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

[⚡️ELECTROMAN⚡️]

But, the average age of detached US housing stock is ~40 years. Many will need new panels/breakers/meters/wiring to support an electrical lifestyle. Not cheap for some.

I think a 240 volt 20 amp outlet would be sufficient for most. Very cheap to install.

 

[EVNow]

Eh?

I was talking about what is considered a cash cow by definition.

I’m not doubting margins on the S/X or whatever.

Cash cow = something that gives good gross profit for low investment.

 

[SOULPEDL]

Okay I have no idea how you assumed 22% of those who doesn't live paycheck to paycheck will be in the market for a 100k car. In fact only 0.8% of Americans would buy a car that's 85k+. There are probably more people in the paycheck to paycheck group with a 100k+ car than the 22% who are probably more sensible with money.

https://i.redd.it/tlbadmkwgh011.jpg

I added up the % right of $35K and got 42.4%. Draw the line at $45K and you lose 23.1%. That $35K line is critical to mass adoption.

 

[CorneliusXX]

They don't need to buy all the materials up front. Nor do they need a bunch of cash. Just like with the 3, they can sell the completed goods before they have to pay for the ingredients. Further, for large scale installations (or even PW installs), they can get deposits up front.

CapEx may not be so bad with the internally designed and sourced equipment.

It's possible they can get good terms from suppliers, but that is not guaranteed, especially if they are moving to direct ownership of cell production. The further they drive down the supply chain towards raw materials, the longer the time between purchase of the materials and sale to the end customer. Deposits are good, but a small fraction of the raw material costs.

Here is my back of the envelope working cap requirements for the raw materials and inventory at a 1TWh production rate. at a cell level maxcell expects an energy density of 500 watthours per gram. so a years worth of material at 1TWh of production requires 2 million tons of raw material. They'd need 100k tons to cover about 2.5 weeks of production (which is a guess at what sort of buffer the'd want) - that's about a billion dollars of cost at current nickel prices (Li & cobalt costing substantially more, Al and graphite substantially less - unfortunately i can't find the element mix of a cell).

They would also be producing around 20m KWh of batteries per week - even if cells cost as little as $50 per KWh, a weeks inventory would be a billion.

Then there are all the items that go into making the packs which need to scale to the same size as cell manufacturing. Surely several hundred million more.

 

[CorneliusXX]

Useful stats.

Total addressable US market for

Model 3 : 2.4 Million / yr
Model 3+Y+Pickup : 7.2 Million / yr
Model S : 44k / yr
Mode S+X : 136k / Yr

Tesla sold ~52k s/x last year or 38% of the addressable market

That's a good starting point, however I would expect the substantially lower operating costs to shift the shape of the curve to the right. It wouldn't be unreasonable to move the red line $5k or possibly $10k to the left.

 

[Singuy]

I added up the % right of $35K and got 42.4%. Draw the line at $45K and you lose 23.1%. That $35K line is critical to mass adoption.

Where in the original post said anything about a 35k car? He said S,X at 100k.

 

[Artful Dodger]

I haven't seen much discussion on when people are expecting Pickup to hit production, and exactly what year Elon's 2TWh battery manufacturing target will correspond to. Any thoughts?

Okay I'll give it a shot...

The normal rollout interval has been 2-3 yrs from 'Reveal' to Mass Production, so perhaps 2021-22 for Tesla Pickup in quantity? It'll certainly depend on bty cell capacity and its likely lower priority than Semi.

I still hold the opinion that the rumoured new “giant, giant, giant machine that duplicates everything, is modular, is simple on the modular level, and is... gigantic" is to build battery cells, modules, and packs. Not for die cast model Y bodies (which is foolish btw, Elon already said they will replace a 70-part rear-subframe assembly with 4 parts in the Y, then later with a single cast part when the larger casting machine becomes available. This casting machine DOES NOT replace the body stamping presses, sheesh. /rant).

