Tesla Gigafactory Investor Thread

[Mario Kadastik]

Seattle I think your misgivings stem from the fact that you assume Tesla to be a car company. It's not. Tesla is an energy company that specializes in battery based energy storage and usage technologies and as a sideline albeit the main business right now they produce excellent electric cars. Tesla has already announced partnerships with SolarCity to provide battery backup modules for the solar installations as well as they have announced plans to come out with a large battery buffer systems for industrial usage latest by the end of this year.

So battery IP and tech is the main business of Tesla. The fact that majority of the batteries end up inside cars is the second component, but in no case should Tesla fully outsource the battery tech as that's their competitive advantage.

 

[AudubonB]

I, too, initially balked - and hard - at Tesla being the one to finance and control the battery giga-factory, but for exactly the reasons Mario has enumerated, I gradually but ineluctably changed my mind. That said, I still think you can make the case that in the short- and medium-term, if Return on Investment were the #1 criterion for your company to make its decisions, the factory might oughtn't be built. However, Mr Musk's stated goals being to alter the world's energy consumption paradigm, I now am a fervent backer of the project.

Now, as far as the Arizona desert as being too remote for its input (labor) or product (delivery to Fremont) - no, that is negligible. Take a look, for example, at Intel's newest facility, the 2013-completed hypermonstrous "Fab 42": it cost $5.2 bn - probably $1.7bn for the building alone; took 10.5mm man-hours and some 21,000 tons of structural steel (per Intel); I think it's some 2mm sq ft in size (can't find that datum on the spur of the moment), and it sits right in the desert, albeit at the edge of the ever-expanding Greater Phoenix megalopolis. But that's the sort of desert environment that can make sense: great transportation infrastructure right at hand (two Interstates, railroad, airport...and 5.Xmm people) - it would not have been anything at all for Intel to have hired the full contingent of 14,000 employees that were to have been working there.
It is staggering that Intel announced at the end of last month they're mothballing it before it ever cut a 450mm wafer. Holy moly. Wonder if it would suit Tesla, in the same way that Apple + NT Advanced Technology last fall picked up for a song the vacant 1.3mm sq ft First Solar factory in nearby Mesa.

 

[Krugerrand]

How quickly we forget that Tesla has been/had been at the mercy of a handful of suppliers for most of 2013 that stalled ramp up at various times. (And that's not referencing Panasonic.) There was the door handles not being coated properly, the long pieces of chrome trimming that not just anyone could produce, USB cable shipment that got delayed (remember the trip to the local Fry's to buy up their supply?), etc... Remember the frustration for Elon Musk?

Leaving arguably the most important part of the car, the batteries, out in the world for someone else to be entirely responsible for - not that Panasonic hasn't done an excellent job - and being dependent on (and having them on the other side of the world) is far riskier than having it in house. It is in this CEO's nature to want to control as many aspects as possible for obvious reasons. The Giga-factory was very likely in the back of his mind since the day the Secret Master Plan was conceived. Perhaps hoping it wasn't necessary, but planning for it just in case.

 

[bonnie]

I'm predicting the giga-factory will 1) be in Arizona or NM (dependent on the best business incentives) within a day's drive of Fremont and, 2) there will also be a Gen III factory built next to it (removing the single point of failure of just relying on Fremont).

There. I've said it. Let it be so.

 

[Krugerrand]

There. I've said it. Let it be so.

You got it wrong.


So Let It Be Written - YouTube

 

[gym7rjm]

How quickly we forget that Tesla has been/had been at the mercy of a handful of suppliers for most of 2013 that stalled ramp up at various times. (And that's not referencing Panasonic.) There was the door handles not being coated properly, the long pieces of chrome trimming that not just anyone could produce, USB cable shipment that got delayed (remember the trip to the local Fry's to buy up their supply?), etc... Remember the frustration for Elon Musk?

Leaving arguably the most important part of the car, the batteries, out in the world for someone else to be entirely responsible for - not that Panasonic hasn't done an excellent job - and being dependent on (and having them on the other side of the world) is far riskier than having it in house. It is in this CEO's nature to want to control as many aspects as possible for obvious reasons. The Giga-factory was very likely in the back of his mind since the day the Secret Master Plan was conceived. Perhaps hoping it wasn't necessary, but planning for it just in case.

Very good point Krugerrand, having complete control over the battery supply will allow a much smoother roll out of the model E and probably a much faster ramp up.

The devil is in the details of how the Giga plant is presented -- whenever it will be presented. If Elon is able to clearly explain how the plant will allow further and faster growth for the company, then wall street will like the investment. It's also unclear as to how much money Tesla will put into it if it is a joint venture. Many people were afraid that the secondary offering was going to be bad for the stock price, but Elon was ingeniously able to make the offering price a super strong support level.

Question, has the gross margin target for the Model E ever been formally talked about? I've only seen speculation. I could see a situation where alongside the Giga factory announcement, Elon would say that by building it they would be able to achieve a certain gross margin target well above industry standard. He could also formally raise the gross margin targets of the Model S and X. I think something like that would be received very well by investors because it would paint a clear path to raking in big profits.

