Tesla Gigafactory Investor Thread

[dhanson865]

"We do expect that cell production will start up in the second half of next year." 50:15

Not the end of 2016.

I'd argue that next year from 2015 is 2016. I'm not sure why you think "next year" from today isn't 2016?

See my partial transcript above.

 

[Yuri_G]

I'd argue that next year from 2015 is 2016. I'm not sure why you think "next year" from today isn't 2016?

See my partial transcript above.

We are saying the same thing. Starting in the second half of 2016 is different than starting at the end of 2016. I would interpret that as starting in Q3 2016.

 

[tftf]

The Q3 2015 shareholder letter says "end of 2016" for stationary cells produced in the GF. See on page 2.

And on the CC the CTO mentions EV cells by 2017, as I had mentioned. See transcription provided by dhanson.

I don't see how that is massively ahead of schedule on the EV side.

We will likely have to wait for the 10-Q for more details.

PS: I also wonder if Tesla will finally correct/clarify their GF investment numbers for 2015 (numbers didn't match in previous 10-Q). In any case, Tesla and Panasonic didn't invest a lot in the GF so far compared to full $4-5bn needed/projected until 2020.

 

[Yuri_G]

"The Gigafactory project is on course to begin battery cell and pack production in 2017."

Q1 2014: [/FONT][/COLOR]http://ir.teslamotors.com/secfiling.cfm?filingID=1193125-14-187459&CIK=1318605

 

[JRP3]

+1 listen to the call guys.



I had to play that section 3 times to get this rough transcription, it still has errors but it's pretty close considering both guys stutter/stumble with unrehearsed Q&A.

49:33 Our next call...
Q - Colin Rush, can you talk about acceleration of ramp of the Gigafactory? What are you seeing... 2016, when will we see cells [from there] going into cars

A - JB we've accelerated storage products ... we do expect to start product of cells in second half next year*, which is again ahead of plan. Some of those cells will be initially allocated for Tesla Energy products. And we are still targeting around 2017 for the first cell production that would be for going into vehicles and going into the Model 3 so that remains on target.

OK, I missed that.

 

[dmckinstry]

2. I was stating obvious facts. Generating heat with electricity is not efficient and using batteries for storage for that makes even less sense.

Even the most efficient PV cells have a lot of waste heat that can be used (as already mentioned) via heat pumps.

 

[tftf]

PS: I also wonder if Tesla will finally correct/clarify their GF investment numbers for 2015 (numbers didn't match in previous 10-Q). In any case, Tesla and Panasonic didn't invest a lot in the GF so far compared to full $4-5bn needed/projected until 2020.

To expand on these numbers:

If one building corresponds to one block as the article/linked video below says then satellite and drone images will immediately show when Tesla starts building up additional battery capacity in Nevada:

...according to a Story County official, Dean Haymore, Tesla is planning 7 “blocks” (with one block being the under-construction Gigafactory).

Tesla Gigafactory Could Be Over Twice Initially Planned Size | CleanTechnica

Therefore the current GF building will probably only be able to pump out 5-7 GWh on the cell/pack level in 2017.

This very roughly corresponds to Tesla and Panasonic only investing about 20% (of the total planned funding of $4-5bn by 2020) until 2017 (that's even generously rounding up past and projected cap-ex for the GF).

The next 10-Q will show how much has been spent on just the first block (corresponding to about 14% of capacity in all 7 blocks) so far.

I know this info isn't new, the video in question has been discussed before: Tesla Gigafactory - Page 53

But this topic is interesting because of the total investment needed for the GF (to one day build 500k car batteries/year) versus money raised and invested up to now.

Tesla can probably only equip about 70-100k* cars/year (which limits future Model3 sales, this production ceiling can't be changed overnight until new blocks are constructed) using the current block 1 building.

_____
* I'm likely very generous with 100k cars/year (because Tesla was talking about 35GWh on cell level and 50GWh on pack level once full output is reached and pack sizes per car keep going up in the future; also, in case assembled cells arrive from third parties into the GF Tesla won't have the full claimed cost advantages over other suppliers...).

 

[Tim]

Electricity is not an efficient way to produce heat.

