWh for 2018, but certainly in 2017, the likely initial price for Gigafactory TE products is much higher. I think it would be fair to guess a $350-400/kWh average price in 2017. It would depend on the amount of cell supply available. In other words, if Tesla was trying to move 14 GWh, I'd choose a lower price point, closer to $250/kWh. If they want to move 2 GWh, then I'd choose a much higher price point, like $400/kWh.

I think you (and @MitchJi, @vgrinshpun and others) have spelled out a convincing case of why TE is going to make a major impact on Tesla in the near term. Differences on a few details are not that important to me personally. Tesla for very good reasons is keeping its cards close to the vest on TE, but enough information is available in your posts and elsewhere on this forum for anyone who is interested to understand the magnitude of the short- and long-term opportunity, which I don't believe is factored into the current share price.

Thanks again for your very helpful analysis.