Tesla beyond 1000

[haid]

The problem is - Tesla isn't generating any money from operations - and thus has no funds to invest in manufacturing cells. May be down the line - when they are selling Gen 3 and making significant profits, they can.

I would think Tesla could whip up a billion dollars to do something interesting. Look back to the most recent round that helped raise funds for paying off the DOE loan.

Of course, this would dilute shares some. But if it were in support of a strategic move (e.g. battery supply), I don't think the market will punish the stock.

How much money would it take to make a mega battery factory?

 

[vfx]

The problem with producing their own as we have said many times before, you run the danger of falling behind in battery tech. ....

Tesla has shown they are not shy in hiring the best of the best in all fields. No reason to think battery designers would not want part of the Tesla pie.

 

[Robert.Boston]

If Tesla made batteries and then sold them, then yes it could lower gross margin. But they will be producing them for their own purposes. So if they can make the cells for $100/kWh instead of buying them for $120/kWh, this will increase their gross margin.

Fair point; what I should have said is that it would likely reduce the ROE, which is ultimately what we care about. The best result Tesla could achieve would be to internalize the margin they now pay to Panasonic, but to do so, they'd have to replicate Panasonic's capital investment. Tesla has higher-value propositions for that cash. Similarly, Apple doesn't own the factories that make their products because that's not where the ROI is highest.

 

[sleepyhead]

In getting back to the original poster's question of what will potentially be Tesla's next big thing to propel it beyond the existing business case fo selling cars, I can think of a couple of different ideas to keep Tesla going to the next big thing. The firt idea I have is that I think it's going to be in terms of what to do with all of this excess battery capacity in the future. I do completely agree with Sleepyhead above though about building their own battery factory as increasing margins and decreasing COGS, but I'm talking about all of the batteries in 6-8-10 years from now as people trade in their Model S or X and Tesla upgrades the battery to the latest tech to sell it on the used market as their CPO S or X Sales. I think they are going to have potential for a huge supply of slightly used 50-70kwh remaining capacity battery packs in suprlus looking for applications.

I think the market could be huge to use these as local power storage units, residential or otherwise, especially combined with Solar City. THere would really be no reason at all for someone to need a home backup power generator if you've got some solar panels and a couple of monster batteries ready for it. I see this capability being huge for someone like SOlar City whose business model seems built on energy arbitrage to/from the power company. Once the power company changes the regulations to charge more for maintaining the lines and less for the generation of power, then the need for home power stoarge will be critical. And there's Tesla with this huge market for batteries more than qualified to do the trick that have essentially already been paid for and now able to be sold again.

The second growth vector I see along similar lines is the peaker power demand model for the larger supercharger sites. Being able to have enough power and capacity for grid storage to help the power companies reduce the need to maintian the peaker power plants currently maintained for that very small level of demand when the power needs are highest, could ultimately prove to be a potentially large income source in my mind for Tesla.

The next thing I see which hasn't been mentioned in a while is the SC network itself. I think licensing that technology to another major automanufacturer once it is compeletely rolled out and operational has potential again to be as much of a moneymaker as their primary business of making and selling cars.

I think the market potential in all three of these ancillary growth vectors are enough to keep me extremely bullish on Tesla's prospects as a company. I'm not a Teslanair just yet, but by maintaining my long term bullish stance through their announced plans for making and selling the greatest cars in the world, and my optimistic belief in the above, I hope to be joining that club sooner rather than later. I've been very bullish and a stockholder since 2011.

Thanks,
Wayne

I agree, there are many ways for Tesla to make money. Your first and second idea are mutually exclusive, but the licensing idea is something that could work out. If Tesla charged $3,000 for each car built by other manufacturers for free supercharger access it would get another $3b for every million cars sold with supercharger access.

Fair point; what I should have said is that it would likely reduce the ROE, which is ultimately what we care about. The best result Tesla could achieve would be to internalize the margin they now pay to Panasonic, but to do so, they'd have to replicate Panasonic's capital investment. Tesla has higher-value propositions for that cash. Similarly, Apple doesn't own the factories that make their products because that's not where the ROI is highest.

I agree with this, and I wanted to point out that I actually never recommended that Tesla build there own battery factory.

But I could see why they would want to build there own factory and that is to reduce supplier risk for their most important component. I also disagree with those who say that the risk is too high, because what if some newer technology shows up making Tesla's battery plant obsolete. Tesla could retool their factory to start making these newer cells/batteries. But this will not happen for many, many years. New technologies don't just show up overnight. And even if a new technology was discovered today, then it would take a decade or two to build up to scale to supply auto manufacturers.

I think we have to accept that Tesla will be using 18650 or similar cells for the next decade or so. Battery technology will not change as fast as some people think it might.