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

[Fact Checking]

Yeah, the economies will switch... to a huge negative on their balance sheet as they work to pay off the capital investments involved in such a change. Not to mention all of the "dragging engineers off of working on Tesla's more pressing projects" aspect.

Do we know it for a fact that it's indeed so complex and capital intensive to introduce a new battery pack, now that they've already introduced about a dozen battery packs in their corporate history? Could they have it down to an art?

Genuine question - I don't know.

 

[KarenRei]

Do we know it for a fact that it's indeed so complex and capital intensive to introduce a new battery pack, now that they've already introduced about a dozen battery packs in their corporate history? Could they have it down to an art?

Genuine question - I don't know.

Perhaps you missed the giant negatives on their balance sheet every time they tooled up new lines?

Yes, building new production lines is monstrously expensive. And you need both cells and packs, and modifications to the vehicle's production for the new packs, and requalifying the new vehicles with the new packs for crash safety and fire safety and thermal management in different climates and pretty much everything.

 

[Fact Checking]

Perhaps you missed the giant negatives on their balance sheet every time they tooled up new lines?

Those negatives generally mixed the costs of vehicle assembly lines with the costs of battery pack assembly lines, and we don't really know how expensive it is to retool existing battery pack lines in isolation.

Since they've tweaked battery packs literally a dozen times in the past, their latest lines ought to have included the possibility of low cost retooling at the planning level, right?

 

[KarenRei]

Staff costs are mostly fixed

Not in the least. Since when is Musk averse to firing?

this is why a 90% increase in Model 3 production volume QoQ in Q3 only needed c.30% higher employee hours

No, that's because of heavy work in making Model 3 production more efficient. E.g. having to do paint correction on a much smaller share of the vehicles, no longer rejecting large batches of parts (including all of the embodied labour therein), having to do less manual labour to make a part in the first place, etc.

I'll reiterate that I don't think this is in the least what will happen. As I've pointed out several times, I expect a price reduction and a recentering of margins.

 

[KarenRei]

Those negatives generally mixed vehicle assembly lines and we don't really know how expensive it is to retool existing battery pack lines.

You're not just going to "retool" the existing 18650 pack lines into making 2170 packs. At best you might be salvaging hardware from them.

 

[mongo]

The least likely thing we'll see, IMHO, is a switch to 2170s any time soon. The last thing Tesla needs is to needlessly burn 10GWh/yr of their much-needed 2170 production (which Panasonic always seems to lag on making more of), free up their excellent 18650 cells for competitors to buy (or reengineer their other product lines to use them), add an entirely new pack production line (since the pack wouldn't be the same as either the 3's or the current S/X's), reengineer the vehicle (including its production lines) and requalify it (battery packs are structural elements, you can't just arbitrarily change them.. also lots of safety issues to requalify), and dozens of other things.

There does not need to be any 'burn'ing of 18650 capacity. That cell size can be used in megapack, powerpack, Boring pods, or even a GF3 low cost 3 pack. GF3 would make the most sense to me as it cuts shipping and opens the supply chain to current 18650 producers, but mega and PP are flexible enough to use them also.

Tesla could quite likely keep the 75/100 pack structure as-is and fill with 2170 cells in a single layer and hit the 100kWh+ mark, no vehicle retest needed (depending on exact packing). Worst case, it might require slight interior wall shifts.

it's hard to get people to accept that S/X might be using 18650s for quite some time.

Might? Sure. Must? Not gonna agree with that.

 

[mongo]

You're not just going to "retool" the existing 18650 pack lines into making 2170 packs. At best you might be salvaging hardware from them.

If even that. New GF1 lines are so much faster, is there any point?

 

[Fact Checking]

You're not just going to "retool" the existing 18650 pack lines into making 2170 packs. At best you might be salvaging hardware from them.

