Tesla Gigafactory Investor Thread

[hobbes]

I don't mean to make this seem negative. The 28% growth number was referring cumulative spending for end of Q2 vs end of Q1. Spending in Q2 alone was ~$40M compared to ~$80M in Q1.

Thanks for pointing that out.

Total investment by Tesla on the project that Tesla CEO Elon Musk calls Gigafactory 1 during the second quarter grew by 28 percent from the previous quarter to $183 million, GOED confirmed.

Clicking the link to the previous quarter in the quote above gives you the numbers 62.6 million for Q4 14, 80.6 for Q1, and Q2 was 39.8 million ($143.2 million at the end of Q1 - 183 million at end of Q2). So per quarter spending actually dropped by 50% from Q1 to Q2. Was that expected after the basic building is now done? Would that help earnings numbers or did they likely put the money into the new production line?

- - - Updated - - -

Why is that important? Panasonic is fulfilling their contract with Tesla. Not a surprise.

I remember they used to be reluctant to commit in the beginning, but now that they have a contract, you´re right, it is not a surprise any more.

 

[tftf]

I remember they used to be reluctant to commit in the beginning, but now that they have a contract, you´re right, it is not a surprise any more.

Panasonic so far only invested a few million USD in the Gigafactory (GF). In any case, it won't be $3 billion (Tesla once intended to invest $2 billion on its own until 2020) in total:

Ito said Panasonic plans to invest around 60 billion yen ($478 million) in the current fiscal year through March in its automotive business. That includes the Gigafactory, which Tesla has said will cost up to roughly $5 billion, with Panasonic to shoulder around 30 to 40 percent of the investment in a plant that is key to the automaker's plans to ramp up sales.

http://www.reuters.com/article/2015/06/08/panasonic-autos-batteries-idUSL3N0YU31Z20150608

More importantly, Tesla's latest GF investment numbers don't make any sense to me and are very low in comparison to the $2 billion raised in 2014:

Latest 10-Q (just released): "During the SIX months ended June 30, 2015, we used cash of $54.6 million towards the construction of this project and expect to spend up to $300 million for the full year."

Former 10-Q for Q1 2015: "During the THREE months ended March 31, 2015, we used cash of $56.3 million towards the construction of this project and expect to spend up to $300 million for the full year."

Emphasis in capital letters mine. Less cash used in last six months than in three months within the same period?

In any case, not more than $400 million (taking the highest numbers, six months should probably read three months in the latest 10-Q) will be spent by Tesla on the GF until January 2016, that is $206 million until the end of Q2 2015 plus ("up to" according to Tesla's 10-Q) 190 million in Q3 and Q4 2015.

At the same time, most if not all cash on hand will be gone by then in my opinion (with just the latest line of credit from June 2015 left as a cushion).

I can only see one result: A massive capital raise with new equity soon or very soon - because most of the $2 billion raised in 2014 (convertible bond) weren't used on the GF so far and the rest will be burned within six months on other items.

 

[techmaven]

Panasonic so far only invested a few million USD in the Gigafactory (GF). In any case, it won't be $3 billion (Tesla once intended to invest $2 billion on its own until 2020) in total

Why the $3 billion? The cost of the factory is *up* to $5 billion, with nearly $1 billion in tax breaks. So $5 billion, minus $1 billion, minus $2 billion, leaves $2 billion total for Panasonic & partners for all 5 phases.

http://www.reuters.com/article/2015/06/08/panasonic-autos-batteries-idUSL3N0YU31Z20150608

Even this article says 30-40% of the $5 billion. That's $2 billion tops, assuming both the highest cost $5 billion and the highest share of 40%. At the lowest, it's 30% of $4 billion or $1.2 billion.

I can only see one result: A massive capital raise with new equity soon or very soon - because the majority of the $2 billion raised in 2014 (convertible bond) weren't used on the GF so far and will be burned within six months.

Of course you would see it that way.

Tesla Gigafactory phase 1 is roughly 20% of the plant. Assuming that first part takes 25% of the total cost to start up due to the grounds prep and other work, that's $1.25 billion of the high $5 billion number. Tesla is likely paying $500 million of that, and Panasonic is paying $500 million, again, using the highest numbers. Panasonic's investments in the battery plant is well known sussed out, telegraphed in their own financial reporting and can only be done in bulk when the shell is mostly done. The shell isn't mostly done yet.

Assuming that Tesla's portion of the Gigafactory phase 1 is done by the end of 2015, that's $500-$180 = $320 million over the course of the 2nd half of the year, or $160 million a quarter. But that's using the highest number. It could be as low as $320 million for the phase 1, which is then only $140 million for the 2nd half of 2015, or $70 million a quarter.

