Tesla Gigafactory Investor Thread

[Krugerrand]

Business logic and data from the market was on Elon's side when he started Tesla.

???? No other car company had succeeded in many decades. It's about a whole lot more than technology. The same goes for SpaceX. If everything was there already on Elon's side then it also existed for anyone else's side too, but nobody stepped up to the plate because business logic and data said you'd have to be crazy to try either company. How come Nissan didn't step up to the plate and produce a long range BEV? GM? Business logic and data per you suggests they should have along with every other OEM. With the technology out there, why didn't someone else strap together 7000+ laptop batteries? Why did they go with large format ones?

We know from history that both Tesla and SpaceX came *this close* to going under. Trying to now make it sound like it was a walk in the park is disingenuous at best. From the many interviews I've watched of Elon tell the history and other articles from current/former employees, it more accurately has been a journey of glass chewing and staring into the abyss. According to business logic and data, Tesla can't even sell their cars directly to the consumer in several states and certainly can't have continued on all this time without conventional advertisement.

If anything, Tesla and SpaceX prove that business logic and data isn't worth the paper it's written on, but hard work, determination, a balls to the walls attitude, and a sincere intent can accomplish the impossible.

 

[30seconds]

@30second and jhm

I take it you don't follow many companies, but in general you don't make money with a 15% gross margin.

a. You are wrong about the first point
and
b. You also managed to not understand my point - which was I am sure that gross margins will be higher than 15%. They were able to easily sell out 2016, implying that they probably could do the same at at GM of 30%, 40% or possibly even 50%. This is not a stupid team. Profits will be used to fund further expansion so I doubt that this is breakeven product.

 

[AudubonB]

Mild-mannered Moderator here -

Play nice, everyone, or there are going to be some Time Outs. Better yet, take the weekend off and cool down. There are any number of ways the points several of you have been making could have been written in far less inflammatory ways than what's been posted over the past two or so pages.

 

[Perfectlogic]

The logic was on his side? So you think he was right in 2003, but now that Tesla has made it through the first ten plus years, built a global sales model, acquired one of the largest plants in the US for almost nothing, created an energy company on the coat tails of the car company, building perhaps the largest manufacturing site in the world (Gigafactory), built a multinational charging infrastructure, that now the tide is against him? This is so out there as to almost avoid contradiction. The logic of Tesla is much more sound today than it was in 2013 let alone 2013. Tesla has changed more since 2013 than probably any other manufacturers has in the last decade. From proving they could mass produce a luxury, high performance sedan, to now proving they can repeat that with the Model X and advancing the core technical leadership of their cars at an accelerating rate.
They are moving to a growth rate that I think will likely be over 60% for the next 3 years, as Model X and Tesla Energy sales combine with the Model 3 introduction. Hyperbolic arguments against Tesla's entire business logic and continued existence encouraged me to buy in 2013 and still inspire me to acquire on dips. I look forward to see how our differing view of the future pans out over the next few years.

The discussion was about the profitability of tesla energy sales next year at the guided 15% gross margin. Not a longer term view or tesla as a whole.

- - - Updated - - -

Perfectlogic, thank you for insulting me personally. Kindly show me your math and justify the assumptions you hold to be true. Specifically, tell us how much incremental R&D will be spent on TE that was not spent on other Tesla products. Likewise incremental SG&A not otherwise spent on Tesla. Additionally break out fixed and variable components. Then you can back into the scale needed to turn a profit and the time it will take for the Gigafactory to break even. In short, cut your condescending crap and show us your analysis.

If you wan't to determine the profitability of a 15% gross margin I would say a good way to start is by looking at what kind of expenses other companies have, from there you can adjust your expectation based on how you think Tesla might differ from the lot. But given that every single company has SG&A+R&D spend above 10% and often 15%+ I think it's pretty reasonable to discount any net profit from the gigafactory next year assuming the 15% guided gross margin.

- - - Updated - - -

???? No other car company had succeeded in many decades. It's about a whole lot more than technology. The same goes for SpaceX. If everything was there already on Elon's side then it also existed for anyone else's side too, but nobody stepped up to the plate because business logic and data said you'd have to be crazy to try either company. How come Nissan didn't step up to the plate and produce a long range BEV? GM? Business logic and data per you suggests they should have along with every other OEM. With the technology out there, why didn't someone else strap together 7000+ laptop batteries? Why did they go with large format ones?

We know from history that both Tesla and SpaceX came *this close* to going under. Trying to now make it sound like it was a walk in the park is disingenuous at best. From the many interviews I've watched of Elon tell the history and other articles from current/former employees, it more accurately has been a journey of glass chewing and staring into the abyss. According to business logic and data, Tesla can't even sell their cars directly to the consumer in several states and certainly can't have continued on all this time without conventional advertisement.

