Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable

[petit_bateau]

Here's my simple model for Tesla's Battery Master Plan v.3

• The pilot plant is a proof-of-function prototype with a single line @ 10GWh/yr
  
• Tesla needs to build 9 additional Bty lines per year, each with 10GWh/yr capacity
• This gets us to 100GWh capacity in 2022, and ~3,000 by about 2029
• Note: if 3rd parties are unwilling/unable Tesla can build out 20 TWh/yr in 12 yrs

View attachment 591857

Now we get to the unstated consequence of Battery Day: Tesla MUST build a tertiary layer of production to build the machines that equip the Bty Cell factories.

Tesla MUST add 9 new such Bty lines (per chart above) to achieve the arithmetic growth required by their stated goals.

It might be practical to build a single such Meta-Factory, but given the scale required (potentially ~180 lines over 12 years), I think its more practical to build THREE such Meta-Factories (one each in China, Germany, and USA).

Each of these MTBTMs (Machines-that-build-the-Machine) would each have to be sized to produce 60 bty lines over 12 years, or about 5 each per year.

Think of these MTBTMs as Grohmann clones, but specialized for battery cells.

Does anybody know where (and from whom) Coca-cola Bottlers buy there production equipment? That's the scale of manufacturing we are discussing right now.

Cheers!

1. You are assuming a linear build-out of capacity. In my modelling I assume non-linear. The problem with my sort of modelling if you do it too crudely is that in 2030 you get 20mln cars/yr capacity and then in 2031 you get 30 mln cars/yr of capacity.Therefore I anticipate that at some point on the journey they will be observing a) competitor reactions, and b) FSD-impact on vehicle demand and c) storage penetration, and d) competition/regulatory concerns, and as a result may ease back from non-linear growth to linear or sub-linear growth so as to come off the S-curve in a bumpless transfer - at least that will be their aim. I think they will be making that transfer at about 2030 as the trajectory they discussed in battery day is much the same as the one I have been modelling.

2. This exactly why they were buying Grohman and the other acquisitions of manufacturing eqpt. Some of this new stuff is a different skillset (it is more akin to mining/paper industry processes, e.g. the Voiths, Metso, Valmet) and so some further acquisitions may be needed to bring the relevant core competencies in-house. Whether they do that through business acquisitions, or through personnel acquisitions I am unsure, most likely a mixture. They might as they have done in the past partner with a suite of companies then cherry pick as they hollow out their supply chain.

3. Vertical integration is a double-edged sword. Most obviously it creates downsides in bigger capital demands, and issues of controlling scale and scope to set against the evident upsides. However it also creates a problem that the supply chain that you wish to partner with today, is well aware that you will likely cannibalise them tomorrow. That in turn breeds a certain leeriness, and indeed I know companies that have turned down work with Tesla because they saw this exact risk several years ago (it is not just Tesla that looks forwards strategically) and chose not to put themselves at risk.

regards, dspp/pb

 

[mongo]

Sorry for being ignorant but surely that is not just pure profits as Tesla pays to a cell provider for all those subscriber lines...?

Yeah, it depends which cars you are using as the baseline.

Tesla maintains cell connectivity on all cars (at the non premium level), so that is a fixed cost.

Compared to free premium connectivity (the original system), the monthly fee is pure profit (or pure expense reduction, same result).

Compared to standard connectivity, the monthly fee has a profit level of (fee - additional_data_usage)

So much better than giving it away free, but real gain depends on usage and the data plan terms.

 

[hobbes]

It should help with greater energy density/range. Solvent takes up space.

If I understand correctly dry vs. wet only refers to the production stage. Currently, cathode materials in a solvent are processed and then dried (which takes a lot of effort), in the dry cathode technology there is never any solvent so no drying necessary. Does not affect the mass of the cell (and thus energy density) after it is done because currently, the solvent is removed by drying before cell goes into the car.

