Tesla Gigafactory Investor Thread

[ItsNotAboutTheMoney]

Hershey,

Back to the napkin, your current world's capacity or there abouts for 200K G3 plus S&X would make double the world's capacity for S&X plus 500K G3. I personally think G3 demand will be there and in spades. Being production limited on the introduction of a game changing technology (Model S) is acceptable. Having a two year wait for G3 would not. Sure, you can argue that Tesla can survive it but I would not want them to try.

That brings us back to the need for massive capacity (I'll avoid Giga) in but a few years time. I guessing $10B to solve the capacity problem. Sure, it is not needed on day one but that kind of fund raising/problem solving takes some time thus my interest in how that problem is being solved today.

I like your idea of the analysts picking up the ball on the Q3 call. I'll be listening Actually, I think lowly shareholders can ask questions on the call.....

From my reading, the Suminoe expansion would add 300M cells per year for $1.3B of strong yen. Assuming 5k per car, that's 60k cars per 1.3B, If you're thinking 500k cars per year, 10B sounds like a high-side estimate, especially given the identixal tech. Less than 18 months to bring new lines online, so I think they'd be able ramp withou any problem.

 

[StapleGun]

From my reading, the Suminoe expansion would add 300M cells per year for $1.3B of strong yen. Assuming 5k per car, that's 60k cars per 1.3B, If you're thinking 500k cars per year, 10B sounds like a high-side estimate, especially given the identixal tech. Less than 18 months to bring new lines online, so I think they'd be able ramp withou any problem.

Just to add a little more data to these calculations, here's a great article on the cost of battery factories originally posted by someone in CapOp's battery pack price thread.

http://americanmanufacturing.org/files/1-s2.0-S0378775312018940-main (4).pdf

The article roughly states that a new factory costs about $4 per cell that it will produce each year, which is consistent with the Suminoe expansion you mention. It also says that the same factory in China would be about 15% cheaper than the US though.

 

[CapitalistOppressor]

Just to add a little more data to these calculations, here's a great article on the cost of battery factories originally posted by someone in CapOp's battery pack price thread.

http://americanmanufacturing.org/files/1-s2.0-S0378775312018940-main (4).pdf

The article roughly states that a new factory costs about $4 per cell that it will produce each year, which is consistent with the Suminoe expansion you mention. It also says that the same factory in China would be about 15% cheaper than the US though.

Lol. I just reposted this over there after having to look my original post on it up, and then did the same Suminoe comparison. Obviously we are on the same wavelength.

I don't think there is any way that GenIII happens without many billions of dollars worth of investment.

John Peterson's estimates of battery capacity includes a ton of generic producers from SE Asia, India, etc that have non-automated lines that produce low end, low quality batteries for local industry or second tier export markets (think 1.8aH batteries used in cheap toys instead of high quality laptop batteries).

I think the EnergyTrend statistics are much more reliable, because they survey only the big manufacturers like Panasonic, and they are estimating current production at ~660m cells per year from those sources. That data is much more on point for this discussion, because Tesla just can't utilize the kind of low end batteries you can get from some two bit manufacturer in Vietnam.

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As to the suggestion in the OP, one issue would be whether the US would authorize an acquisition by Samsung. Any domestic auto manufacturer, including Tesla, is subject to review whenever foreign ownership stakes rise beyond a certain level.

I suspect that the Obama administration would work hard to find a domestic buyer if Samsung made a bid for Tesla.

For that matter, the administration has ~$5 billion available in the same advanced technology loan program that was used to fund the Nissan plant at Suminoe, A123 and Tesla itself. And they just put out the word that they want new proposals to use that money.

I wouldn't be shocked if Tesla is thinking about putting together a proposal on the scale of Ford's $4b loan that they took out to fund their plugin strategy.

 

[VolkerP]

Tesla can't go this alone

The recent discussion of battery supply shed a light for me on this: Tesla cannot go this alone. Let me explain.

1. Without expansion of global 18650 cell production capacity, Tesla is production limited to <50.000 Model S/X cars per year.
2. They already feel the pain and try to generate as much revenue per cell as possible (P, P+, price increases, incentive of quicker delivery for higher-optioned cars)
3. 3rd party 18650 manufacturers have little incentive to invest in new cell production capacity for ONE customer. What if Tesla goes bust?
4. From the limitation in 1., and an optimistic average life span of 20 years per Model S/X, there would never be more than 1 million Tesla EVs on the world's streets. A mere drop in the ocean and a far cry from a transition to sustainable transport.