So what if the new Grohmann machines in the Gigafactory, a second set of which is being installed right now according to Carsonight, were designed to allow the making of Model S/X form factor battery packs as well, and this would free up battery pack assembly space in Fremont, which would allow the addition of a Model Y chassis line in Fremont? Final assembly of Model 3 and Model Y would be shared - similarly to how the Model S/X final assembly lines are shared.

In parallel this would allow Panasonic to disassemble the transportable bits of their 18,650 equipment in Japan, and move it to Nevada - without disruption and time pressure.

I.e. concentrate battery pack production into GF1, initial Model Y vehicle assembly to Fremont.

Sounds like a smart, capex efficient plan to me, with (much) faster introduction for Model Y than originally planned.

 

[Ellec]

Regarding the Model Y unveil and the chances of Pickup or another product being unveiled as a one last thing announcement.

Did anyone have a clue the Roadster would be unveiled at the Semi event? Was it a total secret?

 

[KarenRei]

So what if the new Grohmann machines in the Gigafactory, a second set of which is being installed right now according to Carsonight, were designed to allow the making of Model S/X form factor battery packs as well, and this would free up battery pack assembly space in Fremont, which would allow the addition of a Model Y chassis line in Fremont?

In parallel this would allow Panasonic to disassemble the transportable bits of their 18,650 equipment in Japan, and move it to Nevada - without disruption and time pressure.

I.e. concentrate battery pack production into GF1, initial Model Y vehicle assembly to Fremont.

Sounds like a smart, capex efficient plan to me.

So rather than using the Grohmann machines for increasing 3 production, Powerwall/Powerpack/Megapack production, and gearing up for Model Y production, we're going to instead be using this to.... not increase production?

.... No.

ED: I think I've said my fill here, and I don't want to spam this thread for people who are late to the party... so I'm going to duck out of this topic for now. I'm sure it'll pop up again... repeatedly... until the end of time....

 

[replicant]

So this twitter thing from yesterday was not fake. so maybe T-Row thingy is also real
Court gives investors the okay to subpoena Azealia Banks and Grimes in lawsuit against Elon Musk and Tesla, asking them to preserve information

Is it me or the article's author calls short-sellers "investors"? Why don't we simply call them speculators? Or is war peace?

 

[KarenRei]

Regarding the Model Y unveil and the chances of Pickup or another product being unveiled as a one last thing announcement.

Did anyone have a clue the Roadster would be unveiled at the Semi event? Was it a total secret?

I think most people expect an "Oh, and one more thing..." moment at Tesla unveilings A pickup unveiling wouldn't surprise me in the least. I'd actually be disappointed if there wasn't an "Oh, and one more thing..." moment.

 

[Fact Checking]

So rather than using the Grohmann machines for increasing 3 production, Powerwall/Powerpack/Megapack production, and gearing up for Model Y production, we're going to instead be using this to.... not increase production?

The benefits would be:

• They could dynamically load-balance total battery pack assembly capacity between Model S/3/X/Y.
• They could balance vehicle assembly in Fremont, and reach the 10k/week output originally planned.
• They could start doing the construction work in GF1 to further expand, without it being in the critical path of introducing the Model Y.
  
• They would lift the 100k/year Model S/X production limit: as per past performance their demonstrated production capacity is at least 130k/year, maybe it could increase to 150k/year. These are their highest margin vehicles, whose margins would improve further.
• The 100D/P100D was introduced 2.5 years ago - a refresh and further moving of the goalposts for the competition is probably not a bad idea at this point.
• Doing this would allow Panasonic to move their 18,650 lines and retool them to 2170. Panasonic has plenty of usable factory space in GF1 and has expressed an intention in the past to move all battery assembly to the U.S.

In the general scheme of things GF1 2170 output is expected to reach 35 GWh/year this spring, and they have nowhere near enough vehicle and storage revenue for that IMHO.

So it's pretty much the perfect time to transition S/X battery pack to a 2170 and harmonize battery pack production across all vehicle variants.