JB said there's not even going to be natgas piped into the gigafactory. All process heat is going to be via heat pump. Sounds pretty efficient to me.

Edit:

Just saw your later reply in thread. A modern heat pump can easily have a COP of 4. Even compared to solar heat directly. A heat pump powered by 22% efficient panels probably exceeds what you could do by concentrating sunlight directly.

 

[electracity]

.........

Finally, there are technological improvements... Tesla's current cell is already much better than the chemistry that LG can supply in 2017. Tesla has already hinted several times that they expect to improve their current cell at least once, if not twice before the Model 3 ships. That also lowers the per kWh price.

It must be fascinating to have access to so much proprietary information.

- - - Updated - - -

According to the shareholder letter, which the CFO would have signed off on, "We have also accelerated plans to begin cellproduction for Tesla Energy products at theGigafactory by the end of 2016. This is severalquarters ahead of our initial plan."

We can quibble over the details, but Tesla is ahead of schedule at the GF. They are moving battery production out of Freemont to free up resources to build more cars and prepare for the Model 3. They are building product and generating cash flow at the GF and automating the battery pack production, increasing productivity to drive down costs. You are entitled to your own narrative, but not your own facts. Personally I was hedged and concerned about the bearish model, but based on this solid report, Tesla is positioned for a long run of positive news. Making delivery numbers for 2015, which the market discounted. Ramping up Model X in 2015, which the market discounted. Going live in the GF in 2015, which the market did not anticipate, all leading up to the Model 3 pre-reveal in March, which many expected to be delayed. All things considered, being sold out for the GF through 2017, seems more important than producing cells in December 2016 or March 2017.

Except that Tesla neither will make 55000 cars or make nearly the number of MX they forecast. I think Tesla is doing fine, but they are not making their numbers.

Gigafactory guidance, like all guidance, is a lowball estimate. Until they actually produce cells they haven't made a meaningful goal. Proclaiming them as the undisputed leader in low cost li-ion is a bit premature before they have made a single cell. Stuff happens.

 

[dc_h]

Tesla is on track to produce 70-80,000 cars in 2016 without any GF cells. Based on their ramp up, it seems likely that margin from Tesla Energy will be reinvested in ongoing development of the GF. As 2017 comes and the Model 3 starts, cell production seems to be on track to expand more rapidly. I don't think they have firmed up expected numbers for Model 3 in 2017, but 100,000 for year one seems aligned with the long term plan laid out in 2013.
I'm not sure if you are making a bear case or not with this post. Your historical record has Tesla bankrupt well before now, but you are laying out a cash flow neutral project that will result in a GF twice the original scale by 2020, allowing cash flow from Model X & S to be invested in the Model 3.

To expand on these numbers:

If one building corresponds to one block as the article/linked video below says then satellite and drone images will immediately show when Tesla starts building up additional battery capacity in Nevada:



Tesla Gigafactory Could Be Over Twice Initially Planned Size | CleanTechnica

Therefore the current GF building will probably only be able to pump out 5-7 GWh on the cell/pack level in 2017.

This very roughly corresponds to Tesla and Panasonic only investing about 20% (of the total planned funding of $4-5bn by 2020) until 2017 (that's even generously rounding up past and projected cap-ex for the GF).

The next 10-Q will show how much has been spent on just the first block (corresponding to about 14% of capacity in all 7 blocks) so far.

I know this info isn't new, the video in question has been discussed before: Tesla Gigafactory - Page 53

But this topic is interesting because of the total investment needed for the GF (to one day build 500k car batteries/year) versus money raised and invested up to now.

Tesla can probably only equip about 70-100k* cars/year (which limits future Model3 sales, this production ceiling can't be changed overnight until new blocks are constructed) using the current block 1 building.

_____
* I'm likely very generous with 100k cars/year (because Tesla was talking about 35GWh on cell level and 50GWh on pack level once full output is reached and pack sizes per car keep going up in the future; also, in case assembled cells arrive from third parties into the GF Tesla won't have the full claimed cost advantages over other suppliers...).