Tesla is managing cash closely at this point... they obviously have all the numbers, they could choose to delay projects and other investments or whatever to make the cash work.

Tesla's up to $2 billion in investment will take the next 4-5 years. That's roughly $400 million a year, or $100 million a quarter.

Tesla Energy storage product launch means that the Gigafactory will start producing revenue in the first half of 2016, without needing to wait for the products to be incorporated into Model S, X, or 3. Tesla will be cash flow positive before the Gigafactory phase 1 is completed, assuming no new large capex spending.

Tesla makes a gross profit of over $200 million a quarter already. The Model X launch will likely end up nearly doubling that number on a run rate basis by the end of 2016. They could pay for the rest of the Gigafactory on increased revenues alone, with both the Model X and Tesla Energy products in 2016 and then Model 3 in 2017/2018.

I believe they will raise capital, however, as they won't be content on waiting for the revenues to pay for it. The demand for their products is too strong and they will want to move faster.

 

[tftf]

Why the $3 billion? The cost of the factory is *up* to $5 billion, with nearly $1 billion in tax breaks. So $5 billion, minus $1 billion, minus $2 billion, leaves $2 billion total for Panasonic & partners for all 5 phases.

Tesla's own submitted forms to Nevada authorities say otherwise:

Breakdown of the capital investment - Attachment "F"

Building and Site Infrastructure - $1.1bn
Machinery and Equipment - Building Systems - $300m
Machinery and Equipment - Module, Pack and Battery Assembly - $2.2bn
Machinery and Equipment - Materials Processing - $1.4bn

Source: http://bit.ly/1TgZewP (Reddit summary, link to original PDF document included)

That amounts to $5 billion.

All my other figures ($400 million in total until early 2016, $190 million for Q3 and Q4 2015) are taken or deducted from their 10-Q. Unfortunately, Tesla's numbers don't make sense to me, so I had to make some assumptions.

Maybe someone can explain their 10-Q filings regarding GF investments in Q1 and Q2 2015?

Until then, my outlook remains the same: Tesla will do a massive capital raise (using new equity, because the LOC from June 2015 is already borrowed against collateral assets) soon.

 

[dalalsid]

Tesla's own submitted forms to Nevada authorities say otherwise:

Breakdown of the capital investment - Attachment "F"

Building and Site Infrastructure - $1.1bn
Machinery and Equipment - Building Systems - $300m
Machinery and Equipment - Module, Pack and Battery Assembly - $2.2bn
Machinery and Equipment - Materials Processing - $1.4bn

Source: http://bit.ly/1TgZewP (Reddit summary, link to original PDF document included)

That amounts to $5 billion.

All my other figures ($400 million in total until early 2016, $190 million for Q3 and Q4 2015) are taken or deducted from their 10-Q. Unfortunately, Tesla's numbers don't make sense to me, so I had to make some assumptions.

Maybe someone can explain their 10-Q filings regarding GF investments in Q1 and Q2 2015?

I take this as
Building and Site Infrastructure - $1.1bn (Tesla) - 1.1
Machinery and Equipment - Building Systems - $300m (Tesla) - 0.3
Machinery and Equipment - Module, Pack and Battery Assembly - $2.2bn (50% Tesla) - 1.1
Machinery and Equipment - Materials Processing - $1.4bn (25% - 50% Tesla) - 0.35 - 0.7

Tesla Total = 2.85B - 3.2B over 6 years (2015 - 2020) = 475M - 530M/yr average.

Easy way to get there:
400M in 2015 growing 100M each year gives 3.5B total.

So simple question: Can Tesla spend 100M more next year than it did this year and still be cash flow positive? Can it keep spending 100M more each year?

 

[techmaven]

I take this as
Building and Site Infrastructure - $1.1bn (Tesla) - 1.1
Machinery and Equipment - Building Systems - $300m (Tesla) - 0.3
Machinery and Equipment - Module, Pack and Battery Assembly - $2.2bn (50% Tesla) - 1.1
Machinery and Equipment - Materials Processing - $1.4bn (25% - 50% Tesla) - 0.35 - 0.7

Tesla Total = 2.85B - 3.2B over 6 years (2015 - 2020) = 475M - 530M/yr average.

Easy way to get there:
400M in 2015 growing 100M each year gives 3.5B total.

So simple question: Can Tesla spend 100M more next year than it did this year and still be cash flow positive? Can it keep spending 100M more each year?

Still up to $5 billion....

Dalalsid, the Tesla portions are too high I think in your assumptions. I don't see any reason to think that the Module, Pack, and battery assembly is 50% Tesla, nor the materials processing being as high as 25%.