 

[mongo]

If I understand correctly dry vs. wet only refers to the production stage. Currently, cathode materials in a solvent are processed and then dried (which takes a lot of effort), in the dry cathode technology there is never any solvent so no drying necessary. Does not affect the mass of the cell (and thus energy density) after it is done because currently, the solvent is removed by drying before cell goes into the car.

Yar, with the small addition that the solvent does have some undesirable effects on the electrode and longevity. Also, dry electrode can allow higher energy density.
How Tesla Could Improve Its Million Mile Battery With Maxwell's Dry Battery Electrode Technology

 

[UkNorthampton]

2. This exactly why they were buying Grohman and the other acquisitions of manufacturing eqpt. Some of this new stuff is a different skillset (it is more akin to mining/paper industry processes, e.g. the Voiths, Metso, Valmet) and so some further acquisitions may be needed to bring the relevant core competencies in-house. Whether they do that through business acquisitions, or through personnel acquisitions I am unsure, most likely a mixture. They might as they have done in the past partner with a suite of companies then cherry pick as they hollow out their supply chain.

3. Vertical integration is a double-edged sword. Most obviously it creates downsides in bigger capital demands, and issues of controlling scale and scope to set against the evident upsides. However it also creates a problem that the supply chain that you wish to partner with today, is well aware that you will likely cannibalise them tomorrow. That in turn breeds a certain leeriness, and indeed I know companies that have turned down work with Tesla because they saw this exact risk several years ago (it is not just Tesla that looks forwards strategically) and chose not to put themselves at risk.

regards, dspp/pb

Tesla seem to achieve a lot with a little. They don't have teams of contract, sales, middle managers to pay. I think this aspect of vertical vs outsourcing is important.

The best person to decide on whether to buy a better workstation isn't someone in a management chain according to annual budgets that must be spent, can't be increased etc.

Just let the people (engineers) with the skills do what they know to be right. Trust them. Let them be the best that they can be.

Tesla's return/progress on research and engineering spending is fantastic.

if I compare it to my experiences, getting something bought that is needed wastes 5 people's time and takes forever. The final decision is made by a manager with no understanding and has to be spent in a certain period.

It's the same in a supplier as an OEM. The hierarchy model cannot compete with Elon's model.

Give authority to the right person - the expert.

The speed of decision and the right person making that decision are key.

 

[DFibRL8R]

Tesla Model Y Dual Motor AWD gets paid Acceleration Boost upgrade

Nice, could give a decent bump to income at end of quarter.

 

[heltok]

Tesla seem to achieve a lot with a little. They don't have teams of contract, sales, middle managers to pay. I think this aspect of vertical vs outsourcing is important.

The best person to decide on whether to buy a better workstation isn't someone in a management chain according to annual budgets that must be spent, can't be increased etc.

Just let the people (engineers) with the skills do what they know to be right. Trust them. Let them be the best that they can be.

Tesla's return/progress on research and engineering spending is fantastic.

if I compare it to my experiences, getting something bought that is needed wastes 5 people's time and takes forever. The final decision is made by a manager with no understanding and has to be spent in a certain period.

It's the same in a supplier as an OEM. The hierarchy model cannot compete with Elon's model.

Give authority to the right person - the expert.

The speed of decision and the right person making that decision are key.

I would add that Tesla as a company seems much more efficient than other companies. They don’t waste 50% of their hours on useless meetings, they don’t have much dead weight slowing everything down, they fix bottle necks by brute force rather than let the entire company wait, they bet on the right technology from the start rather waste time with useless implementations that they will have to scrap before it goes into production anyway, they don’t do silly concept demos to fool shareholders that they are still relevant etc. And they also have access to the top talent that works more efficient than average talent.