So let's spec up that (Giant)^3 machine (I'll call it the 'G-Cube') for its output, first for N. America: (per Elon's statements on expected long-term steady-state demand)

• 750K/yr Model 3+Y @ 67 KWh => 50 GWh/yr (2021)
  
• 100K/yr Semi @ 1MWh => 100 GWh/yr (2023)
  
• 500K/yr Pickup @ 300 KWh => 150 GWh/yr (2024)

So that's a requirement for 300 GWh/yr within 5 years for the first N. America G-Cube (I'm going to lump storage requirements together separately since they have a different rampup curve, and their own steady-state demand).

That's roughly 10x the current cell capacity at GF1. A compounded annual growth rate that yields 10x increase over 5 years is 59% CAGR. That's actually pretty close to Tesla's historical auto production growth rate over the past 6 years, so I call it physically possible to do. Now let's build out a growth table for the next 5 years: (numbers listed are predicted production run-rates achieved by the end of the listed year; assuming* 29.5 GW/yr run rate by end of 2019, up from 28 GWh/yr by 2019.5)

Year GWh
2019 29.5*
2020 47
2021 75
2022 119
2023 189
2024 300​

Now let's get on with specing out the G-Cube:

• each G-Cube must be able to produce 25GW/yr in finished product
• Tesla must be able to build 1 G-Cube/yr in 2020-21
• Tesla must be able to build 2 G-Cubes/yr in 2022-23
• Tesla must be able to build 4 G-Cubes in 2024-25

Each G-Cube must produce cash flow which will pay for another G-Cube after 2 yrs operation. Technically that's a CAGR of only 41% but hey this is an estimate (the main point is that this is the exponential part of Elon's vision).

For the first G-cube, let's say consumer facing product is $100/KWh at the pack level (long held as the enabling goal for Tesla's production aspirations). That's $5B in product over 2 years from each G-cube. Traditionally, the cost of raw materials for cells has been ~60% of the finished product, so let's say there's $2B left over (notice how I'm skipping over the part about robotics and cost of labor?)

So as long as Tesla can spec, build, and equip its first G-Cube for $2B, it pays for itself after 2 years which allows them to build another G-Cube out of FCF (NO LOANS).

Then, as production efficiency increase (that's the reason you stay 'modular' so you can swap out old designs) the exponential increases. After a further 2 years running those 2 G-Cubes, you can afford 2 more G-Cubes, etc etc... and I haven't even modeled depreciation.

Can they do it? Sure. China has demonstrated they're all in for the tech, and especially for the financing (ie: recourse local debt in Shanghai). Then FCA will pay for the first G-cube in Europe with its $2B/2yr CO2 offsets to Tesla. These may actually INCREASE as other failed manufacturors join the FCA emissions pool after 2021. I suspect the production ramp for Europe will be approx like this:

Year GWh
2022 25
2024 50
2026 100
2028 200
2030 400​

So you see that gets Tesla to a world-wide runrate of 1 TWh/yr for vehicle packs sometime between 2025-2030 (depending on precisely when the first EU GF4 w.G-cube comes online).

In all of this, remember, storage is EXTRA (I'm calling for 2+ TWh/yr production when including Tesla grid+storage products). As a bonus, here's a rough steady of the state product demand I see for both China and the EU (emphasis on smaller** city cars; no pickups at all; numbers approximate)

• 750K/yr Model 3+Y @ 67 KWh => 50 GWh/yr
  
• 200K/yr Semi/Bus/Delivery @ 500KWh => 100 GWh/yr
  
• 1.5M/yr Model 2 @ 27 KWh => 150 GWh/yr (2024)
• Total: 300 GWh/yr

So given a requirement for 300 GWh/yr each in China+EU, and 400 GWh in N. America, that's a 1.2 TWh/yr requirement for the planned Tesla vehicles over the next 10 years.

**Recall Elon spoke about a smaller $25K Tesla during the 2018 AGM (which many commenters now refer to as the 'Model 2'), and naturally it will have much larger sales volumes in the older congested cities of Europe and large cities of Asia).