I did forget to incorporate the expansion from the original plans... Tesla is looking to build a bigger Gigafactory than originally designed.

In any case, I'm not so sure that the Gigafactory spend is higher in the next few years... it should be roughly the same, but with a lot more revenue coming in to help pay for it.

 

[tftf]

So simple question: Can Tesla spend 100M more next year than it did this year and still be cash flow positive? Can it keep spending 100M more each year?

We know what happened so far: They raised $2 billion in early 2014 and will at most (!) have only invested $400 million (includes other cash sources, I'm not even considering that) into the GF up to January 2016.

The CFO already announced cash-flow positive quarters (at least from operating activities) back in Q4 2013 and that didn't work except for one single Q (Q1 2014 iirc):

Deepak Ahuja
Yes. Well, I think in 2014, we certainly expect to generate significant cash flow from operations.

I therefore see a massive equity raise coming soon to finance the full GF and the Model 3.

PS: Correct 10-Q figures would also help, but the ballpark numbers remain the same.

 

[32no]

We know what happened so far: They raised $2 billion in early 2014 and will at most (!) have only invested $400 million (includes other cash sources, I'm not even considering that) into the GF up to January 2016.

The CFO already announced cash-flow positive quarters (at least from operating activities) back in Q4 2013 and that didn't work except for one single Q (Q1 2014 iirc):



I therefore see a massive equity raise coming soon to finance the full GF and the Model 3.

PS: Correct 10-Q figures would also help, but the ballpark numbers remain the same.

TFTF,

Thanks for joining the conversation here on TMC. It is nice to get out of the Seeking Alpha echo chamber sometimes. However, your whole comment is FUD. Sure, Tesla has only invested $400 million into building the Gigafactory so far, but we have no idea how much equipment they have purchased so far either, so if you're trying to say that they raised $2 billion and spent most of it on something else, you are wrong until you have sufficient facts to back it up.

Second, Deepak did indeed say that 2014 would be cash flow positive from operations, and they almost accomplished that for the whole year:

Quarter	Cash Flow From Operations
Q1 2014	$58,723,000
Q2 2014	-$1,662,000
Q3 2014	-$27,996,000
Q4 2014	-$86,402,000
2014	-$57,337,000

The only reason that they didn't have significant cash flow is their massive miss on guidance due to production, shipping, and holiday slip ups. If they met their guidance of 33k cars they would have been about break even and if they met their original guidance of 35k cars they would have been significantly cash flow positive.

 

[tftf]

Sure, Tesla has only invested $400 million into building the Gigafactory so far

No, it will be $400 million by the end of 2015 (that's the maximum amount, i.e "up to"), after two more quarters. So far they only spent $206 million. Here's the relevant line from the latest 10-Q:

"We have acquired land for the site of our Gigafactory and have incurred $206.6 million of construction costs as of June 30, 2015."

Again, this number doesn't match their Q numbers for Q1 and Q2 2015. I'm quoting the highest number above to be on the safe side.

(I'm still waiting for possible explanations for Q1 and Q2 numbers, their latest 10-Q report seems to contain errors, details outlined in my posts above).

You can call my prediction FUD. I predicted back in 2013 that the GF will cost at least $5 billion and I'm now predicting that Tesla will soon need to do a massive equity offering to keep the GF and Model 3 development going.

We will see in the next few months who was right (either Tesla can generate enough internal cash-flow or it has to tap outside sources).

I will come back and either congratulate you and other posters above on being correct or remind all of you of my prediction.

We should know by the end of Q1 2016, probably much earlier (Tesla will very likely advertise the offering as a mere "safety cushion").

 

[32no]

No, it will be $400 million by the end of 2015 (that's the maximum amount, i.e "up to"), after two more quarters. So far they only spent $206 million. Here's the relevant line from the latest 10-Q:



Again, this number doesn't match their Q numbers for Q1 and Q2 2015. I'm quoting the highest number above to be on the safe side.

(I'm still waiting for possible explanations for Q1 and Q2 numbers, their latest 10-Q report seems to contain errors, details outlined in my posts above).

You can call my prediction FUD. I predicted back in 2013 that the GF will cost at least $5 billion and I'm now predicting that Tesla will soon need to do a massive equity offering to keep the GF and Model 3 development going.

We will see in the next few months who was right (either Tesla can generate enough internal cash-flow or it has to tap outside sources).

I will come back and either congratulate you and other posters above on being correct or remind all of you of my prediction.

We should know by the end of Q1 2016, probably much earlier (Tesla will very likely advertise the offering as a mere "safety cushion").

