Tesla Gigafactory Investor Thread

[Chickenlittle]

The suggestion was that Panasonic would bring others with them.

Even if they didn't tesla would find it easy to fund 1 billion out of receipts in three years

 

[hummingbird]

Suppose that Panasonic decide to participate in the Gigafactory and to invest $1B, that would still not be enough, as more investment will be required (at least $4B, but $5B would be more likely). Which other company is most likely to be stepping forward as a partner of Tesla Motors, and to make an additional investment in the Gigafactory (for another $1B?)?

This is not news. We are clear about this: Tesla and Panasonic have a love-hate relationship.

For now, let's not dream about Panasonic participating in the Gigafactory in the USA. Panasonic's CEO Tusuga said clearly in public that their approach was to take incremental steps to increase cell production as needed.

Translation: 1) they intend to milk Tesla as much as possible by keeping cell supply limited, 2) understandably, they are not interested in sharing their cell IP and know-how with Tesla. Why would they want to drive down cell prices in a hurry with a giant factory located in the USA? Their interests are to protect their IP & know-how, make money and keep jobs in Japan. Keep in mind Panasonic Corporation lost 10 billions dollars in the past 10 years, by necessity they are very conservative.

On the flip side, Panasonic and Tesla may sign another deal for 4 billion cells in 2016 for Gen 3, as they did last October for 1.8 billion cells for Model S/X.

1.8 billion cells is good for 270,000 Model S&X (to 2017)

4 billion cells will be good for another 300,000 Model S&X plus 500,000 Model Es.

(note: each Model E will use 4,000+ cells. each Model S/X will use 6,500 cells on average)

Unless something changes, Panasonic will try to hold cell prices up for as long as possible. I suspect current cell price is approximately $3.00 per cell. I suspect Panasonic will drop that price by 3% per year over the next 5 years, like this:

$/cell ($/kWh)
--------------------
3.00 ($247/kWh)
2.91 ($240/kWh)
2.82 ($232/kWh)
2.73 ($225/kWh)
2.66 ($219/kWh)
2.58 ($212/kWh)

Model E needs battery size of 48 kWh. $220 x 48 = 10,500. Total pack price of $12,500 (10,500 + 2,000). Can Tesla make the Model E given this price?

Elon is of course not happy with this. He does not like to be Russianed. He now has $2 billion in the bank, we wait and see what he does next.

 

[kenliles]

good point-
I would remark, with Elon, the Pan-boys may find themselves dry-milking if they aren't careful

 

[hummingbird]

Unfortunately Tesla and Panasonic are currently joint at the hip. They share current cell chemistry. Tesla is stuck for now. But I suspect Elon will find a way out of this one way or another.

I am not an expert, but I hope somehow Tesla and the Chinese government will jointly do something big. (Wild thought: acquire Panasonic to take control of its battery business and spin off the rest. Then build two Gigafactories to start, one in USA, one in China)

The Chinese government desperately want EVs to succeed. We are close. It's very much a matter of $/kWh. One way or another, the price will come down. The only question is when? and by who? Then the EV revolution will take off big time in China because the government will mandate it. Tesla should be able to play an important role if Elon does this right.

For sure, Elon is very much interested in getting CO2 emissions down in China ASAP.

 

[Johan]

hummingbird: Tesla through JB Straubel have said on several occasions that the cell they are currently using in the Model S packs is not the regular NCA18650 3.4mAh cell, which I suppose Panasonic hold the full patent for, but a modified, "automotive grade", cell that is specified and designed by and for Tesla. So we do not really know that there are any Panasonic patents as of now that would prevent Tesla from manufacturing cells on their own. The 18650 cell format and the general principles of LiIon batteries absolutely not subject to patent protection by Panasonic, as we know there are other suppliers out there manufacturing cells that can, in effect, substitute the Panasonic cells. So if Panasonic were to not participate in the Gigafactory, for some of the good reasons you bring up (why drive down price, being conservative etc) then I suppose it all comes down to financials: can Tesla finance the factory themselves, or find another more willing partner. From the past we've seen that Elon is bascially as much a financial as well as technological genius and again and again he keeps coming up with creative and attractive new financing models.

 

[pz1975]

The one part of all of this I don't understand is why Elon/Tesla would make a major announcement such as the gigafactory and go through the whole process of raising their own $2.3 billion for it if they weren't absolutely sure they already had partners lined up or at least in the final stages of discussion. I don't remember a time that the company has ever made any poor decisions since their inception even remotely close to what this would be if they could not find any/enough partners for the GF and they were left stranded. It just doesn't seem to be Elon's way to make a big announcement like that that would have the potential to greatly backfire.

 

[Cosmacelf]

The reason they made the gigafactory announcement when they did was because the stock price had reached stratospheric heights. The gigafactory was announced in conjunction with a capital raise. They may very well have not been ready for the announcement, but the imperative of being able to raise $2B cheaply was too big to pass up.