So what must happen next? At the supercharger event, Elon stated "join us, or copy us."
(IMO he left out the 3rd alternative "or, go bust." :wink

One hunch is the fact that Toyota is licensing Tesla drivetrains for the RAV4 EV (although a compliance car in limited number), and Mercedes e-cell B-class (not sure what volume is planned here). Does this spur investment in cell production capacity? I have some doubts.

We need an established EV battery market for good. A healthy market consists of multiple suppliers and consumers. Volume and prices are reliable and predictable for all participants. Contracts for large volume and several years are closed on a regular basis.

But how could that market develop?

At least one of the incumbent players follows in Tesla's footsteps with the 18650 technology for a mass produced car. 18650 suppliers are confident enough in continued demand that they expand production.
Or, Tesla raises the cash to invest in cell production all by themselves.

What other possibilities are there?

 

[lolachampcar]

just off hand

-One or more major battery suppliers invests in Tesla and Tesla uses those funds to underwrite the supplier building out capacity.
-One of the major auto manufacturers realizes they can not re-invent themselves and yet there is a paradigm shift. They buy Tesla, underwrite battery capacity and lend their supply chain management to Tesla to help them manage the growth all the while keeping Tesla independent from the parent and preserving the no dealer foothold.
-Tesla limits G3 production to battery capacity as multiple vendors grow it within their (the battery mfg's) internal tolerance for investment.

 

[sleepyhead]

There is one very easy solution and that is to tap into another government loan.

This time for $5 billion. That would make me extremely happy as a shareholder.

 

[evmile]

Well if there is any good news tablets don't use 18650 cells and they seem to be replacing the laptops which do use 18650 cells.

So the other half of the world's supply may become available soon enough.

 

[Bobfitz1]

I'd have to go back and listen to the exact wording in the last earnings call but I came away with the impression that G3 @ 500K per year would require about double the world's existing capacity (with MS currently consuming roughly 20%??). I believe Elon was talking about needing a lot more capacity simply to realize his requirements for G3.

I read the terrific article you posted link to on battery factory costs. If Gen III takes approx 4,000 cells, then 1/2 million cars annually need 2 billion cells annually. I think the article mentioned world production of 18650 is currently 6 billion per year. That seemed high to me, but rest of article seemed factual. Just going on memory of the article. So hopefully I'm not misquoting their figure for current world production.

Article made me suspect TM might invest a few hundred million to build an in house battery factory, just to keep Panasonic and Samsung on their toes and investing in more new factories of their own.

 

[vin5xxx]

Gigafactory or not the threat of future capacity concerns on 18650 availability appears to have receded. Elon says this is no longer a threat to Tesla's growth:

Cool story of a Musk fan getting to hang out with Elon for 30 minutes last week | Forums | Tesla Motors

 

[sleepyhead]

Gigafactory or not the threat of future capacity concerns on 18650 availability appears to have receded. Elon says this is no longer a threat to Tesla's growth:

Cool story of a Musk fan getting to hang out with Elon for 30 minutes last week | Forums | Tesla Motors

Sounds to me like it is time to buy some more TSLA.

 

[Ryo]

Gigafactory or not the threat of future capacity concerns on 18650 availability appears to have receded. Elon says this is no longer a threat to Tesla's growth:

Cool story of a Musk fan getting to hang out with Elon for 30 minutes last week | Forums | Tesla Motors

Neat story. Perhaps I'm missing obvious but what does he mean by a "1% supplier"?

" Elon went on to say that any supply issues would be from a 1% supplier but he mentioned nothing specifically"

 

[Ludus]

Wow. This is the kind of entirely believable slam dunk post that makes reading these forums worthwhile. The original post was at the Tesla house forum but it got linked here quickly.

One of the perks of Tesla's new found market cap gravitas seems to be being taken more seriously by the big guys. Taking that issue off the table in the most natural way by having Panasonic and Samsung just commit to handling it is very positive news.

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Neat story. Perhaps I'm missing obvious but what does he mean by a "1% supplier"?

" Elon went on to say that any supply issues would be from a 1% supplier but he mentioned nothing specifically"

http://cleantechnica.com/2013/08/12/4-elon-musk-statements-from-friday-that-caught-my-ear/

Elon has made some statements about the 1% of suppliers who just can't cut it.