 

[replicant]

Saying one thing and doing another is how Goldman makes it to record profits. The only reason Goldman is able to do what it does is because every Secretary of the Treasury is a former Goldman CEO. The reality is we live in the United States of Goldman, the influence of Goldman over our government and power it has to control our economy is as insidious as it is pervasive.

The Great American Bubble Machine – Rolling Stone

This applies to the President of the European Central Bank

Draghi was then vice chairman and managing director of Goldman Sachs International and a member of the firm-wide management committee (2002–2005).[9] He worked on the firm's European strategy and development with major European corporations and governments.[10] After the revelation of off-market swaps used by Greece with the help of Goldman Sachs, he said he "knew nothing" about this deal and "had nothing to do with" it. He added that "the deals between the Greek government and Goldman Sachs had been undertaken before [his] joining of [the company]

 

[jbcarioca]

Only if the economies of scale remain similar.

Sure, but if they are in fact doing a major technical refresh, with little/no cosmetic changes, the margins will certainly rise due to increasing scale economies with 2170 vs 18650 plus reduced assembly cost, simplified (and cheaper) BMS and other systems plus new motors, and now sources fro all manner of componetry, thus further reducing costs and improving functionality/efficiency.

Of course we do not know for certain, but we do know that the vast majority of S and X technology actually dates from 2008-2009, albeit with continuous improvement in battery chemistry and much else beside. A decade ago Tesla had limited options for sourcing and was forced to make numerous suboptimal decisions because of the tenuous condition of Tesla back then. Now there is huge advance in manufacturing technology, running gear design, supplier negotiating power and so much more.

That means the refresh S and X will have major advances from a user perspective as well as lower production costs. Without any other evidence I suggest that the pricing will be more or less within present S and X ranges, that the new base S will probably be priced in the same general; range as a loaded P3D+ (more or less that is the current practice of BMW, Mercedes-Benz and Audi. At Porsche (perhaps a better example given the relative passions of Tesla and Porsche vs almost all others) a 718 with most options ends with US MSRP of $133,940 while a base 911 goes for $92,360. Tesla certainly will never go as far as Porsche, which always offers almost endless options for anybody who's inclined to personalize their car.

For now and in the likely future base larger vehicles will have pricing roughly comparable to fully loaded smaller ones. Why not? They're different buyer preferences.

 

[ReflexFunds]

Not in the least. Since when is Musk averse to firing?



No, that's because of heavy work in making Model 3 production more efficient. E.g. having to do paint correction on a much smaller share of the vehicles, no longer rejecting large batches of parts (including all of the embodied labour therein), having to do less manual labour to make a part in the first place, etc.

Everyone on one specific shift on the production line has their own job to do and they can't just be cut. There is a minimum level of staff capacity needed to produce the cars, at that level reducing car throughput just reduces staff utilisation. On some process stations staff could be reduced from 2 to 1, but the main flexibility is reducing overtime hours and reducing number of shifts. Reducing shift hours would be the most efficient way to make staff costs variable with production, but it is effectively a significant pay cut for individual employees which in many ways is harder than firing people.

Definitely some of the improvements in Q3 were due to better quality, more efficient processes etc, but mostly it was because in Q2 a lot of staff were standing idle for long periods while problems were fixed elsewhere on the line.

 

[mrdoubleb]

IMHO, the most likely thing coming for S/X is a price drop. But they won't want to do that (or any alternative possibilities) too close to the date of termination of the 75D models, so as not to make buyers feel screwed over.

Tesla does not need to have "Q1 unscathed" re: S/X. They just need to max out their production capacity annually, as always, and make up for any quarterly revenue drops that might occur with revenue growth in Model 3s (and potentially Tesla Energy)

As for the price drop: remember, there's only about $4k worth of extra cells in a 100D vs. a 75D. Margins on 75D had to have been tiny and margins on the 100D large in order to average ~25-30%. Now they can transform the 100Ds to lower margin vehicles, with the P100Ds as the higher margin upgrade, and recenter at ~25-30% margin with a far lower sales price for the 100Ds.