 

[arashlzy]

The one part of all of this I don't understand is why Elon/Tesla would make a major announcement such as the gigafactory and go through the whole process of raising their own $2.3 billion for it if they weren't absolutely sure they already had partners lined up or at least in the final stages of discussion. I don't remember a time that the company has ever made any poor decisions since their inception even remotely close to what this would be if they could not find any/enough partners for the GF and they were left stranded. It just doesn't seem to be Elon's way to make a big announcement like that that would have the potential to greatly backfire.

I agree, on the face of it, it seems like the announcement was premature. Why tell the world about such an audacious plan without a clearer path to roll it out? The fact that it came on the heels of the earnings report is suspect. IMO TM should have waited till they had some more concrete plans for the GF before they announced, and I think the share price is going to reflect the weight of this doubt.

 

[pz1975]

I agree, on the face of it, it seems like the announcement was premature. Why tell the world about such an audacious plan without a clearer path to roll it out? The fact that it came on the heels of the earnings report is suspect. IMO TM should have waited till they had some more concrete plans for the GF before they announced, and I think the share price is going to reflect the weight of this doubt.

I guess I wasn't clearer in my post. I agree that the doubt will fuel stock price lowering, but I actually feel confident that Tesla does have everything under control and the doubt is just because of lack of immediate news. In the press release, it clearly shows the timeline for partners to be all the way through 2014 so just because nothing has been announced doesn't mean things aren't going along just as planned. I have faith in Elon and Tesla, and especially for big things like this.

 

[Jack6591]

Why tell the world about such an audacious plan without a clearer path to roll it out?

To build interest? It amazes how many people know that Tesla Motors is building a battery factory. Elon is marketing Tesla Motors without spending a dime.

I'm waiting with bated breath. Are you?

 

[GSP]

Suppose that Panasonic decide to participate in the Gigafactory and to invest $1B, that would still not be enough, as more investment will be required (at least $4B, but $5B would be more likely). Which other company is most likely to be stepping forward as a partner of Tesla Motors, and to make an additional investment in the Gigafactory (for another $1B?)?

Tesla plans for the cell supplier, most likely Panasonic, to bring their material suppliers to the table as well. The companies that make the cathode materials, anode materials, separator, electrolyte, the can, etc will all invest in the gigafactory. It will be raw materials in one end, complete battery packs out the other. Just like Henry Ford showed us years ago.

GSP

 

[hummingbird]

The one part of all of this I don't understand is why Elon/Tesla would make a major announcement such as the gigafactory and go through the whole process of raising their own $2.3 billion for it if they weren't absolutely sure they already had partners lined up or at least in the final stages of discussion. I don't remember a time that the company has ever made any poor decisions since their inception even remotely close to what this would be if they could not find any/enough partners for the GF and they were left stranded. It just doesn't seem to be Elon's way to make a big announcement like that that would have the potential to greatly backfire.

Here is my version of what may have happened ... (a pure guess on my part)

First, from the Q4 earnings release:

"Very shortly, we will be ready to share more information about the Tesla Gigafactory. This will allow us to achieve a major reduction in the cost of our battery packs and accelerate the pace of battery innovation. Working in partnership with our suppliers, we plan to integrate precursor material, cell, module and pack production into one facility. With this facility, we feel highly confident of being able to create a compelling and affordable electric car in approximately three years. This will also allow us to address the solar power industry’s need for a massive volume of stationary battery packs."

Then Elon said they will hold a conference call the following week to discuss the details of GF. Further, he indicated it was very likely Panasonic will be a partner in the GF. "but not 100%" is what he said at other meetings.

I had some interactions with the Japanese in the past. During discussions, they will often say "yes, yes, yes" to mean "yes, I understand what you said", but they do not mean "yes, we have a deal". Americans hear "yes, yes, yes" and assume yes means they have a deal.

The Japanese culture is to not offend you face to face. So they often say "yes, yes, yes" during conversations.

I think this went on for several months and finally at the end Elon found out they had a misunderstanding all along. (recall the 1.8 billion cell deal was signed Oct 30, 2013)

Panasonic was a "no show" at the end. A few days later, Panasonic CEO Tusuga finally said in public that they can only take small steps.

Translation: We don't want to risk billions when our current relationship is fine with us. We will sell you all the cells you need at $3 each. Keep us posted on how the Model S&X are doing on a monthly basis, and we will crank up productions as necessary. We aim to keep cell supply tight to keep the price firm. Yes, $3 per cell. Yes, yes, yes.

That's my guess of what happened.

Elon has been Russianed many times before. He will deal with it. Let's wait and see.