Add it all up, and that's 6.5M Tesla Vehicles per year production reached sometime between 2025-2030 (again depending on the SELF-FUNDING rampup). Best part? That's roughly $280B in annual revenue just from the Tesla Automotive division. Even if TSLA continues to trade at just 2x earnings, that puts TSLA at $3,200/share within 10 yrs.

And remember, 'Storage is extra'. So is FSD it seems, but that 10 year horizon is nearly @neroden scale time for FSD so...

That's just the numbers from currently planned/rumoured products. I personally plan to be taking Sunday rides on a Tesla bicycle that weighs 20 kg with a hubless SRPM motor and a 2 KWh fast-charging bty w. 10-yr svc-life by 2030.

Cheers!

P.S. So yeah, 15X TSLA upside yada-yada, but I will be selling all my shares at the Opening today, because Capt Sully tweeted that I should be 'concerned' about Autopilot.
/S

 

[Fact Checking]

I added up the % right of $35K and got 42.4%. Draw the line at $45K and you lose 23.1%. That $35K line is critical to mass adoption.

Note that each column has to be multiplied by price and profit margin - I.e. the right side will, despite "only" representing 40% of the units, generate ~60% of revenue and ~70% of the profits due to higher price and higher profit margins per unit - which is what matters to growth.

Characterizing market share by unit count only is the auto industry's favorite trick to downplay Tesla's market position and impact.

The other important thing is, as @CorneliusXX noted, that the total cost of ownership of an EV is significantly lower, which shifts the "true price" of EVs further down - making $40k EVs competitive with $35k gascars in the U.S. and $30k gascars in Europe.

On the flip side, FUD and large distance to the nearest service center will reduce the addressable market.

 

[mrmage]

- Credit is tighter so the tendency is to sacrifice long term returns for short term savings (ICE discount vs gas savings)

Old cars cost much more in maintenance and repair. We have painful first hand experience back when we were poor graduate students.

Exactly!

 

[Fact Checking]

OT life choices, addiction, cellular phones and poverty:

15% of Americans smoke. Talk about burning your money when you are poor. That habit is equal to a yearly grocery bill for some.

Nicotine is a nasty chemical addiction that is as hard to shake as heroine or cocaine addiction. Those who are addicted to nicotine cannot function without a minimum daily dose. The negative impact of cigarette purchases is much higher on poor income levels - but the compulsion of the addiction is just as strong as on higher income levels.

36% of Americans can't stop eating their fast food yet many live check to check.

Certain types of fast food are actually addictive to a certain degree, but low quality high carb food also has high nutrition value per dollar. There's still a very significant percentage of Americans who periodically get hungry due to lack of money.

More importantly, healthy food, in particular vegetables and nuts are significantly more expensive, especially out of season. "Healthy food" is simply not a life choice available to the lowest income levels:

6 startling facts about child hunger in the U.S.:​

• 16 million American kids struggle with hunger each year.
• 62% of teachers say children in their classrooms are coming to school hungry.
• Nearly half of all food stamp recipients are children.
• Black and Latino children experience hunger at double the rate of white children.
• ...

Also note the social context: children who grew up in poverty will eat and learn to enjoy unhealthy food, making it harder for them to switch to healthy food later in life.

86.4% of Americans (this one includes me) purchase alcohol. I guess we understand the instructions for getting piss out of the boot..... a complete waste of my money right?

Alcohol is not nearly as addictive as nicotine, but it's also cultural and comparatively low cost: in the U.S. sales of alcoholic beverages are about 1% of GDP - not insignificant but not super high either. Soft drinks have a similar market share, and technically you don't really need sugar water, simple water would be enough.

15% of Americans are gamblers and that's not the upper 1%. They are usually the unhappy poor.