I agree that Tesla might raise cash, and if they do, it won't be until after the end of Q1 2016 because that's when the stock will be high due to the following catalysts: excellent Model X sales, free cash flow and profitability, Model 3 concept reveal and reservations, etc. This will definitely be a safety cushion capital raise because Tesla will have over $1 billion in cash left and they will be cash flow positive by then, which shows you it is definitely not the emergency cash raise you are expecting.

Anyway, if you are so confident in your predictions, why don't you tell us how many cars you think Tesla will deliver this year and next? Your friend logical thought (Mark Spiegel) said he predicts 37,000 cars this year. Do you agree with him?

 

[jhm]

Let's suppose that starting Q1 2016, Tesla builds out 3 GWh each quarter. I think Tesla stands to gross $50 to $60 per kWh, but to be conservative let's suppose on $40 of gross profit per kWh. So output in 2016 is about 7.5 GWh for $300M gross, 19.5 GWh in 2017 for $780M gross, and 31.5 GWh in 2018 for $1260 gross. Meanwhile Tesla ponies up $2000M for 50 GWh of capacity. This is an investment of $40M per GWh capacity or $480M per year to install 12 GWh capacity. So the combined cash flow of gross minus investment is ($180M) in 2016, then $300M in 2017, and $780M in 2018. So clearly 2016 is the tricky year to get through. Notice also that in Q4 2016 under this ramp we have capacity to make 12 GWh annually, or 3 GWh in that quarter. This grosses $120M which matches the investment rate per quarter.

Now we cannot know exactly what this ramp will look like, but notice that the first quarter of the plant is about 12.5 GWh capacity. Once that is in place, we can pretty much grow out the rest of the plant on a positive cash flow basis. I suspect this is by design. The pilot facility is the critical mass for entire project. It is sufficient rocket fuel to break free of earth's gravity. I think we can focus on the discussion of whether their is enough cash to complete the pilot.

 

[techmaven]

Don't forget that Tesla Energy products have been made from Panasonic's plants in Japan so far and we really don't know yet the depths of that supply and the GM, except to say somewhere in the 15% range.

 

[chickensevil]

Don't forget that Tesla Energy products have been made from Panasonic's plants in Japan so far and we really don't know yet the depths of that supply and the GM, except to say somewhere in the 15% range.

On this note those were just the pilot/prototype projects. They are currently doing these in the US at Fremont and the other location that I can't recall the name. They said pretty clearly on the call that gigafactory operations are underway in these facilities and that it will be moved into their permanent location in Nevada in Q1. So they are massively derisking some of this by working on making these products now before it all goes under one roof. I believe their comments were that the target GM on these were currently right around break even but that it would change once they moved to Nevada.

About the cash raise, I will not be surprised to see one happen but not for the reason stated regarding "running out of funds". It will likely be because they are going to be looking toward acquiring another location soon combined with all the machinery they are going to need to start buying in 2016/2017 for the Model 3 that will be the need for the cash.

They could have slowed things down and slowed their growth by keeping that 2BN in funds just burning a hole in their pocket until it was totally spent on the gigafactory in 2020 or they could use that money now to push above the original volume cap of MS/MX production beyond that ~40k mark and get to making more cars. I for one, and glad they spent the money because capacticty for at least 100k a year MS/MX (maybe more) was well worth the spending.

 

[Perfectlogic]

Let's suppose that starting Q1 2016, Tesla builds out 3 GWh each quarter. I think Tesla stands to gross $50 to $60 per kWh, but to be conservative let's suppose on $40 of gross profit per kWh. So output in 2016 is about 7.5 GWh for $300M gross, 19.5 GWh in 2017 for $780M gross, and 31.5 GWh in 2018 for $1260 gross. Meanwhile Tesla ponies up $2000M for 50 GWh of capacity. This is an investment of $40M per GWh capacity or $480M per year to install 12 GWh capacity. So the combined cash flow of gross minus investment is ($180M) in 2016, then $300M in 2017, and $780M in 2018. So clearly 2016 is the tricky year to get through. Notice also that in Q4 2016 under this ramp we have capacity to make 12 GWh annually, or 3 GWh in that quarter. This grosses $120M which matches the investment rate per quarter.

Now we cannot know exactly what this ramp will look like, but notice that the first quarter of the plant is about 12.5 GWh capacity. Once that is in place, we can pretty much grow out the rest of the plant on a positive cash flow basis. I suspect this is by design. The pilot facility is the critical mass for entire project. It is sufficient rocket fuel to break free of earth's gravity. I think we can focus on the discussion of whether their is enough cash to complete the pilot.

