Tesla Gigafactory Investor Thread

[AlMc]

CHARLOTTE, N.C., Nov 05, 2014 (GLOBE NEWSWIRE via COMTEX) --
Polypore International, Inc.'s PPO, +24.17% Celgard, LLC subsidiary ("Polypore") and Panasonic Corporation (otcpkCRFY) ("Panasonic") are pleased to announce that they have signed a letter of intent to work together in the development of coated and uncoated Celgard® brand separators to meet Panasonic's requirements for their next generation cylindrical battery cell production for various applications globally. Upon successful completion of this development effort, it is expected that the parties will enter into a long term supply agreement.

http://www.marketwatch.com/story/po...-ion-battery-separator-development-2014-11-05

Hmm. Polypore International is an American Co headquartered in Charlotte North Carolina.

And is up 20%+ today!

 

[jhm]

10M sq ft = 230 acres. Also Gigafactory may have two floors, so it might only cover 115 acres of land.

 

[chickensevil]

10M sq ft = 230 acres. Also Gigafactory may have two floors, so it might only cover 115 acres of land.

I thought it was 5M sq ft if 2 floors (thus giving 10M) or 10M if one floor. Since they cleared a plot of land for 10M that would suggest they were going with one floor.

 

[jhm]

I thought it was 5M sq ft if 2 floors (thus giving 10M) or 10M if one floor. Since they cleared a plot of land for 10M that would suggest they were going with one floor.

IDK, but they may as well go two floors at 10M. They'll need a second GF site in a year or two. If they build this out in modules, they may as well go for 20M at full capacity. Of course, if there are operational or engineering issues against two floors, then so be it.

It makes me wonder if there are any advantages to two floors. Suppose you could make the cells on second floor and let them roll down to first floor where packs are assembled. Gravity feed of cylindrical cells would be pretty cool. The machine that makes the machine, that's where the action is. I hope to tour this in a few years.

 

[chickensevil]

IDK, but they may as well go two floors at 10M. They'll need a second GF site in a year or two. If they build this out in modules, they may as well go for 20M at full capacity. Of course, if there are operational or engineering issues against two floors, then so be it.

It makes me wonder if there are any advantages to two floors. Suppose you could make the cells on second floor and let them roll down to first floor where packs are assembled. Gravity feed of cylindrical cells would be pretty cool. The machine that makes the machine, that's where the action is. I hope to tour this in a few years.

They have access to more land that from what I understand was already basically given to them free of charge that includes 7000 acres of wind farm space and 2000 acres of whatever else they want it to be. The reason they got the land for free was because Tesla forced Nevada to build out USA parkway all the way down to US 50 (I think that was the road) which is something that the industrial park owner has been wanting to make happen for like 15 years. So getting the state to build that road was worth ~9,000 acres

Anyway, point is, it might be *easier* to build out rather than up. Keep in mind they are going to blanket the roof in solar panels. So either they need to make it 2 stories from the start, or not at all since it will likely be extremely expensive to remove all the solar panels, build the second floor, and then add them back.

 

[Model 3]

They have access to more land that from what I understand was already basically given to them free of charge that includes 7000 acres of wind farm space and 2000 acres of whatever else they want it to be. The reason they got the land for free was because Tesla forced Nevada to build out USA parkway all the way down to US 50 (I think that was the road) which is something that the industrial park owner has been wanting to make happen for like 15 years. So getting the state to build that road was worth ~9,000 acres

Hmm... I may have missunderstud this, but I thought they got the land for the GF for free, and an option to buy upto the next 9,000 acres?

http://fortune.com/tag/gigafactory/

Legally, the giant industrial park, which Gilman manages, is giving the 980-acre gigafactory parcel to Tesla.

[...]

In addition, Tesla has options to purchase another 9,000 adjacent acres, including 7,000 acres for a wind-farm with the potential to produce about 140 megawatts of electricity, according to Gilman.

 

[chickensevil]

Hmm... I may have missunderstud this, but I thought they got the land for the GF for free, and an option to buy upto the next 9,000 acres?

http://fortune.com/tag/gigafactory/

Well crap... I remembered that part wrong. Thanks for the correction.