If anything, Tesla and SpaceX prove that business logic and data isn't worth the paper it's written on, but hard work, determination, a balls to the walls attitude, and a sincere intent can accomplish the impossible.

Clearly TSLA and SpaceX made sense, otherwise it wouldn't have worked, unless you believe magic made it work. If it didn't make sense to someone it is because they don't understand all the factors. There is no doubt we would have to switch out the dirty ICEs in time, it was just a matter of when and with what technology. The Prius gained traction in the early 2000s and the Roadster helped prove the concept, the major auto makers should have taken EVs much more seriously at this point. In any case now seems way too late as EVs were clearly gaining traction several years ago, there was more than half a million Prius sales in 2010.

"We know from history that both Tesla and SpaceX came *this close* to going under. Trying to now make it sound like it was a walk in the park is disingenuous at best."

I'm not making it sound like a walk in the park, I am just saying what he did makes sense. I'm not sure why it upsets you that I don't worship him like a god.

- - - Updated - - -

a. You are wrong about the first point
and
b. You also managed to not understand my point - which was I am sure that gross margins will be higher than 15%. They were able to easily sell out 2016, implying that they probably could do the same at at GM of 30%, 40% or possibly even 50%. This is not a stupid team. Profits will be used to fund further expansion so I doubt that this is breakeven product.

See my response to dc_h, you seem to have misunderstood the premise of the discussion.

 

[electracity]

I pointed out somewhere that both Tesla Energy and Tesla cars can't both benefit from gigafactory lower cell costs in this decade.

SpaceX is a mess, unless one prefers rockets made by twenty somethings new to the industry. I assume Tesla is better organized because they have better options in hiring experienced people. Outsiders have much higher interest in working for Musk than do the people actually working for Musk.

 

[Johan]

I pointed out somewhere that both Tesla Energy and Tesla cars can't both benefit from gigafactory lower cell costs in this decade.

SpaceX is a mess, unless one prefers rockets made by twenty somethings new to the industry. I assume Tesla is better organized because they have better options in hiring experienced people. Outsiders have much higher interest in working for Musk than do the people actually working for Musk.

Please do elaborate on how SpaceX is a mess, since you seem to know more than most of us.

Also please do explain the first statement. Is it not going to be the same kind of cells in both cars and storage? If you mean that one cell can't go two places at once then no need to explain, but also kind of an unnecessary statement.

 

[Discoducky]

I pointed out somewhere that both Tesla Energy and Tesla cars can't both benefit from gigafactory lower cell costs in this decade.

SpaceX is a mess, unless one prefers rockets made by twenty somethings new to the industry. I assume Tesla is better organized because they have better options in hiring experienced people. Outsiders have much higher interest in working for Musk than do the people actually working for Musk.

Please do elaborate on how SpaceX is a mess, since you seem to know more than most of us.

Would like to know that as well as some on this forum have worked with/for both

 

[electracity]

Gigafactory doesn't have the production volume to produce cells for Tesla Energy. Discussions about Tesla Energy margins seem to assume low cost cells.

I have a relative that is an engineer at spacex. With their turnover rate, eventually everyone will have a relative who works at spacex. Musk needs to demonstrate that he can build a large business where talented engineers want to work for more than a couple of years.

 

[Johan]

Gigafactory doesn't have the production volume to produce cells for Tesla Energy. Discussions about Tesla Energy margins seem to assume low cost cells.

I have a relative that is an engineer at spacex. With their turnover rate, eventually everyone will have a relative who works at spacex. Musk needs to demonstrate that he can build a large business where talented engineers want to work for more than a couple of years.

Great, thanks. Very convincing arguments.

BTW, do you GF doesn't have or won't have? And if so when?

That it doesn't have the production capacity currently, we can agree on seeing how it is currently producing exactly 0 cells. But you know how many it will produce in 2017, 2018 etc? Impressive foresight, please share.

 

[LargeHamCollider]

I pointed out somewhere that both Tesla Energy and Tesla cars can't both benefit from gigafactory lower cell costs in this decade.

SpaceX is a mess, unless one prefers rockets made by twenty somethings new to the industry. I assume Tesla is better organized because they have better options in hiring experienced people. Outsiders have much higher interest in working for Musk than do the people actually working for Musk.

SpaceX is not only not a mess, it is by far the most efficient launch provider in history. SpaceX went from zero to orbit for a couple hundred million, this is a full order of magnitude less than any other country/company (and likely closer to two orders of magnitude for most). They've been scaling up at an incredible pace, it was on the basis of Musk's ridiculous work with spaceX that I first invested in Tesla. I don't think people outside the aerospace industry understand just how impressive the achievements of SpaceX are.