The gigafactory ramp isn't nearly this steep unfortunately, they said $4-500M in revenue for 2016 last earnings and "probably at least a few billion in 2017", this is when the business starts earnings real money.

 

[JRP3]

You can call my prediction FUD. I predicted back in 2013 that the GF will cost at least $5 billion...

Did you also predict the increase in size of the GF?

 

[Krugerrand]

You can call my prediction FUD. I predicted back in 2013 that the GF will cost at least $5 billion and I'm now predicting that Tesla will soon need to do a massive equity offering to keep the GF and Model 3 development going.

No, that's not at all what you said in 2013. More accurately you were saying (all over the Internet) that the GF would cost $15-20 billion, that you couldn't see any way for it to be done for less. You were firmly in the camp of 'no way Tesla is going to be able to get that kind of money/be able to finance it/blah, blah, blah'.

As far as your current prediction - it's not much of a prediction. Tesla has already left the door open for another round of 'something' per the most recent ER call and they've even labelled it for us: 'in case of macro/unexpected/ stuff'. So, you're a little late. I've no doubt, though, that you'll return having conveniently forgotten much of what you've said in the past, the timing of it all (such as the current prediction after the fact), and then try presenting it in a light that makes you look like a close friend of Dion's.

 

[tftf]

No, that's not at all what you said in 2013. More accurately you were saying (all over the Internet) that the GF would cost $15-20 billion, that you couldn't see any way for it to be done for less. You were firmly in the camp of 'no way Tesla is going to be able to get that kind of money/be able to finance it/blah, blah, blah'.

You must confuse me with other people (John Petersen?). I wrote $5 to $10 billion for the Gen III car project plus the battery factory (sum) back in 2013:

For The Record: Tesla Will Likely Need 5 To 10 Billion USD For Its Gen III Car And Battery Plant - Tales From The Future | Seeking Alpha

But that's not important. The important fact remains that most money raised will be used for other purposes with the GF project still in early stages:

- Tesla raised $2 billion back in 2014 (up to $2.3 bn with over-allotment), communicating that these funds will be largely used for the GF project

- Only $ 206 million was invested in the GF until the end of Q2 2015 in total (maybe less, their 10-Q numbers don't seem to match. Also, their report to the GOED in Nevada only mentions $183 million)

- Cash on hand (and of course this includes all other cash/earlier capital rounds) was down to $ 1.1 billion by the end of Q2, cap-ex and op-ex will likely rise in Q3 2015

- Tesla will only invest a further $190 million in the GF until the end of 2015 (from 10-Q: $300 million - $110 million combined for Q1/Q2 2015. These numbers can't be verified because of likely 10-Q errors, I'm again using the highest numbers)

 

[chickensevil]

Oh, no you don't get off that easy, just because you happened to mention a number that Tesla has also used.

tesla's original number was 4-5 billion with only 2/3 of that capacity earmarked for the car production which comes in at 500k a year. So taking a simple fraction on the assumed worst number that would be 3.3BN to produce 500k cars.

you stated 5-10 B based one 250-500k cars. So matching numbers up one for one, you are saying 500k at 10B and tesla originally stated (in the worst case) 3.3B for 500k that makes you way off the mark on the costs.

i appreciate that way back then you tried to pull from legitimate number sources, but what you didn't take into account was how much cost savings they are actually expecting to get out of all this by going to such a large scale.

now we still have a projected 5B spending from Tesla (last I heard) and yet they have already said they are going to get much more capacity out of that than originally planned. So that drags down the cost per car even lower if sticking to 500k as they are still looking at only 35GWh going to the cars with the rest to storage.

there were plenty of flaws with that article, though it was a valiant effort to come up with a number before I think anyone had a number in their head. But don't go patting yourself on the back when the data doesn't even remotely match your claims...

 

[MitchJi]

Has anyone figured out how much Tesla will save by using solar and wind plus batteries? I believe that producing lithium cells is energy intensive (drying) and energy prices in Japan have to be much higher?

 

[jhm]

The gigafactory ramp isn't nearly this steep unfortunately, they said $4-500M in revenue for 2016 last earnings and "probably at least a few billion in 2017", this is when the business starts earnings real money.

Ok, suppose my ramp is likely about 3 months too early. So that would be more like 4.5 GWh in 2016, grossing about $140M. This is about 1.7GWh for TE products and the rest of it goes to vehicle production.

But to make 90k Model X/S, Tesla will need about 7 GWh. Add to that about 1.7 GWh for TE. So if Tesla moves most of the packing to Sparks, 7.5 GWh may not be that far off.

To be clear, when I am talking about gross profit per kWh, I am thinking about both auto and TE packs.