 

[tftf]

Tesla is on track to produce 70-80,000 cars in 2016 without any GF cells. (...)
I'm not sure if you are making a bear case or not with this post. Your historical record has Tesla bankrupt well before now, but you are laying out a cash flow neutral project that will result in a GF twice the original scale by 2020, allowing cash flow from Model X & S to be invested in the Model 3.

Yes, they can produce the S and X fine in 2016 and beyond with Panasonic supplying the cells from factories in Japan. I never wrote about Tesla going bankrupt in 2015 or 2016 - Tesla can continue to spend for many years as long as there's people willing to raise more funds (either more debt or dilution).

But this isn't cash-flow neutral, except for maybe a single quarter until the next cap-ex wave kicks in, see chart here:

Tesla's Eternal Flame - Bloomberg View


And Tesla Energy isn't an automatic magic cash-flow machine with high margins. As we all know, Tesla competes with its own cell supplier Panasonic in this space (as well as many others):

Panasonic Corp., which makes the lithium-ion batteries for Tesla Motors Inc.’s cars, will begin selling batteries that power homes in Europe, starting in Germany, where people are given greater incentives to switch to solar-generated electricity.
The push into international markets with home batteries will put the Japanese company into direct competition with flagship customer Tesla, which in May unveiled a suite of batteries to store electricity for homes and businesses. Tesla Chief Executive Officer Elon Musk has said Germany is a key market for his product, because of the country’s advanced consumer solar power market.

http://www.bloomberg.com/news/artic...ic-to-sell-home-batteries-in-europe-next-year

Battery FrenemiesTesla and Panasonic Poised for a Fight in Europe - Bloomberg Business

I outlined above that Tesla is currently building up just 14% of the planned capacity for the GF - not even this first block is finished for cell produciton until late 2016 / 2017.

Now compare the state of GF1 (block1, 14% of the total and probably good for only about 70k cars/year, not 500k) to the money raised in early 2014, in mid-2015 (not even talking about the line of credit, just the dilution) and with the cash on hand at present.

Tesla will need additional billions to finish this first GF from 2017-2020.

 

[jesselivenomore]

This "dilution", has TSLA raising a secondary ever caused the stock to go down? No, because raising money to build a factory is not dilution, it is investment and value creation. They are not raising the money to keep the lights on. The market understands this, which is why the stock often rallies on secondaries instead of going down. So TSLA will dilute all the way up to 500, 1000. And investors will be more than happy to give them more money, because they are creating value.

 

[SteveG3]

tftf, Tesla will be cash flow breakeven to positive when the Model X reaches steady state production. this is expected to happen in Q1, perhaps it does not happen until Q2 if new production challenges arise for the X. Yes, that's further out than what was said at the beginning of the year (getting out of cash flow negative by Q4). Tesla already raised ~$700 million in August of this year to compensate for this delay.

you are correct that Tesla will need billions to finish the GF. what you do not seem to have realized is that those billions will come from their ongoing business selling the Model X and Model S and eventually the Model 3. perhaps you've come to believe that Tesla loses money with incremental vehicle sales. that is completely false. be careful, there are many people who do not want Tesla to succeed and some write and say things about Tesla that are completely false. inform yourself and you will not fall prey to this nonsense.

 

[electracity]

It seems we should see the footings being built for block 2 now, based on car and Tesla Energy demand. If the plan is to be at full production by the end of 2020, and Tesla is on plan, where are the footings?
Why isn't Musk asked to lay out a capital plan that matches his production plan?

 

[tftf]

what you do not seem to have realized is that those billions will come from their ongoing business selling the Model X and Model S and eventually the Model 3. perhaps you've come to believe that Tesla loses money with incremental vehicle sales. that is completely false.

We will see. That's what people said a few years ago.

Maybe they will once again manage 1-2 quarters in the black (see chart above for late 2013 and early 2014), but then the Model3 and the GF will again consume billions that aren't realistically coming from operative results.

I doubt many people realize how much additional investment the "full" GF (7 blocks) will need going forward and how "little" - compared to the full $5bn - has been spent so far on just one GF block (14% of the total project). For those who missed this article back in May/June:

But the 900,000-square-foot building represents just 14 percent of the total size of the factory at build-out.
“That building will be seven times larger once fully constructed,” Steve Hill, director of the Governor’s Office of Economic Development, told members of the Legislative Commission.