 

[Krugerrand]

The devil is in the details of how the Giga plant is presented -- whenever it will be presented. If Elon is able to clearly explain how the plant will allow further and faster growth for the company, then wall street will like the investment. It's also unclear as to how much money Tesla will put into it if it is a joint venture. Many people were afraid that the secondary offering was going to be bad for the stock price, but Elon was ingeniously able to make the offering price a super strong support level.

Most people are always afraid. It's quite obvious that Elon Musk is not one of them. :smile:

In the end, I don't see it mattering what Elon Musk says on the topic. It's going to happen, regardless. Some will understand what it's all about and understand the significance, those that don't will spin the Giga factory details into a negative, doom and gloom, and a bunch of what ifs. *shrug*

 

[ItsNotAboutTheMoney]

Leaving arguably the most important part of the car, the batteries, out in the world for someone else to be entirely responsible for - not that Panasonic hasn't done an excellent job - and being dependent on (and having them on the other side of the world) is far riskier than having it in house. It is in this CEO's nature to want to control as many aspects as possible for obvious reasons. The Giga-factory was very likely in the back of his mind since the day the Secret Master Plan was conceived. Perhaps hoping it wasn't necessary, but planning for it just in case.

I don't see the Gigafactory changing anything other than putting the whole chain together on a single site:

#	Section	Description	Company
-1	Repurpose	Aging batteries as solar PV back-up	Tesla, Solar City
0	Recycle	Recycle dead batteries	Umicore?
1	Cell	Manufacture cells	Panasonic, others?
2	Battery	Assemble cells into batteries	Tesla

The materials to make the batteries are heavy. Having lots of shipping adds cost. The need for new capacity provides the opportunity for consolidation. The potential for the factory to repurpose the aging batteries is, I think, a bonus, as it deals with an outstanding question.

 

[keithz]

I don't see the Gigafactory changing anything other than putting the whole chain together on a single site....

This is actually an amazing idea. They would be able to just ship out completed battery packs from the Gigafactory. And fill the ships with returned battery packs for repurpose or recycling.

 

[bonnie]

You got it wrong.


So Let It Be Written - YouTube

I stand corrected.

 

[aronth5]

You got it wrong.


So Let It Be Written - YouTube

Nope.
And then Elon said to JB "Make it So"

 

[Krugerrand]

As much as I love Captain Picard, Rameses was the first AND he put it in stone. The Captain merely copied him.

 

[bonnie]

Stop squabbling. Let it be so.

 

[brianman]

Stop squabbling. Let it be so.

Best line:

Shut up, Wesley!

I'm not sure if the TMC voice on that one is bonnie or Nigel.

 

[Robert.Boston]

Moving ourselves back on-topic....

 

[AudubonB]

Okay, back on topic:

Californians may think otherwise, but I can attest that at least a significant fraction of Americans outside that state think it quite newsworthy that a nuts-and-bolts (albeit very, very high-tech) manufacturer decided to create a start-up in the Golden State (yes, I am extremely aware of the NUMMI bargain and everything else).

Regardless: concerning the potential for the battery giga-factory also being located in California, adjacent to the Fremont plant or otherwise: given the immense amounts of press regarding the state's dire and looking-worse-down-the-road water situation, how much water might be needed in a battery manufacturing plant? Ceteris paribus, can this be a deciding factor?

 

[ItsNotAboutTheMoney]

This is actually an amazing idea. They would be able to just ship out completed battery packs from the Gigafactory. And fill the ships with returned battery packs for repurpose or recycling.

The or is the beneficial piece. It makes it much easier if you can centralize the complex decision and processing.

The key that JP-style resources-resources-doom-mongers miss is that while they'd need large annual volumes, if everything stabilizes they'd end up in an 10 or 11-year loop.

So, I guess, back to the thread title, if you want to invest off the back of the Giga factory, it's a matter of figuring out the key partners needed for large-scale, full-cycle operations, and eventually, hopefully, the Chinese company with whom Tesla will partner when they build the 2nd factory.

 

[Krugerrand]

Regardless: concerning the potential for the battery giga-factory also being located in California, adjacent to the Fremont plant or otherwise...

Less than zero potential regardless of water, sunlight or anything else. This is a BIG factory being planned. GYNORMOUS, even. There isn't land of that size adjacent to the Fremont plant. And if Bonnie's declaration of a Gen III factory built along side the Giga Battery Factory, which sounds like a logical step...

 

[Robert.Boston]

I'd give Texas a very serious look. Texas has excellent infrastructure for building big things, a very business-friendly government, no personal income tax, and port facilities. The latter is important if Tesla were to co-located the Gen III and/or truck factory with the battery factory, giving Tesla an easy way to ship completed vehicles out to Europe.

 

[kenliles]

I'd give Texas a very serious look. Texas has excellent infrastructure for building big things, a very business-friendly government, no personal income tax, and port facilities. The latter is important if Tesla were to co-located the Gen III and/or truck factory with the battery factory, giving Tesla an easy way to ship completed vehicles out to Europe.

That would induce an interest revisit of the dealership laws in that exchange - just too much irony for the mind that they couldn't sell them there.
*Order in-line, buy in CA, build in TX, ship it across the border and import from Mexico. Might prove an interesting 'State' of affairs