One failed launch does not mean that the whole company is a mess.

 

[electracity]

SpaceX is not only not a mess, it is by far the most efficient launch provider in history. SpaceX went from zero to orbit for a couple hundred million, this is a full order of magnitude less than any other country/company (and likely closer to two orders of magnitude for most). They've been scaling up at an incredible pace, it was on the basis of Musk's ridiculous work with spaceX that I first invested in Tesla. I don't think people outside the aerospace industry understand just how impressive the achievements of SpaceX are.

One failed launch does not mean that the whole company is a mess.

You obviously don't work at spacex. Got a link to their financials?

 

[pmadflyer]

I thought the tesla energy cells would continue coming from the Panasonic factories in Japan. The vehicle cells and the packs for both energy and vehicles would be produced at the GF. However, unexpected demand is driving cell production at the GF for Energy products at the end of next year.

I could be wrong though.

 

[electracity]

I thought the tesla energy cells would continue coming from the Panasonic factories in Japan. The vehicle cells and the packs for both energy and vehicles would be produced at the GF. However, unexpected demand is driving cell production at the GF for Energy products at the end of next year.

I could be wrong though.

Yes, the Tesla Energy cells will come from panasonic or similar. My only comment was on Tesla Energy margins being lower using these cells.

 

[pmadflyer]

It might make sense to have a few lines operating at a loss (with cells at today's cost) so that when the $100 kWh cells come off the adjacent lines, they have the kinks worked out, and a line of repeat customers.

 

[Krugerrand]

Clearly TSLA and SpaceX made sense, otherwise it wouldn't have worked, unless you believe magic made it work.

Making sense is entirely different than 'having business logic and data from the market on Elon's side', which is what you originally said, and which has been obviously not true.

I'm not making it sound like a walk in the park, I am just saying what he did makes sense. I'm not sure why it upsets you that I don't worship him like a god.

Yes, actually you are making it sound like a walk in the park, like anyone with half a brain could have done it, that it was obvious and only a matter of time, and yet we have proof that none of that is/was true. Because if it was so obvious that the technology existed then Nissan, Toyota and GM would have strapped together thousands of laptop batteries and produced a Model S instead of Tesla. Because it made so much business sense to start an EV company, then nobody would have called the Roadster a glorified golf cart, or the Model S vaporware, and GM wouldn't have crushed their EV1s and instead would have spun off another company and called it EVs of General Motors and so on.

It is because of Tesla that the world view has begun to change about what is possible. It is because of Tesla that GM is going to at least attempt to produce the Bolt. It is because of Tesla that all the other OEMs are announcing new and improved hybrid and ev models. It isn't because it made sense to them, or because of business logic and data. Indeed the latter is why the other OEMs are so stubbornly clinging to their old business models and practices because to have to change means they might very well end themselves in the process. And to suggest, hint at, or anything of the like that a transition would have happened without Tesla and would have happened easily because 'it makes sense' is to not understand what's happened to this point, nor to understand the establishment and human nature.

I'm not sure why you keep mentioning God, magic and the like when I've not said, suggested or hinted at anything along those lines. But to be clear, I'm not upset about what you think. I will, however, correct misinformation when I come across it.

 

[Perfectlogic]

Making sense is entirely different than 'having business logic and data from the market on Elon's side', which is what you originally said, and which has been obviously not true.



Yes, actually you are making it sound like a walk in the park, like anyone with half a brain could have done it, that it was obvious and only a matter of time, and yet we have proof that none of that is/was true. Because if it was so obvious that the technology existed then Nissan, Toyota and GM would have strapped together thousands of laptop batteries and produced a Model S instead of Tesla. Because it made so much business sense to start an EV company, then nobody would have called the Roadster a glorified golf cart, or the Model S vaporware, and GM wouldn't have crushed their EV1s and instead would have spun off another company and called it EVs of General Motors and so on.

It is because of Tesla that the world view has begun to change about what is possible. It is because of Tesla that GM is going to at least attempt to produce the Bolt. It is because of Tesla that all the other OEMs are announcing new and improved hybrid and ev models. It isn't because it made sense to them, or because of business logic and data. Indeed the latter is why the other OEMs are so stubbornly clinging to their old business models and practices because to have to change means they might very well end themselves in the process. And to suggest, hint at, or anything of the like that a transition would have happened without Tesla and would have happened easily because 'it makes sense' is to not understand what's happened to this point, nor to understand the establishment and human nature.