I think my point still stands. They have 980 acres that at present is only being filled with a 10m Sq Ft building, giving them room for expansion on the lot and even more room for expansion with the extra acreage of land.

So I don't see them building up, but rather out.

 

[DaveT]

In Tesla's 10Q filed on Nov 7, 2014, they include the detailed agreements signed between Tesla and Panasonic on Oct 1, 2014.

Tesla Motors - Quarterly Report

It seems to be about 30-40 pages of signed agreements:
10.1 Agreement between Panasonic Corporation and the Registrant dated July 31, 2014
10.2 General Terms and Conditions between Panasonic Corporation and the Registrant dated October 1, 2014
10.3 Production Pricing Agreement between Panasonic Corporation and the Registrant dated October 1, 2014
10.4 Investment Letter Agreement between Panasonic Corporation and the Registrant dated October 1, 2014

IMO, this is good news as it shows that Tesla and Panasonic have made significant progress in hashing out the concrete details of their relationship. It further de-risks Gigafactory.

I also found it interesting that Tesla noted earlier in the 10Q that "We plan to use the battery packs manufactured at the Gigafactory for our vehicles, initially for Model S and Model X, and later for our Model 3 vehicle, and stationary storage applications." So it look like GF batteries will end up in the Model S/X first, likely sometime in 2016.

 

[uselesslogin]

I also found it interesting that Tesla noted earlier in the 10Q that "We plan to use the battery packs manufactured at the Gigafactory for our vehicles, initially for Model S and Model X, and later for our Model 3 vehicle, and stationary storage applications." So it look like GF batteries will end up in the Model S/X first, likely sometime in 2016.

In a way this is no surprise though. They already said 15 GWh of cells are coming from existing factories and they will assemble packs there. They will have to clear out pack assembly from Fremont by then in order to make room for a Model 3 line.

 

[vgrinshpun]

I also found it interesting that Tesla noted earlier in the 10Q that "We plan to use the battery packs manufactured at the Gigafactory for our vehicles, initially for Model S and Model X, and later for our Model 3 vehicle, and stationary storage applications." So it look like GF batteries will end up in the Model S/X first, likely sometime in 2016.

Similar, but even more intriguing statement is included in the shareholder's letter. Based on Elon's answers during the Q2 ER call, the existing battery cell output is enough to make 150,000, may be 200,000 (stretch) cars per year. Now that Q3 shareholder's letter indicates that early production of the batteries at the GF could provide some potential expansion capacity for Model S and X, it is clear that TM is planning to have enough battery capacity to potentially sell more than 150,000 or even 200,000 MS/MX in 2017. It seems that this is flying under the radar for now, but I am sure that we are going to hear more in the coming quarters. Currently no analysts include these volumes of MS/MX in their models.

Together with Panasonic we are making good progress toward first cell production in 2016, slightly earlier than originally scheduled. Starting operations earlier will reduce ramp-up risks for Model 3 and provide some potential expansion capacity for Model S and Model X.

http://files.shareholder.com/downloads/ABEA-4CW8X0/3473357330x0x791902/d7b8cc04-9c3e-4216-9ce3-7fb4d7e0c00b/Q314%20SHL%20Final.pdf

 

[jhm]

Similar, but even more intriguing statement is included in the shareholder's letter. Based on Elon's answers during the Q2 ER call, the existing battery cell output is enough to make 150,000, may be 200,000 (stretch) cars per year. Now that Q3 shareholder's letter indicates that early production of the batteries at the GF could provide some potential expansion capacity for Model S and X, it is clear that TM is planning to have enough battery capacity to potentially sell more than 150,000 or even 200,000 MS/MX in 2017. It seems that this is flying under the radar for now, but I am sure that we are going to hear more in the coming quarters. Currently no analysts include these volumes of MS/MX in their models.

http://files.shareholder.com/downlo...c3e-4216-9ce3-7fb4d7e0c00b/Q314 SHL Final.pdf

On the general theme of flying below the radar, I wonder how much of the stationary market story is just cover for building out excess capacity. Grid storage is likely to be a low margin market, certainly much lower than the per car gross profit Tesla can make on a car. Thus, the stationary products become expendable when capacity is needed for autos. So 30% capacity for stationary becomes a way to derisk a massive build out of capacity. It presents an option: break even on stationary sales or capture higher profits from autos if there is sufficient demand and auto capacity.