If they don't do that, then their S/X margins are going to be crazy high.

I don`t know, I am with @Fact Checking on this one. From the data I have seen for Norway and the US data someone referenced from Troy, it is clear, and not surprising, that 75D accounted for 50%+ of S/X sales. In some regions may be even higher (Certainly in Norway it is like 5:1 for S and 2:1 for X). Even if Model 3 top end can pick up some of that and 100D sales may grow as well, there is no way these two avenues will pick up 12-15k sales that could be lost. and the cost is not just sales lost, but production capacity and staff sitting idle, fixed costs being split among fewer cars and margin suffering across S/X and 3...

So it is more likely that they will do a quick announcement (PR) on the new battery packs for S/X just before the ER and use the downtime now to update the lines. If we get a proper announcement event, then i expect the interior refresh as well, otherwise that may indeed come later in the year like Q3.

With that, I think the "one more thing" at the Model Y event will be the prototype of the pick-up. (Even more likely now as Rivian and others are announcing products in that space).

 

[Fact Checking]

Sure, but if they are in fact doing a major technical refresh, with little/no cosmetic changes, the margins will certainly rise due to increasing scale economies with 2170 vs 18650 plus reduced assembly cost, simplified (and cheaper) BMS and other systems plus new motors, and now sources fro all manner of componetry, thus further reducing costs and improving functionality/efficiency.

Also note that it's probably better to do a battery pack refresh before an interior refresh, and leaks suggest they are working on a major S/X interior refresh, which I guess would arrive in the second half of this year or early next year:

I.e. this pretty much leaves the near future as the only opportunity to change the battery pack to 2170, unless I'm missing something.

The reason why I think that a battery refresh is done sooner is to maximize demand:

• By doing the interior refresh first they'd not reach customers who don't like the minimalist Model 3 interior.
• By doing the battery refresh first they'll capture demand that was waiting for a new, higher performance, higher efficiency Model S/X, and a few months later they could switch over to the new interior - getting the best of the two worlds.
• I.e. when you have two features planned, one of which is an uncontroversial improvement while the other one is a question of 'taste' and might be objectionable to some customers, you first implement the uncontroversial feature - i.e. the battery pack upgrade.
• Also note that an upgraded battery pack might convince some customers who are not fans of the minimalist interior. I.e. the best approach is to refresh everything else first, and then do the risky interior refresh in hopes of the combination of all the features being convincing to a maximum set of customers ...
  
• I don't know it for a fact but intuitively I'd guess that the retooling for the interior refresh is much more expensive than battery pack retooling. Battery pack, as long as it doesn't result in big modifications to the chassis, is basically a modular unit with comparatively few effects on the rest of the car (with the exception of the cooling system perhaps).
• An interior refresh on the other hand affects literally hundreds of molding machines in the molding shop, and touches the totality of the final assembly line. It's hugely disruptive. (For similar reasons do I think will they drop Premium Interior on the Model 3 as a last step.)

Elon has been uncharacteristically silent on Twitter in the past couple of days, which might suggest that he wants to talk about all this but cannot yet!

 

[traxila]

So how many furious buyers will scream about not having the 2170 battery pack the moment after it is announced? Guess there is method to the madness of OEMs plodding upgrades and triennial slight improvements.

IMO, this must happen, sunk costs be damned. The 2170 battery pack is superior. You cannot leave the S and X without it. As soon as production allows, the switch must be made. Innovation is Tesla’s best most, as per Elon.

 

[jhm]

BTW., the referral program is ending on February 1, and the 53rd Super Bowl is on February 3. Coincidence?

Oh, man, why'd you have to do that? Shall we just get a thread for fantasy first time TV ads?