 

[petit_bateau]

Some musing from this slide from the battery day presentation:
- The savings don't kick in for Tesla right away, takes a few years
- I wonder what each of those horizontal gridlines represent? If I was a betting man I would they were $25 increments, meaning they are at ~$130 p/KW now, and Teslas cost curves down to around $60 p/KW in 2025 - which sort of fits the 56% cost reduction
View attachment 591947

$20 increments, at pack level

 

[AudubonB]

...the supply chain that you wish to partner with today, is well aware that you will likely cannibalise them tomorrow. That in turn breeds a certain leeriness, and indeed I know companies that have turned down work with Tesla because they saw this exact risk several years ago (it is not just Tesla that looks forwards strategically) and chose not to put themselves at risk.

I am trying to reconcile the above with my vision of the Prudent Business. Given an acceptable return, be it ROI, ROA, ROC or whatever matters when making one’s go/no go decisions, that a firm would turn down an opportunity to its rivals because Tesla might cannibalize them down the road strikes me as nigh inconceivable. I think that is even more the case because if we take that thought process one further step, then our Prudent Business would have to consider its rival, instead, to be bearing such risk...and were that to come to pass, then not only would our PB have lost the opportunity of having gained said Return, but now would have Tesla as a rival?

Is there something wrong with my view? It’s 0330 here so maybe I shouldn’t be signing or not signing any contracts.....

 

[UkNorthampton]

I would add that Tesla as a company seems much more efficient than other companies. They don’t waste 50% of their hours on useless meetings, they don’t have much dead weight slowing everything down, they fix bottle necks by brute force rather than let the entire company wait, they bet on the right technology from the start rather waste time with useless implementations that they will have to scrap before it goes into production anyway, they don’t do silly concept demos to fool shareholders that they are still relevant etc. And they also have access to the top talent that works more efficient than average talent.

I totally agree.

On the last point, There have been studies that show the best programmers are incredibly more useful than the average. Bad programmers will have a negative effect.

A core of really bright people who work together can achieve miracles compared to typical hierarchical structures with endless meetings and committee compromises and delays.

 

[Sofie]

I'm lucky as I have several co-workers who own Teslas and several others who are TSLA owners.

Unfortunately most all of mine drive either BMWs, Range Rovers, or those massive pickup/semi truck looking combustion engines

 

[petit_bateau]

I am trying to reconcile the above with my vision of the Prudent Business. Given an acceptable return, be it ROI, ROA, ROC or whatever matters when making one’s go/no go decisions, that a firm would turn down an opportunity to its rivals because Tesla might cannibalize them down the road strikes me as nigh inconceivable. I think that is even more the case because if we take that thought process one further step, then our Prudent Business would have to consider its rival, instead, to be bearing such risk...and were that to come to pass, then not only would our PB have lost the opportunity of having gained said Return, but now would have Tesla as a rival?

Is there something wrong with my view? It’s 0330 here so maybe I shouldn’t be signing or not signing any contracts.....

I run a company in the energy sector. A colleague runs a company in the automotive sector. About 3-4 years ago we were chewing over Tesla and I showed him some of my projections and asked him what he thought of them. His answer was that Tesla had approached them to do something (I know what it was, but I can't tell you exactly what) and they'd looked at the project/business opportunity vs the other opportunities they had. They declined Tesla and went with the other ones precisely because they could foresee that they would spend several years and a whole lot of €€€ and effort and etc, and then Tesla would mirror it and dump them. They did just fine with their other projects in the subsequent years. I am sure he was not the only 'partner' that chose not to participate. I'm not saying Tesla is wrong either, simply that a) there are pros and cons, and b) don't make the mistake of thinking that Tesla has a monopoly on intelligent, thoughtful, far-sighted talent.

 

[MC3OZ]

1. You are assuming a linear build-out of capacity. In my modelling I assume non-linear. The problem with my sort of modelling if you do it too crudely is that in 2030 you get 20mln cars/yr capacity and then in 2031 you get 30 mln cars/yr of capacity.Therefore I anticipate that at some point on the journey they will be observing a) competitor reactions, and b) FSD-impact on vehicle demand and c) storage penetration, and d) competition/regulatory concerns, and as a result may ease back from non-linear growth to linear or sub-linear growth so as to come off the S-curve in a bumpless transfer - at least that will be their aim. I think they will be making that transfer at about 2030 as the trajectory they discussed in battery day is much the same as the one I have been modelling.

