Tesla Gigafactory Investor Thread

[MitchJi]

This article makes a good analogy with the nascent solar market. Being the "biggest" player early on doesn't garantuee success, far from it because of technology gaps in the future:

No it's a foolish analogy. Solar cells were priced so high that there was almost no demand. Packs manufactured at the GF are going to cost less than disruptive prices, both for cars and for storage.

 

[Cyberax]

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.

It's a very small risk. Historically, Li-Ion battery advances required little to no changes in battery factories. That's because most of the changes are just tweaks in the chemistry of one of the elements.

Moreover, battery factories are not a huge conveyor-style facilities that require all the stages to be functioning at all times. Rather they consist of multiple parallel assembly lines that can be tweaked or upgraded independently.

 

[tftf]

No it's a foolish analogy. Solar cells were priced so high that there was almost no demand. Packs manufactured at the GF are going to cost less than disruptive prices, both for cars and for storage.

The irony exactly is that these (now defunct or merged at firesale prices) players like Q-Cells, Suntech or LDK kept driving down prices. You are proving my / the article's point:

What Tesla Motors investors should understand about what the manufacturing capacity did to disrupt the energy market is that while the solar industry itself is enduring, most of those manufacturers who built out the early capacity that changed the energy industry are now bankrupt. Suntech Power, Q-Cells, and Yingli Green Energy all held the title of world's largest solar manufacturer at one time, and they've gone through insolvency or are close to it (Yingli). Why this happened in solar is also something Tesla Motors may not be able to avoid.

 

[WarpedOne]

I would still LOVE to see LG's plans of their 35GWh factory in 2020.

tftf, where did you see them?

 

[dalalsid]

I would still LOVE to see LG's plans of their 35GWh factory in 2020.

tftf, where did you see them?

Tesla plans to use 35GWh for three models - S/X/3. If LG makes 35GWh, they should be able to supply 3 models. Maybe 1 car manufacturer that is serious or 3 that are not serious. If LG wants to do what tftf thinks it will do, it needs 350GWh, not 35GWh. It will take an order of magnitude more capacity than LG, Samsung, BYD, AESC and the rest of the world are planning combined by 2020 for the 20 or so models that tftf thinks will compete with Tesla. In short there is almost certainly no way any car manufacturer is competing with Tesla unless they exclusively tie up a battery manufacturer for the foreseeable future. If LG starts supplying anyone except GM, there goes any hope of GM outdoing Tesla. So all the noises that LG is making about supplying EV powertrains is bad for GM. If Samsung supplies anyone except BMW, then that's bad for BMW.

 

[MitchJi]

The irony exactly is that these (now defunct or merged at firesale prices) players like Q-Cells, Suntech or LDK kept driving down prices. You are proving my / the article's point:

No, you are probably too biased to understand my point It's not an accurate analogy.

 

[TheTalkingMule]

If or as EVs and ESS/local storage become more mainstream over the coming decades, the opposite could happen. Operating margins could get squeezed even further with growing volumes. As with the solar panel, NAND flash, TV screen examples...margins remain ultra-low today even though revenue opportunities exploded.

If if's and but's were candies and nuts we'd all have a Merry Christmas!

You can't compare A GE 2021 projection to what Tesla is doing tomorrow afternoon and call it apples to apples. That article takes a "new technology" soundbite and extrapolates out the savings from there. As Elon would say........"Great, show it to me."

 

[Fallenone]

The biggest point of building gigafactory is to bring down battery cost. And now this article claims falling cost of battery could be a bad omen for Tesla?

When I first started investing, I read a lot of articles all over the internet. Not before long I found many of the sources are pure rubbish. Motley Fool was among the first of these sources.

Again, Tesla wanted to make believe (or maybe they believed it themselves back then) the public/investors that this $2 billion round would finance the Gigafactory. It didn't.

The latest 10-Q states that only $261 million have been invested so far and the RGJ article linked above even uses a lower number: $238 million.

In any case, that's a fraction of the full investment needed until 2020 while the full $2 billion raised are already spent (obviously mostly on other purposes).



PS: This article makes a good analogy with the nascent solar market. Being the "biggest" player early on doesn't garantuee success, far from it because of technology gaps in the future:

Could Falling Costs Be a Bad Omen for Tesla Motors' Gigafactory? -- The Motley Fool

Remember when Q-Cells was the biggest solar manufacturer in the world and poised to dominate the panel industry for decades thanks to economies of scale and advanced tech compared to Asian competitors? That was just a few short years ago...

Margins for all kinds of batteries have been equally razor-thin for years. Just because a new sector has exploding revenue (see solar panels, flat-screen TVs, flash chips and computer chips as recent examples...) doesn't mean op margins are good or early leaders won't be toppled by fast followers with deeper pockets.