 

[Model 3]

On the general theme of flying below the radar, I wonder how much of the stationary market story is just cover for building out excess capacity. Grid storage is likely to be a low margin market, certainly much lower than the per car gross profit Tesla can make on a car. Thus, the stationary products become expendable when capacity is needed for autos. So 30% capacity for stationary becomes a way to derisk a massive build out of capacity. It presents an option: break even on stationary sales or capture higher profits from autos if there is sufficient demand and auto capacity.

Good and interesting thoughts, but was it not that these 30% would be used for grid-storage and battery packs to other carmakers? Thinking that the size of this market is undervalued. Makes me especially think about VW group that has a stated policy of buying batteries - preferably finished standard battery packs - where they can get them cheaper, and thus do not develop their own capacity, or enter into long-term binding agreements with battery manufacturers that can form the basis for these to build out its capacity.

http://seekingalpha.com/article/2662215-how-volkswagen-evaluates-batteries-to-compete-with-tesla

 

[jhm]

Yeah, I'm not so sure how literally we can take 30% "stationary". This why I've started another thread on high margin applications for battery packs. My main concern is about chasing low margin markets when there is a lot of low hanging high-margin fruit. I'm fine with selling complete packs to VW, I just want to make sure we get a high enough margin to forego the opportunity to make more Tesla cars.

 

[chickensevil]

Yeah, I'm not so sure how literally we can take 30% "stationary". This why I've started another thread on high margin applications for battery packs. My main concern is about chasing low margin markets when there is a lot of low hanging high-margin fruit. I'm fine with selling complete packs to VW, I just want to make sure we get a high enough margin to forego the opportunity to make more Tesla cars.

Nothing wrong with having some diversification on the product offering. Not everything is going to be 30% margins on a 100k+ ASP. If they get 15%+ margins on selling just the packs I will be perfectly happy with that.

 

[Auzie]

Yeah, I'm not so sure how literally we can take 30% "stationary". This why I've started another thread on high margin applications for battery packs. My main concern is about chasing low margin markets when there is a lot of low hanging high-margin fruit. I'm fine with selling complete packs to VW, I just want to make sure we get a high enough margin to forego the opportunity to make more Tesla cars.

Imo Tesla chasing any margin is just a necessary means to an end, not a primary goal. The primary goal is to accelerate the advent of sustainable transport.

 

[jhm]

Imo Tesla chasing any margin is just a necessary means to an end, not a primary goal. The primary goal is to accelerate the advent of sustainable transport.

Right, but margins are also a proxy for how much economic value is being created. Transportation fuels sell at a substantial premium to efficient grid electricity. Applications such as EVs have the potential for high margins based on arbitrage between the transport fuel and electricity markets. That's why its possible to power your Tesla for a fourth to third the cost of a comparable ICE vehicle. So the goal of sustainable transport is primarily about displacing oil with renewable electricity.

The problem with stationary batteries is not simply that the margin is low, but that due to the efficiency of the electricity markets their is not as much opportunity for energy arbitrage. There is some, to be sure, but my point is the need to arb oil is much greater, both economically and environmentally. I strongly suspect that the greenhouse gas reduction of 1 GWh of batteries in vehicles is much greater than the reduction of the same amount of storage in the grid. So chasing margin is not just a means to an end, it is a focus on where biggest environmenal and societal needs are.

Why would we want to slow the advent of sustainable transport by diverting Gigafacory capacity to grid storage? If it is there as an option to derisk the investment in Gigafactories, a kind of diversification, I can accept that. But that takes me back to my point about it being an expendable product should the opportunity to accelerate auto sales arise.