Gambling is actually incredibly addictive, and if acquired at a young age it will be a lifetime struggle. The high percentage of gambling addiction in the U.S. is primarily due to lack of regulation - most European countries with strict regulation of gambling institutions have much lower percentages: for example Sweden has less than 0.5% of the population considered a gambling addict - in the U.S. over 5% of the population is considered a compulsive gambler.

96%!!! of Americans own a cell phone. That includes the ones that don't get a paycheck at all. I cell phone is not a required life item.

You've got to be kidding me: cellular phones are basic necessities of most forms of modern life and of being able to get and keep jobs, friends and family, and to stay safe. Just like internet access, cellular phones are close to a basic human right today.

82% of teenagers own an IPHONE! I guess mommy and daddy are all rich.

You've got to be kidding me #2: if as a teenager today you don't have a smartphone your friends approve of you are socially dead unless your father is someone like Elon Musk . If you don't have a smartphone your opportunities in life will be reduced significantly. The size of your social network acquired at younger ages, and the average income level and social rank of your social network directly correlates with later social and economic opportunities. No responsible parent will deny their teenager children their smartphone of choice if they want one.

I think the fact that around 86% of U.S. teenagers want to own an iPhone and 82% of them get them speaks well of how far parents are willing to stretch to give their kids opportunities, regardless of income.

Really, guys, unless you grew up in or close to the poverty line, by very careful about forming an opinion prematurely about something you haven't experienced directly...

 

[Tslynk67]

Yahoo daily chart seems unreliable as I've seen many times.I compared intraday charts from 3 sources, and all are different. The ones which seems qualitatively best is from nasdaq.com / edgar db, the worst Yahoo.

Interestingly though if you look at 5d Yahoo chart, the volume picture is the same as in Nasdaq chart. And this spike isn't there.

Yep, it's pretty bad, but I use is as you can add multiple stocks - so it's good to see the comparison with Nasdaq. I'm not aware of any other trackers that do this. Well I see some fancy ones posted here, but they look like they're from brokers or other software, not publicly available web sites.

 

[schonelucht]

Seems like a habit that is catching on. But. Putting OT: in front of a post does not make it acceptable to post it anyway.

—

As mod I concur. Putting OT in front of a post is not a license to post something completely unrelated to Tesla or EVs, no matter how interesting. Also because it provokes more OT responses.

RSF

 

[Stars aligned]

Yep, it's pretty bad, but I use is as you can add multiple stocks - so it's good to see the comparison with Nasdaq. I'm not aware of any other trackers that do this. Well I see some fancy ones posted here, but they look like they're from brokers or other software, not publicly available web sites.

That's true, the functionality is really good, as well as it is showing up to the minute prices. One just needs to be aware of a few weaknesses and do some double checking from time to time.

 

[Fact Checking]

I think the fact that around 86% of U.S. teenagers want to own an iPhone and 82% of them get them speaks well of how far parents are willing to stretch to give their kids opportunities, regardless of income.

BTW., to make this topic a bit less OT: Tesla is on the way to become a similar status symbol and desired achievement in life among teenagers as an iPhone.

Just saying to those concerned about Model S/X demand being stuck in the 80k/year range.

Side note: nice pre-market TSLA price action with a high of $230.02, let's see whether it holds. We might still see some downwards pressure once the uptick rule is over and the shorts are free to drive down the price.

 

[mongo]

It's possible they can get good terms from suppliers, but that is not guaranteed, especially if they are moving to direct ownership of cell production. The further they drive down the supply chain towards raw materials, the longer the time between purchase of the materials and sale to the end customer. Deposits are good, but a small fraction of the raw material costs.

Here is my back of the envelope working cap requirements for the raw materials and inventory at a 1TWh production rate. at a cell level maxcell expects an energy density of 500 watthours per gram. so a years worth of material at 1TWh of production requires 2 million tons of raw material. They'd need 100k tons to cover about 2.5 weeks of production (which is a guess at what sort of buffer the'd want) - that's about a billion dollars of cost at current nickel prices (Li & cobalt costing substantially more, Al and graphite substantially less - unfortunately i can't find the element mix of a cell).