 

[jhm]

The biggest point of building gigafactory is to bring down battery cost. And now this article claims falling cost of battery could be a bad omen for Tesla?

Let's be specific falling battery costs are a really bad omen for oil and gas producers and traditional car makers long before it is a bad omen for Tesla.

The only thing keeping natural gas in electricity production is that there is not yet enough energy storage to integrate substantially more wind and solar and to make gas peakers obsolete. The only thing keeping oil demand up is a lack of electric vehicles. Both of these depend on battery production not scaling up and not cutting costs. As batteries become cheaper and more available, they will steadily erode longterm demand for both oil and natural gas.

Considering how vast the oil and gas industry is there is pretty much endless market potential for competitive battery makers. Only after the oil and gas industry has been thoroughly gutted do we need to worry about limits to addressable battery market.

To put this into perspective, OPEC has failed in internal negotiation to lower its production cap. They have been fighting about a difference of just 1 mb/d (million barrels per day). This quantity meets demand of about 25 million conventional autos. How many batteries would it take to put 25 million EVs on the road? At 40 to 60 kWh per EV, we need 1000 to 1500 GWh of batteries, just to offset demand for 1 mb/d of oil production. We are not anywhere near this scale in cumulative battery production. Hopefully, by 2030 well exceed this level in annual production, 1500 GWh batteries and 25 million EVs. Once we hit this level, demand for oil will fall over 1% each year, and everyone will agree that oil has no future.

But that day is not today. Today most investors believe oil has a long, prosperous future. Today investors are not sure if batteries and EVs will ever scale up enough to make a dint in oil demand. Today oil investors are not the least bit worried that falling battery prices will doom oil and gas. So today I am not going to worry that falling battery costs will someday doom Tesla.

Oh, yes, and when those oil investors come to see that one Gigafactory will over its lifetime of production offset demand of 1 mb/d or more. They will be happy to invest in such a virtual oil field that only costs $5B to develop.

 

[chickensevil]

Tesla plans to use 35GWh for three models - S/X/3. If LG makes 35GWh, they should be able to supply 3 models. Maybe 1 car manufacturer that is serious or 3 that are not serious. If LG wants to do what tftf thinks it will do, it needs 350GWh, not 35GWh. It will take an order of magnitude more capacity than LG, Samsung, BYD, AESC and the rest of the world are planning combined by 2020 for the 20 or so models that tftf thinks will compete with Tesla. In short there is almost certainly no way any car manufacturer is competing with Tesla unless they exclusively tie up a battery manufacturer for the foreseeable future. If LG starts supplying anyone except GM, there goes any hope of GM outdoing Tesla. So all the noises that LG is making about supplying EV powertrains is bad for GM. If Samsung supplies anyone except BMW, then that's bad for BMW.

Thank you as this was another way of saying what I was implying with my comments about LG as it relates to Tesla buying their supply. Regardless of how you cut this pie noone is planning to produce near enough batteries that it matters to Tesla... yet.

Consider that not all car makers have the same margins on their vehicles, yet we somehow still manage to have some 20 odd major car companies in existence (removing out all subsidiaries and such and just referring to the parent company itself). If the car market was as sensitive to margins such as that, then Porsche (as sub of VW) would have been the leader forever as they have the industry leading margins on their products... yet they aren't... The companies with some of the smallest margins (GM and Toyota) are making the most cars. So it is strange that someone making a cheaper component of a just part of a car would doom the entire product from being profitable... and at that, they aren't even able to make a very large volume of this hypothetically cheaper product...

 

[hobbes]

Musk: Tesla Gigafactory will produce cells with battery technology improvement over current products | Electrek

 

[Quant]

Musk: Tesla Gigafactory will produce cells with battery technology improvement over current products | Electrek

That is interesting on its own....however, as Musk has noted, the primary rationale and competitive differentiator for the Gigafactory will be economies of scale.

So, if battery tech improvement for TSLA is 7 % a year, and economies of scale give them at least 10 % better per unit of cost efficiency, then we are looking at well over 50 percent reduction in cost per KWH within 3 years, or by year end 2019. That's like a bare minimum.

And, I very much doubt anyone else will have similar scale economies and battery cost efficiency by 2019.

I think very few people truly comprehend what is coming in a few years ! People are lulled by the current crop of TSLA models at over $85 K.

2018 should be a seminal year for TSLA.

 

[jhm]

LG Chem Makes Big Move In U.S. Energy Storage Market | OilPrice.com

1 GWh deal for LG Chem to supply cells to AES. AES seems only interested in utility scale systems as a "complete alternative to peaking power plants."