I'm not sure why you keep mentioning God, magic and the like when I've not said, suggested or hinted at anything along those lines. But to be clear, I'm not upset about what you think. I will, however, correct misinformation when I come across it.

I think our definitions of sense and logic might be different. If you don't think Elon starting Tesla and SpaceX made sense (even economically) then why was it a success? Was he lucky? I'm not sure what you are getting at here.

"Yes, actually you are making it sound like a walk in the park, like anyone with half a brain could have done it"

No I'm not, where have I said anything like that? Ofcourse if Elon hadn't put a lot of effort into Tesla then we would have transitioned to BEVs anyway, just at a later time (accelerating the transition is a great accomplishment, he is a great entrepreneur). Elon didn't make some great breakthrough, the most important part of being able to make a viable (for the market) BEV is relatively cheap and energy dense battery cells and that was supplied by Panasonic, 10 years earlier the Roadster wasn't possible and 10 years later it would have been easier. It's like the people praising Steve Jobs for bringing us the smartphone or Zuckerberg for making FB. Both of these inventions would have happenend without them that is absolutely certain as we are a capitalist society. The Iphone came soon after the hardware allowed it and FB happened soon after internet speed allowed it, just like the transition to BEVs happened just after the battery cell tech allowed it.

 

[dalalsid]

You obviously don't work at spacex. Got a link to their financials?

You have a link yourself? They are parking excess cash in scty so it can't be too bad.

 

[Johan]

You have a link yourself? They are parking excess cash in scty so it can't be too bad.

Of course no one has a link, since it's privately held. No need to quibble. Perhaps they're doing great financially: investing heavily in future growth or perhaps they're "burning cash". Even if we had a balance sheet we would never agree, since it's all about outlook.

Point in case is Tesla: the financial info is there, some say it's a great success story, some say they're heading for the abyss.

 

[Krugerrand]

I think our definitions of sense and logic might be different. If you don't think Elon starting Tesla and SpaceX made sense (even economically) then why was it a success? Was he lucky? I'm not sure what you are getting at here.

Logic: a proper or reasonable way of thinking about something

Economical: giving good value or service in relation to the amount of money, time, or effort spent


It most certainly did not make logical sense to start a car company where none had succeeded for many decades. It did not make logical sense to start a private space company where world interest was at an all time low, and only a few entire countries had succeeded, and it's...well...rocket science!

Economical sense would be of a very personal opinion depending on who you are. Certainly for future generations, transitioning to BEVs has great economical sense, but for the people in the trenches battling the establishment, the naysayers, etc... they might have a very different take. They obviously feel it's important, but when all is said done they might also feel they sacrificed too much for others. We can all see that Elon has suffered.

Why they've been successful to date is because of a combination of a lot of factors, and yes, luck played a part. The luck part for Tesla was Daimler financing at the eleventh hour on the last day in 2008.

One of the biggest factors in success is because Elon does not do *it* for the money. He does it because he believes it needs to be done for our continued existence, plain and simple. There's an understanding that he's got to make money to do it, but the outcome is not to line his pockets with cash. Altruism really does count and makes a big difference.

Willpower is Elon Musk's middle name. It's been talked about by several current/former employees. The guy just will simply not give up and won't let anyone else around him give up. He's broadly intelligent, charismatic, determined and has a real knack for surrounding himself with very capable people of like mind. He doesn't think like most people. Wait But Why has the last installment of the Elon Musk articles up now and it's about this thinking process. The Cook and the Chef: Musks Secret Sauce - Wait But Why

I'm not convinced that mankind's transition to BEVs happens anyway without Tesla. I'm just not. And not until the Model 3 comes out do I think we can breathe a sigh of relief. I think without Tesla's push we choke ourselves to death. I'm also not convinced we get to reuseable rockets and to being a multi-planetary species without SpaceX.

 

[Perfectlogic]

You claim that it did not make economical sense to start Tesla yet Elon has made a lot of money doing it, so obviously you are missing something as it is not up for discussion that it did infact make economical sense.

"I'm not convinced that mankind's transition to BEVs happens anyway without Tesla. I'm just not. And not until the Model 3 comes out do I think we can breathe a sigh of relief. I think without Tesla's push we choke ourselves to death. I'm also not convinced we get to reuseable rockets and to being a multi-planetary species without SpaceX."

Sure, the beginning of the transition to BEVs just happened to coincide with the underlying tech maturing enough to let it happen, just like we wouldn't have the iphone or FB, or even google today if it hadn't been for the founders of those companies, nothing to do with the underlying tech really. There is a difference between technological breakthroughs and incremental innovation.