They would also be producing around 20m KWh of batteries per week - even if cells cost as little as $50 per KWh, a weeks inventory would be a billion.

Then there are all the items that go into making the packs which need to scale to the same size as cell manufacturing. Surely several hundred million more.

It would nor be a step change to 1 TWh, rather a ramp. The goal as stated in the past is to drive the costs down to near the raw material cost. So, in a ramping production scenario, with cell quality raw materials, they can ramp at the delta of their sales price - raw materials adjusted for payables vs receivables.

Say they do need to cover material costs, but make 20% on the sale:

At 100GWh, they buy $160 million in raw goods a week, then 2 months later, sell for $200 million. Over the 8 week startup they pay out $1.28 Billion. For every week after that, their cash position grows $40 million per week allowing purchase of an additional 25GWh of materials.

It would still not be a 100 GWh step change, but you see my point. If you sell at a profit then you can increase production at the rate of your profitability (resulting in cash flow, not profit).

At a 20% net margin with a X week receivables lag, they grow at 1.2^(52/X) a year. If X = 8 weeks then that is a 3.27x YoY growth with no additional investment. To get from 35GWh to 1TWh at that rate takes under 3 years with only the outlay for 6 GWh of production.

 

[pyromatter]

10-Q

SEC Filing | Tesla, Inc.

 

[bhtooefr]

Re: charging availability, what may actually make sense is to lobby the electric utilities to subsidize demand response-capable EVSE installs at both homes and workplaces. (The workplace case could be combined with solar canopies over parking lots, which would also reduce demand overall - cabin heating would be reduced in summer reducing HVAC loads, whereas snow cover would be reduced in winter potentially slightly increasing cabin heating reducing HVAC loads in that direction. But, a utility might not want to subsidize that part of it.)

There's precedent for this kind of thing - I remember 25 years ago, my family needed a new water heater, and the local electric co-op subsidized the purchase of a new electric water heater, with two caveats. It had to meet certain efficiency minimums, and you had to let them install a radio-controlled switch on it, so that they could shut off the water heater during periods of high demand.

Applying the same model to EVSE installs would allow utilities to use EV charging to stabilize the grid - increase demand when there's a surplus of electricity, cut it off or reduce charge rate when there's a shortage. (Note that this isn't full V2G, just load inducement/shedding.) This could prevent curtailment of renewable resources (workplace charging can absorb solar surplus during the day, home charging can absorb wind peaks at night), and/or stabilize base load demand (home charging absorbing that at night as well).

Note that Tesla could also chip in on these subsidies - they already do subsidize destination charging as an advertising cost, effectively.

 

[Pras]

“Deferred revenue related to the access to our Supercharger network, internet connectivity, Autopilot and FSD features and over-the-air software updates on automotive sales with and without resale value guarantee amounted to $1.19 billion and $882.8 million as of June 30, 2019 and December 31, 2018, respectively. Deferred revenue is equivalent to the total transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied, as of the balance sheet date. Revenue recognized from the deferred revenue balance as of December 31, 2018 was $113.5 million for the six months ended June 30, 2019 . From the deferred revenue balance as of January 1, 2018, revenue recognized during the six months ended June 30, 2018 was $44.5 million. Of the total deferred revenue on automotive sales with and without resale value guarantees, we expect to recognize $567.0 million of revenue in the next 12 months.”

The last line is interesting.

 

[jerry33]

Let me know your thoughts about the above, especially if you are a TSLA investor (or Wall Street analyst)!

If we didn't think like that, we wouldn't be TSLA investors.

 

[schonelucht]

Of the total deferred revenue on automotive sales with and without resale value guarantees, we expect to recognize $567.0 million of revenue in the next 12 months.”

The last line is interesting.

In what way? It seems to follow a normal progression scaling with fleet outstanding.