 

[Auzie]

Why would we want to slow the advent of sustainable transport by diverting Gigafacory capacity to grid storage? If it is there as an option to derisk the investment in Gigafactories, a kind of diversification, I can accept that. But that takes me back to my point about it being an expendable product should the opportunity to accelerate auto sales arise.

I could be wrong, but my read on the situation:

Looking for a common denominator in EM enterprises, the key word is sustainability. Colonizing Mars, reducing carbon footprint, etc the unifying theory is to increase our species sustainability.

Perhaps if we look at GF enterprise through that filter, GF does have a purpose to facilitate distributed grid and make solar and wind more viable. Margins are secondary but necessary means to achieve such end goals.

( Not sure we deserve to be sustainable )

 

[jhm]

I could be wrong, but my read on the situation:

Looking for a common denominator in EM enterprises, the key word is sustainability. Colonizing Mars, reducing carbon footprint, etc the unifying theory is to increase our species sustainability.

Perhaps if we look at GF enterprise through that filter, GF does have a purpose to facilitate distributed grid and make solar and wind more viable. Margins are secondary but necessary means to achieve such end goals.

( Not sure we deserve to be sustainable )

I think we're on the same page. Stationary storage is very important to maximizing the penetration of renewables into the energy markets. Tesla is even doing this directly at the Supercharger stations and will be at the Gigafactory. Stationary storage enables intermittent renewables to be fully dispatchable. And this in turn is what is needed to retire coal plants and reduce fossil fuels in the electricity market.

My concern is more about timing. In 10 years the cost should come down 50% and 75% in 20 years. So eventually this could be high margin. So if Tesla focusses on growing the business fast, fueled by high margins, it will eventually address grid storage at scale. Globally, battery capacity needs to double every 24 months. So the question is what sort of cash flow is going to support that rate of expansion. Moving too quickly into low margin products could restrict the cash flow such that doubling every 24 months is not going to happen. So I think of high margin as the precondition for extremely high rates of growth. So we're in agreement about where this is going, and my concern is how quickly we can get there in a financially sustainable way.

 

[Model 3]

My concern is more about timing. In 10 years the cost should come down 50% and 75% in 20 years. So eventually this could be high margin. So if Tesla focusses on growing the business fast, fueled by high margins, it will eventually address grid storage at scale. Globally, battery capacity needs to double every 24 months. So the question is what sort of cash flow is going to support that rate of expansion. Moving too quickly into low margin products could restrict the cash flow such that doubling every 24 months is not going to happen. So I think of high margin as the precondition for extremely high rates of growth. So we're in agreement about where this is going, and my concern is how quickly we can get there in a financially sustainable way.

Your absolutely right. But I think they are going slowly on this. My take is:
They will use all the batteries they can on their cars.
If they still have some batteries left (it should be ~30%), they use it to produce battery packs for other manufactures.
If they still have some batteries left, they use it on "home batteries" to Solar City customers (and maybe other users with home-solar/wind).
If they still have some batteries left, they use it to grid storage. Both "on the grid" and at bigger customers. Just to "bootstrap" the marked. They have to be there early to be considered later, and to get experience in this marked.

So yes, I think they are going slowly here. When they have a few more GF's they may push it more aggressively, and get a better margin.

 

[chickensevil]

Your absolutely right. But I think they are going slowly on this. My take is:
They will use all the batteries they can on their cars.
If they still have some batteries left (it should be ~30%), they use it to produce battery packs for other manufactures.
If they still have some batteries left, they use it on "home batteries" to Solar City customers (and maybe other users with home-solar/wind).
If they still have some batteries left, they use it to grid storage. Both "on the grid" and at bigger customers. Just to "bootstrap" the marked. They have to be there early to be considered later, and to get experience in this marked.

So yes, I think they are going slowly here. When they have a few more GF's they may push it more aggressively, and get a better margin.

Agree except I would flip the Solar City home customers and the grid storage since I think the grid storage will be a much bigger (and more profitable) market.