Tesla’s first building phase nearly complete | Las Vegas Review-Journal

 

[Svetlin]

Tesla should be able to get at least $25B in revenue in 2016 and 2017 combined. Assume 20% gross margin = $5B in gross profit. R&D + SG&A for 2 years should be less than 4B. Here is another billion to burn for the next 2 years. Oh, and count at least another billion in customer deposits once Model 3 reservations open.

I predict that Tesla will only do a capital raise in 2016 if the stock price is above 400.

 

[tftf]

We will see. Here's how Tesla "sold" investors the $2bn raised in early 2014 for the GF:

Tesla Raises $2 Billion With Convertible Debt to Finance Factory - Bloomberg Business

Now, that money is gone and not even 14% of the "full" GF is built out - with an additional 12-15 months to go until local cell production can be started at this "14% of the total" battery unit.

This is only to show how rosy outlooks (in terms of positive cash-flows and ROI) can change.

 

[SteveG3]

We will see. That's what people said a few years ago.

Maybe they will once again manage 1-2 quarters in the black (see chart above for late 2013 and early 2014), but then the Model3 and the GF will again consume billions that aren't realistically coming from operative results.

I doubt many people realize how much additional investment the "full" GF (7 blocks) will need going forward and how "little" - compared to the full $5bn - has been spent so far on just one GF block (14% of the total project). For those who missed this article back in May/June:

What are you talking about tftf?

"a few years ago" the discussion was,

Bears: Tesla? Ever heard of DeLorean, Tucker,... They'll never build a car as desirable as the 'big boys". Besides they will go bankrupt before they can reach volume production.

Bulls: There are inherent advantages to a well done long range EV over ICE vehicles that will make the car compelling independent of environmental concerns. The Model S and Model X are strategic moves to provide Tesla funds to deliver the Model 3.

That was when Tesla was trading in the $20s and $30s, and the company was hoping to reach GLOBAL volumes for the S and X COMBINED of 30K/year.

Since then the Model S has been a success far beyond anyone's expectations. Tesla has gone from looking for the S/X to fund the Model 3, to looking for them to fund the lion's share of a $5 billion battery factory (the increased investment for the future that makes it an obvious win to go from profitable quarters as a niche automaker to quarters with losses to tap enormous potential).

Many of us here on TMC have been bulls from "a few years ago" through today. The only call I've known you to make on Tesla these past years is your claim that the stock is overvalued... a claim you've been making it since it traded in the $70s. Looking back on whose comments from "a few years ago" turned out to be helpful (or not) does not seem like an exercise you would want anyone to engage in if your object is to make your bear assertions seem more persuasive.

 

[electracity]

Tesla should be able to get at least $25B in revenue in 2016 and 2017 combined. Assume 20% gross margin = $5B in gross profit. R&D + SG&A for 2 years should be less than 4B. Here is another billion to burn for the next 2 years. Oh, and count at least another billion in customer deposits once Model 3 reservations open.

I predict that Tesla will only do a capital raise in 2016 if the stock price is above 400.

You forgetting the rise in inventory needed to build a lot more units per years. 2017 volume will probably raise inventory by a billion. So even a billion in profit is not a billion available for capital expenditures. And of course there won't really be a billion in profit over the next two years.

I don't need Tesla to make a profit. I just want to know the capital budget, and where the money is coming from. This isn't the software business where the bet is on a product taking off. Tesla has to build stuff with very capital intensive inputs.

 

[tftf]

Many of us here on TMC have been bulls from "a few years ago" through today....

The "easy money" in Tesla was made from mid/late 2012 to early 2014. These days are long over.

From the day TSLA raised the $2bn "for the GF" (which didn't turn out be exactly true, most of this money was spent on other items, see my earlier comments in this thread for details) the stock has not gone up compared to today.

Back at the end of February 2014 TSLA was already trading near $250 - it's still lower at the moment, even after the gap today.

PS: Not even accounting for the risk and increased vol compared to investing in a broad index etc. since that date.