2. This exactly why they were buying Grohman and the other acquisitions of manufacturing eqpt. Some of this new stuff is a different skillset (it is more akin to mining/paper industry processes, e.g. the Voiths, Metso, Valmet) and so some further acquisitions may be needed to bring the relevant core competencies in-house. Whether they do that through business acquisitions, or through personnel acquisitions I am unsure, most likely a mixture. They might as they have done in the past partner with a suite of companies then cherry pick as they hollow out their supply chain.

3. Vertical integration is a double-edged sword. Most obviously it creates downsides in bigger capital demands, and issues of controlling scale and scope to set against the evident upsides. However it also creates a problem that the supply chain that you wish to partner with today, is well aware that you will likely cannibalise them tomorrow. That in turn breeds a certain leeriness, and indeed I know companies that have turned down work with Tesla because they saw this exact risk several years ago (it is not just Tesla that looks forwards strategically) and chose not to put themselves at risk.

regards, dspp/pb

I am not seeing much evidence Tesla is having problems finding suppliers happy to deal with them, e.g, Panasonic, CATL, LG.
And Tesla doesn't typically supply other car makers.

Vertical integration is typically used when an important area becomes a bottleneck or a supplier is not reliable.
Partnering Tesla may be challenging, but it is also an opportunity to learn and improve.

Tesla may be becoming a very significant portion of the market, and I doubt many suppliers have any significant IP that Tesla would find hard to acquire or hard to improve.

So any supplier that doesn't says they want to partner Tesla probably can't make the grade, or is very nervous about their competitiveness.
If their product was the good, service and volumes are reliable and price is reasonable, I can't see why Tesla would vertically intergrate.

However, you did cite a specific case, which is a specific set of circumstances.
I am not sure that specific case applies more widely.

 

[Khamul]

Alex just wrote on twitter that " The water supply contract for Giga Berlin was approved from the local utility. Water supply is average compared to similar projects". https://twitter.com/alex_avoigt/status/1309450852189564931

That was the only major obstruction to Tesla getting the final build permit for Giga Berlin, wasn't it?

 

[Cobos]

If I understand correctly dry vs. wet only refers to the production stage. Currently, cathode materials in a solvent are processed and then dried (which takes a lot of effort), in the dry cathode technology there is never any solvent so no drying necessary. Does not affect the mass of the cell (and thus energy density) after it is done because currently, the solvent is removed by drying before cell goes into the car.

That depends on if you are really talking drying or sintering. Even drying will likely not get you to 100% removed solvent. I do not know if it would be 99.99 dry or more like 97% dry. If you are sintering as in moving solid matter through solid matter that usually requires very high temperatures, over 800C and cooking times in hours to days for 100% removal of something. So an expensive process, it might be 3 h in the ovens gets you to 95% and you need another 10h for every extra % point f. inst.
So not adding something is always better than adding and trying to remove after.

 

[Driver Dave]

Here is my in-depth analysis of Battery Day:

Market totally missed it.

 

[elasalle]

Forgive the conspiracy theorist in me, but does anyone else feel like Amazon's ring car connect is a play at collecting driving data from Tesla owners

As a security feature , Tesla can fully disable while not in Sentry mod

 

[elasalle]

Might be interesting to see how VW is looking at the future:

https://www.volkswagenag.com/presen...ber/20200915_VW_Presentation_Bagschik_UBS.pdf

My highlights:

Adam Jonas must be convinced

 

[Buckminster]

Agreed.
I just don't see Musk being blindsided by a move like this from Bezos... He knows who Bezos is.
I'm confident he knows what he's doing.

That's 2D chess.

This is a 4D chess honey trap - Elon will expose Bezos for stealing data.

 

[juanmedina]

Sandy on good form:

I saw an email from upper management at a certain EV start up where they said " I want those cells....we need to get a hold of those cells somehow"

The future is bright.