 

[doctoxics]

LG Chem Makes Big Move In U.S. Energy Storage Market | OilPrice.com

1 GWh deal for LG Chem to supply cells to AES. AES seems only interested in utility scale systems as a "complete alternative to peaking power plants."

Impressive compared to what has been done so far. The 1 GWh is to be delivered by 2020. The scale of this single sale can be compared to the 15 GWh per year of energy storage batteries the Tesla Gigafactory will be producing by 2020.

 

[jhm]

Impressive compared to what has been done so far. The 1 GWh is to be delivered by 2020. The scale of this single sale can be compared to the 15 GWh per year of energy storage batteries the Tesla Gigafactory will be producing by 2020.

Yeah, Tesla is at a totally different scale. But what I see here is competition starting to ramp up. I find this very encouraging. The world needs at least a TWh of annual capacity.

 

[MitchJi]

LG Chem Makes Big Move In U.S. Energy Storage Market | OilPrice.com

1 GWh deal for LG Chem to supply cells to AES. AES seems only interested in utility scale systems as a "complete alternative to peaking power plants."

LG Chem Makes Big Move In U.S. Energy Storage Market

A sign that utilities are serious about battery backups is the decision on Tuesday by AES Energy Storage, based in Arlington, Va., to buy 1 gigawatt-hour worth of inexpensive lithium-ion batteries from LG Chem Ltd. of Seoul. That’s enough electricity to power 100,000 homes in the United States.


LG Chem said it will provide the batteries for a project led by AES by 2020 in sales worth hundreds of billions of dollars, though didn’t disclose the specific value of the transaction.

AES’ plan is to package the LG batteries into large banks to provide clean electricity to a utility or a factory when other sources of energy aren’t available. These banks of batteries, also called battery farms, will use software tailored to provide energy for as little as 30 minutes or as long as four hours, depending on the need.

AES isn’t new to this kind of project. For several years it has set up energy storage systems (ESS) in the United States – in Ohio, Pennsylvania and West Virginia – as well as in Chile. All told, the companies’ existing farms so far have installed or are installing batteries with a combined capacity of about one-third of a gigawatt.

“LG Chem has succeeded in setting up a milestone by signing such a large contract for the first time in the world,” said Lee Ung-beom, the president of LG’s energy storage division. As a result, he said, LG Chem will be able to expand production of mid-size and large batteries for ESS, eventually eclipsing its production of batteries for electric vehicles (EVs), which so far has been its largest division.

The market still has not figured out the prospects for Tesla Energy.

 

[doctoxics]

At $250/kwh and annual production of 15 gigawatthours (15,000,000 kwh) of powerpacks (not considering powerwall or recent increases in the Gigafactory size in this analysis), Tesla's annual sales in 2020 would be 3.75 billion dollars. How do LG Chem and AES get to sales of hundreds of billions of dollars? They would need multiple Gigafactories. Perhaps a typo that should read hundreds of millions of dollars.

 

[Gerardf]

At $250/kwh and annual production of 15 gigawatthours (15,000,000 kwh) of powerpacks (not considering powerwall or recent increases in the Gigafactory size in this analysis), Tesla's annual sales in 2020 would be 3.75 billion dollars. How do LG Chem and AES get to sales of hundreds of billions of dollars? They would need multiple Gigafactories. Perhaps a typo that should read hundreds of millions of dollars.

Initially I assumed that to.

Or maybe they mean 100's of BILLIONS of KRW, not US$. Each 100 Billion KRW is around 85M US$.
Still a nice deal and very promising for the energy storage market.

I see no Press release on their Press page : LG Chem Press Release | Press Release | Public Relations Center - Solution Partner LG Chem
A deal potentially worth 100 of Billions US$ would sure have to be mentioned.

 

[doctoxics]

Initially I assumed that to.

Or maybe they mean 100's of BILLIONS of KRW, not US$. Each 100 Billion KRW is around 85M US$.
Still a nice deal and very promising for the energy storage market.

We agree that there is a mistake of about 3 orders of magnitude. The article said dollars not South Korean won. So the error seems likely to be in the number units (should be millions and not billions), but possibly the error could be in the name of the currency (in that case, should be won and not dollars).

 

[AudubonB]

Our little position in Western Lithium (WLCDF) is up 46 percent over the past week. Better than a kick in the pants, which fairly describes its performance in the rest of the calendar year. Some of you don't like the company for its other product mix; that's understandable.

They did recently announce a hook-up with POSCO, Korea's largest steel producer, to help develop a prospect in northwestern Argentina; also, there is a conference call beginning at 11am EST....about one minute from now.....