- - - Updated - - -

hummingbird: Tesla through JB Straubel have said on several occasions that the cell they are currently using in the Model S packs is not the regular NCA18650 3.4mAh cell, which I suppose Panasonic hold the full patent for, but a modified, "automotive grade", cell that is specified and designed by and for Tesla. So we do not really know that there are any Panasonic patents as of now that would prevent Tesla from manufacturing cells on their own. The 18650 cell format and the general principles of LiIon batteries absolutely not subject to patent protection by Panasonic, as we know there are other suppliers out there manufacturing cells that can, in effect, substitute the Panasonic cells. So if Panasonic were to not participate in the Gigafactory, for some of the good reasons you bring up (why drive down price, being conservative etc) then I suppose it all comes down to financials: can Tesla finance the factory themselves, or find another more willing partner. From the past we've seen that Elon is bascially as much a financial as well as technological genius and again and again he keeps coming up with creative and attractive new financing models.

This was posted before:

From page 32 of 2012 10-K: "we have fully qualified only a limited number of suppliers for the cells used in such battery packs and have very limited flexibility in changing cell suppliers."

From page 32 of 2013 10-K: "we have fully qualified only one supplier for the cells used in such battery packs and have very limited flexibility in changing cell suppliers."

Current cell chemistries are jointly developed by the two companies. Tesla is stuck with Panasonic for now.

 

[blakegallagher]

Current cell chemistries are jointly developed by the two companies. Tesla is stuck with Panasonic for now.

Tesla is not stuck with Panasonic. They are for the current cells they are getting but we both know if it came down to it Tesla could use another cell supplier or design their own cell. They have the know how and if their are any Panasonic patents holding them back I am sure they could change something up a bit.

One way or another this factory will happen. I would bet my last Tesla share on that

 

[uselesslogin]

I had some interactions with the Japanese in the past. During discussions, they will often say "yes, yes, yes" to mean "yes, I understand what you said", but they do not mean "yes, we have a deal". Americans hear "yes, yes, yes" and assume yes means they have a deal.

I get it and maybe you are right. However, this is literally the first thing you learn about the Japanese culture if you take any global culture course at a University. Heck, I think I heard this in high school. I hear it so much I wonder if it is even true. There is no way Elon Musk and his negotiation team are not familiar with the way the Japanese communicate. I am more likely to believe this is what they said, Tesla understood them perfectly, and Tesla is trying to strong arm Panasonic into making a deal by announcing their intentions and demonstrating their ability to raise cash and go it alone. We won't know any more until we know any more.

 

[blakegallagher]

I get it and maybe you are right. However, this is literally the first thing you learn about the Japanese culture if you take any global culture course at a University. Heck, I think I heard this in high school. I hear it so much I wonder if it is even true. There is no way Elon Musk and his negotiation team are not familiar with the way the Japanese communicate. I am more likely to believe this is what they said, Tesla understood them perfectly, and Tesla is trying to strong arm Panasonic into making a deal by announcing their intentions and demonstrating their ability to raise cash and go it alone. We won't know any more until we know any more.

Thanks for this. +1.

 

[FluxCap]

Here is my version of what may have happened ... (a pure guess on my part)

That's just like, your opinion, tftf.

 

[hummingbird]

That's just like, your opinion, tftf.

View attachment 47346

How do you read the Panasonic situation FluxCap? Why the personal attack? And what's with tftf? You are imagining things.

 

[EarlyAdopter]

Shortly before the revised deal with Panasonic was announced end of October, Tesla confirmed they were in talks with Samsung and other battery suppliers. Panasonic offers manufacturing capacity and efficiency, not battery IP. They are replaceable.

http://www.reuters.com/article/2013/10/04/us-korea-autos-tesla-idUSBRE99306020131004

Tesla's Palo Alto based spokeswoman, Liz Jarvis-Shean, also confirmed the two firms [Tesla and Samsung] were in discussions but noted that Tesla was in talks with other battery suppliers as well. "We continually evaluate best (battery) cells and technologies from all manufacturers," Jarvis-Shean said.

 

[imherkimer]

Seems to me that Panasonic has really had a turnaround due to its relationship with Tesla.
Such a profitable relationship would be hard to lose. Panasonic is in a bind either way, and the risks are high either way.
So they are taking their time to define their participation. There have been reports that they already separated the automotive manufacturing from other aspects of the company. They may need to establish a subsidiary or other entity to fulfill the partnership with Tesla. Likely it will take good deal of effort, discussions, and time to work through all the implications and negotiations to reach the operative agreements for such a project. If the factory is in the US, this could be another consideration, since their existing logistics and operations are located in Japan. Panasonic leadership is being cautious, the stakes are high for them either way it goes. In the end, I have the sense that it will be much better for Tesla to build their own factory.

 

[Jack6591]

Could Simbol Materials be a potential partner????

Log In - The New York Times

Tesla Motors Gigafactory: Lithium may draw automaker to Salton Sea

Simbol Materials LLC: Private Company Information - Businessweek

Interesting articles.

1.Is it possible that California (the Salton Sea) is still in the running for the Gigafactory?

2. Could geothermal electrical generation be dovetailed with solar and wind?

3. What would the efficiency paradigm of solar/wind/geothermal contribute to the Gigafactory?