ev-enthusiast
Active Member
Same reasoning here.
It is important to understand the possible bear arguments to better understand your investments.
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Tesla Gigafactory Investor Thread
- Thread starter teddyg
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Same reasoning here.
It is important to understand the possible bear arguments to better understand your investments.
TFTF's arguments boil down to this:
If Tesla manages to bring down the cost of cells to $100/kWh, then LG will bring it down to $95 and Tesla is doomed.
If Tesla manages to bring M3 to market in late 2017/early 2018, GM will bring Bolt 8 or 10 months earlier, and Tesla is doomed.
If Tesla manages to produce 30GwH then LG will produce 31 GwH and Tesla is doomed.
Replace GM with Audi or BMW or Toyota or BYD or the new kid in the block, Faraday.
About 2 years ago it was different set of stories, which have all quietly faded away now:
There is no market for EVs so all the money sunk in battery production will bankrupt Tesla.
Battery chemistry will never improve and the cost will never come below $300/kWh for another 10 years. Tesla is doomed.
yada yada yada.
For those that have not read TFTF's articles and comments in Seeking Alpha it would seem as if he is trying to make a rational bear argument here. But in reality making a bear argument is perfectly par for the game, but TFTF and his Seeking Alpha friends are simply not pointing out the road bumps in Tesla's story - They ABSOLUTELY WANT TESLA TO FAIL AND FAIL BADLY.
They are so emotionally invested in Tesla failing.
Take for instance Paulo Santos latest article. Paulo took a non-issue and spun it into 'Tesla is cheating' story.
That is why I don't take these guys seriously.
If Tesla manages to bring down the cost of cells to $100/kWh, then LG will bring it down to $95 and Tesla is doomed.
If Tesla manages to bring M3 to market in late 2017/early 2018, GM will bring Bolt 8 or 10 months earlier, and Tesla is doomed.
If Tesla manages to produce 30GwH then LG will produce 31 GwH and Tesla is doomed.
Replace GM with Audi or BMW or Toyota or BYD or the new kid in the block, Faraday.
About 2 years ago it was different set of stories, which have all quietly faded away now:
There is no market for EVs so all the money sunk in battery production will bankrupt Tesla.
Battery chemistry will never improve and the cost will never come below $300/kWh for another 10 years. Tesla is doomed.
yada yada yada.
For those that have not read TFTF's articles and comments in Seeking Alpha it would seem as if he is trying to make a rational bear argument here. But in reality making a bear argument is perfectly par for the game, but TFTF and his Seeking Alpha friends are simply not pointing out the road bumps in Tesla's story - They ABSOLUTELY WANT TESLA TO FAIL AND FAIL BADLY.
They are so emotionally invested in Tesla failing.
Take for instance Paulo Santos latest article. Paulo took a non-issue and spun it into 'Tesla is cheating' story.
That is why I don't take these guys seriously.
But is it adequate to cover expenses for Model 3 R&D, Model 3 factory tooling, remaining 75% of investment in the Gigafactory and continued expansion in supercharger network, service centers and stores beyond free cash flow from sales on existing products? It would a good thing if someone could try to model these going forward. I don't understand why there is such hostility against the notion that Tesla will need to tap additional credit lines and/or do a rights offering.
Didn't Ron Baron a while back have a chart chowing Tesla raising 10 billion over the next ten years? Any investor who is certain the Musk doesn't care about making more money needs to also believe that he doesn't care about stock price.
Musks problem may be how to keep control of the company while constantly diluting equity. I imagine he wants as many off balance sheet partnerships as possible on the battery side.
chickensevil
Active Member
You say that like they aren't also selling a product with a ~25% GM with a goal of breaking 30%. Do keep in mind that they are pulling in a bunch of money at the same time that they are blowing through their capital. I think between the two they have more than enough to continue to course. It is just a matter of if they want to continue the course or accelerate it further. With the ambition of "millions of cars" by 2025, I think the only way to make that happen is going to be with another capital raise. But to get the 500k a year by 2020 I don't think they need more funding. Keep in mind that all the major spending for hitting 100k a year has happened or will happen in the next month as they said the spending would be done by q4. So they can pull in cash now from that effort and ride it out to fund other things. 100k a year at 25% at 100k asp is 2.5Bn gross. Sure they will have to spend some amount of money on R&D related to the S and X, but it should be minimal comparatively to what it has been. (Not suggesting they will sell 100k in 2016, I'm more thinking 75-80 but paid for capacity should be closer to 100k so it is useful to think about that when you are talking about further R&D and Capex toward future growth. If they miss that mark and can't get that many then the money already spent has less ROI.)