 

[lolachampcar]

If it is a no problem problem, then it is just a matter of making sure you own enough TSLA before they announce it

 

[wycolo]

Of course Samsung and Panasonic 'will handle it'. That is what they have been doing for a good while now: expanding their production. They are overjoyed that the 18650 will not soon be obsolete as they feared.

Will they hostile-ly takeover Tesla Motors? No way. Why is Elon not worried about these two players? Because they mesh perfectly into the business and will continue to do so. No culture of domination that might need to be satisfied. Only 'loose end' might be how to start producing cells in North America which would increase efficiency (reduce shipping costs).
--

 

[pGo]

Every time I look at the issue of giga battery factory, Apple display production issues come right in front.

It is easy to forget now but think about the production issues Apple had with the original iPhone or the ratina iPads. Apple even had to re-establish the display glass factory that was non-existent (corning used had the solution since years but had no buyer for it and essentially did not run a single piece of display glass through production). Then comes the production issues of display itself & RAM. Apple solved them by working with the suppliers - by investing in them while controlling quality and gradually increased yield.

The Gen 3 can be compared with the original iPhone launch. Apple announced the iPhone whole 6 months in advance - to gauge market reaction, demand, and then establish production pieces by showing them demand. Apple initially invested in RAM production with Samsung for iPods, and then later on with Sharp and as recently as a few months ago making a deal with TSMC for chip manufacturing.

Keep in mind that Apple didn't grow revenues on the first day. In fact, the first two months of iPhone launch, they only sold a few hundred thousands iPhones only.

If Gen 3 wows consumers in all aspect just as Model S, the giga factory issue becomes easier to solve. Looking at the Apple playbook, Tesla can do following.

1) Launch Gen 3 alpha/beta and a defined date of production
2) Wow the market in terms of style, specs, price
3) Create a feeling that everyone wants a Gen 3 from Camry buyer to a 3 series buyer
4) Make a reservation list of 50K (get 2.5K down) or so
5) Check market reaction, get a few B worth of funding (loans better than secondary)
6) Whatever the battery cell supply is, start production while talking with potential partners by investing in the little to increase yield
7) it does not matter if the production is supply constrained for 12-18 months as long as product & brand rocks (Check harley motorcycles for years) while focusing on ramping up.

This does not sound a huge problem to me now. The issue does remain in execution but looking at how Model S is being executed, I have full faith that Tesla can become another Apple in terms of production rampup & quality. A lot of us on this forum think that the battery supply issue needs to be addressed on the first day of Gen 3 launch. I think it needs to be fully resolved in a few years from initial production start. Earlier it gets resolved, better it is.

Another argument is that if production rampup takes longer, the competition may get a hand to come up with competitive product. That is always the case. They already know the capabilities of Gen 3 will be in terms of range and price. Launching HTC One X does not kill iPhone.

 

[VolkerP]

Earlier it gets resolved, better it is.

Wisely chosen your words you have.

 

[pGo]

Here is the first of many steps. Chillex people.

http://www.4-traders.com/SUMITOMO-M...-Lithium-Nickel-Oxide-Production-Fa-17297959/

 

[clmason]

Here is the first of many steps. Chillex people.

http://www.4-traders.com/SUMITOMO-M...-Lithium-Nickel-Oxide-Production-Fa-17297959/

Great find!

FTA: "The planned investment outlay is approximately 4.8 billion yen (US$48 million). After expansion, SMM's production capacity in lithium nickel oxide will increase from the current 300 tons per month to 850 tons."

Very good news.

 

[pGo]

Another article saying Panasonic will invest $200M into battery production expansion. 2nd of many steps

http://pulse2.com/2013/09/14/tesla-...corporation-6752-back-to-profitability-93477/

"Panasonic Corporation (TYO:6752) is planning to invest $200 million to expand their automotive lithium-ion production lines in Osaka and Kasai. Panasonic is now the leading supplier for lithium-ion batteries for plug-in and hybrid cars that are sold in the U.S. Panasonic now has a larger market share than LG Chem and Nissan’s AESC."

 

[brianman]

There is one very easy solution and that is to tap into another government loan.

This time for $5 billion. That would make me extremely happy as a shareholder.

Not me. Sign of weakness, and fuel for the counter-Tesla folks to rise up again. Tesla can stand on its own two feet, with investor from the private sector perhaps, at this point.