Also note that at a minimum, the money spent on stamping and the paint shop gets them to 500k. So they only need to expand (of the big ticket items) the final Assembly, body production, and motor production (although I don't think any of us know that capacity.) The rest of the factory us already there to get to 500k (or will be with the gigafactory supplying the packs).
I think I specifically mentioned free cash flow from sales on existing products. Let's be generous and call it $4B before the Model 3 launch date. That means they have $5.4B cash on investments to fund model 3 R&D, expansion of the existing sales, charging, service and support infrastructure, GF investment, keeping model S and X up to date and car factory (re)tooling +expansion for model 3 production. Again, not saying it can't be done but I would not be surprised if it turns out to be not enough.
I am confident it won't be enough. But predicting a capital raise is not the same as concluding that Tesla or TSLA is doomed. The equity market has been happily chipping in because they believe the plan is on track.
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This is perfect, and I tried to make a similar point a few pages ago. TFTF can be correct about everything and it doesn't prove what he thinks it proves.
chickensevil
Active Member
Right, I was simply putting the amount of cash flow into perspective such that it can attempt to be estimated if their 1.4B plus continued cash flows would be enough. What concerns me most about this being enough money is not the gigafactory or fremont, and it isn't the R&D spendings. It is the OpEx on continuing their growth on sales, service, and supercharging, although based on their numbers supercharging is basically not worth mentioning on the bottom line, which is why they don't. They have been nice enough to tell us the total investment in the infrastructure so far, though, so that is helpful. In any case, adding more sales and service is likely were a giant chuck of the Opex is going into, and as they keep pushing into new markets this keeps getting more costly. We are looking at them already pushing into the middle east, Mexico, South Korea, and India. At some point I would venture they will push into South American countries and African countries. And there is still large amounts of Eastern Europe left to see a service center. Even in their more covered markets, they need more service in NA and Asia. We are talking around 30 people per store and around 40 people per service center, and people are a very expensive resource. Spending on R&D or CapEx is nothing compared to this continued sink of money into paying people to help you run the business.
Anyway, That is truly what I think will be the determining factor here is their balance between expansion of sales/service against growing their capacity of products and keeping them competitive. And to get the volumes they want on the Model 3... they are going to need more service centers.
MitchJi
Trying to learn kindness, patience & forgiveness
You can easily ignore his woefully uninformed posts (the best possible option). But when he posts that two plus two equals twelve how can you ignore all of the detailed responses explaining why that's incorrect?
Of course there are occasionally useful nuggets of information sprinkled in, but it's a painfully inefficient way to learn.
Capital raises are not a big deal. Thousands of firms have done them and it is not a tale of doom to say Tesla will do more - whether another 1 Billion or 5 Billion by 2020. I don't think supporters will let it "go away". Dilution is not doom unless orders somehow drop to some level of inability to sustain a true growth curve. Money is not as important as order-rate (ie. sales rate). I suspect there is one more card to be shown and that would be to securitize leased cars as a financial instrument. Solar City sold securitized solar leases to Space X and possibly Tesla could do similar and offer the package to firms such as Autonation or other buyers.
I want as much information as possible to make a decision about what to do with my money. Wading through the debate, engaging in it, can be tedious with much info to sift through, but I would prefer that to just always seeing one side or the other.
There is an old adage: 'keep your friends close but your enemies closer' :wink:
chickensevil
Active Member
Do note that this is the investor thread on the gigafactory. If you are just looking for general news, then many times that can be found in the significantly more quiet thread on the gigafactory over in the general Tesla Motor section. So having the debate about the investor impact on this project that is going to cost 5B$ and potentially propel Tesla to the next level and then hopefully TSLA will follow that is important to have IMO. If this I not what you want to see and just want general news stories or general analysis on the capabilities of the building then I would suggest you to post about such things in the non-investor thread. That is the reason there are two.
ev-enthusiast
Active Member
Any news about Gigafactory progress?
Staffing should be almost completed by now.
Is TM still aming for first battery pack production end of 2015?
Staffing should be almost completed by now.
Is TM still aming for first battery pack production end of 2015?
Hopefully happy end users getting their Powerwalls installed soon, maybe not end of year soon, but hopefully Q1 soon.
Could you at least quote my arguments accurately?
I wrote that TSLA is overvalued at current share prices (especially including future dilution due to huge cap-ex needs until at least 2020!), not doomed. It may be doomed and declare bankrupcty in a worst-case scenario, but that is not my main scenario. Someone might pick up the pieces for cheap before then (similar to its valuation in 2012).
I wrote that
1) Advanced Li-Ion EV batteries will become a commodity and LG, Samsung etc. can produce them for any car maker on equal terms with Panasonic and other suppliers as needed.
Their combined order volumes will be magnitudes bigger than Tesla's over time (assuming EV demand increases).
Meanwhile Tesla is only building a pilot plant in Nevada, right now. It can't equip 500k cars/year unless it invests additional billions (which aren't available, see balance sheet).
2) More competition and commoditization will squeeze Tesla's market value by around 2020 or even well before that.
Also, Tesla's M3 is likely late to market (and ramp-up will again be slow imho). This means Tesla will enter a very competitive EV and PHEV market below $50k by 2019-2020 when it is finally ready to ramp up M3 output.*
3) There's a risk of completely new battery technology being ready within 5-10 years and Tesla over-investing in current technology due to its vertical integration.
As a small company, Tesla doesn't have the luxury to simply write down such assets (as Renault-Nissan had to with its EV assets recently) and move on.
Your two bold (see quote) statements must be from other people, I never made those. In fact, I'm bullish on EVs long-term (1-2 decades), everybody is working on better battery technology - not just for cars, but also consumer electronics. It's obvious prices are coming down and will be competitive with ICE cars in most price categories around 2020-2025 c.p.. By then, better charging infrastructure will also be ready for EVs.
But I think most people severely underestimate the time needed to get EVs to double-digit car marketshare: The car market can't be disrupted like tech and other fast-moving sectors. Too many people still think Tesla's M3 is the next iPhone. This (tech) analogy is completely wrong imho, due to replacement and cap-ex cycles.
If there's a disruption coming in the car market it's autonomous driving or what pundits like to call "TaaS". Everybody in the industry is working on that - just as with EVs, Tesla will have no advantage there.
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* I still think Tesla's biggest strategic mistake is going down-market and try to build a $30-50k (upper) mass-market car. They should stick to the S and X niches imho and never build a car below $50k. If so, they also wouldn't need to build a Gigafactory.
Uninformed? Where? Can you quote specific items or quotes from here or my articles at SA and I will address them.
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Once Tesla becomes cash-flow positive in Q1, Tesla will be able to afford the Gigafactory and a new production plant i Europe (or somewhere else).
The market won't be sufficiently competitive to warrant worry. Even if every car company ramps out EVs as fast as they can, EVs are still not likely to exceed 50% global market share in 20 years. There's plenty of time and opportunity for growth for Tesla, as the global car industry shifts to EVs.
New technology is usually expensive. Price is what's important, so there's in all likelihood no problem for Tesla to continue using NCA for 2-3 years while simultaneously getting their hands on patents for other chemistries and gradually retooling the Gigafactory. New battery technology won't be a Tesla-killer.
If Tesla doesn't increase production, Tesla is *clearly* overvalued.
They might be CF-positive for one quarter to please/reassure investors in early or mid 2016 but I highly doubt that they can repeat this over several quarters. Huge cap-ex for the M3 hasn't even started yet.
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