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

[PeterJA]

Thoughts on what Tesla will announce on battery day in April & how Tesla’s future battery strategy will come together:

• Use cell supply from Panasonic/LG/CATL to bridge to ramp of in-house cell production (possibly towards ~90GWh contracted from these three suppliers).
• Announce that in-house cell production has just started (Apr-20) on a small scale (likely for Semi or Plaid Model S), with plans to ramp significantly in 2021 (potentially for all future new capacity from 2021).
• Announce a roadmap to reach 2TWh of annual in-house battery cell+module+pack production capacity by 2030. Enough for ~20 million annual EV sales and ~750GWH annual stationary battery storage sales.

Possible relatively short term technology breakthroughs:

• Tesla will apply agile development to its in-house cell manufacturing as it does everything else - so flexibility for rapid upgrades and iterations of the process to accelerate cost experience curves.
• Use Maxwell dry electrode tech to reduce manufacturing cost and footprint.
• Maxwell dry electrode tech leads to better physical properties, in particular allowing thicker cathodes (higher cathode % per cell) & possibly new chemistries.
• Move to use of single crystal cathodes - possibly helped by Maxwell process/other in-house R&D. This was a big part of the 1 million mile cells tested by Dahn.
• Use very carefully selected electrolyte additives following Dahn research.
• Highly automated manufacturing process to reduce staffing bottlenecks to production ramp.
• Tesla Hibar designs systems for electrolyte insertion during the cell manufacturing process.
• Combine all this with further in-house developed cell IP and possibly third party licensed tech. (Remember there are many steps in cell manufacturing and Maxwell/Hibar are only part of this)
• Reduce cathode kg per kWh to reduce raw material cost
• Next generation in-house module/pack lines for continued reduced cost & capex.
• Build a huge factory to build in-house cell/pack manufacturing equipment at scale (the machine that builds the machine that builds the machine) - significantly reducing capex per GWh capacity

Possible Longer term breakthroughs:

• Integrated cell & pack design & manufacturing process to reduce footprint & cost.
• Dahn lithium metal anode allows for much thinner anode, higher energy density & longer electrode life (at the expense of shorter electrolyte life).
• Replaceable electrolyte design to extend lithium metal anode battery life. Develop Hibar machines for easy electrolyte replacement in service centres.
• Dahn research is used to eliminate cobalt from the cathode leaving just Nickel Aluminium or Nickel Manganese.

Note these are all just possibilities (based on acquisitions, press leaks, published scientific papers, patents & speculation):
These various steps & incremental improvements may or may not be introduced once they have been proven ready for affordable mass manufacturing.

Some things I thing would help accelerate and de-risk Tesla’s battery cell ramp plans:

• Buy Panasonic’s GF1 business for cell manufacturing employee experience (who can be used to train new employees on Tesla’s cell lines) and other cell IP.
• Buy/build Cathode powder manufacturing expertise (currently Panasonic mostly uses Sumitomo). Cathode powder is likely ~20% premium to its raw material constituents & the process can be key to cell properties.
• Buy Nickel Sulphate & lithium carbonate/hydroxide processor expertise - this will be a huge % of cell cost & Tesla’s plans require ~10x the current Nickel sulphate & Lithium market size.
• Buy other suppliers in the cell manufacturing chain

Tesla cannot trust & rely on third parties to deliver such critical components of its business plan, particularly when the metals market leaders do not believe in an EV transition as aggressive as Tesla is targeting.

Speculation:

Will Tesla introduce their in-house better battery cells abruptly or gradually? By replacing all current cells or supplementing them? The consensus here seems to be gradually-by-supplementing. I tend to disagree. Consider the Osborne argument.

If Tesla announces dramatically better battery technology coming SOON, won't that hurt sales of cars with the inferior batteries? Even if only Plaid S/X and Semi get the new batteries first, won't a substantial number of 3/Y buyers assume they are coming to 3/Y and wait?

If I was a tech company with dramatically better tech in the pipeline, I would quietly test it, make damn-sure it is ready, sneak it into all my products, and THEN announce it. This is exactly what Tesla did with their first self-driving hardware.
All Tesla Cars Being Produced Now Have Full Self-Driving Hardware
Will Tesla do this again with their super-batteries?

Possibly supporting evidence:

1) The Maxwell, Hibar, and Jeff Dahn acquisitions occurred quite awhile ago. And presumably Tesla started testing the desired technology long before they paid for it.

2) Tesla has the ability to software-limit battery performance and unlock it later. Could cars start getting the new batteries in secret?

3) Tesla announced greater range for Model Y but not Model 3. Why one and not the other? Was it because Model Y can't be Osborned? (because it's not being delivered yet)

4) Tesla didn't promise profitability this quarter due to ramping up new products. Could those products include new batteries?

5) Tesla has proven ability to keep secrets (FSD hardware, Cybertruck design, etc.) and move faster than anybody expects.

6) Rumors of a major S/X refresh last year reportedly did hurt sales until Elon quashed the rumors. So Tesla is quite aware of the Osborne problem.

7) Battery Day is now promised for April, which presumably means after the Q1 Production/Delivery Report in early April but before the Earnings Report in late April. Isn't this the perfect time to wow the market and explain that Q1 earnings will be weak because of ramping costs, not weak sales?

8) Elon has bet the company on new technology before.

9) Anything else?

Possibly contradictory evidence:

1) To my knowledge, no one has reported new battery equipment or production. (But see #5 above.)

2) Maybe abrupt introduction is higher risk than gradual. (But see #8 above.)

3) Anything else?

Importance to investors:

Maybe not much. We already know TSLA has a megaton of positive catalysts coming soon: Shanghai ramp and expansion, Berlin construction, Model Y ramp, Solar Glass ramp, Semi launch, Full Self-Driving updates and revenue recognition, Fiat-Chrysler payments, tax allowance credits, S&P 500 inclusion, bond upgrades, and haloes from Crew Dragon and Starship and Starlink and Boring tunnels and Lord knows what else Elon delivers.

But a possible April announcement that all Tesla models have dramatically better batteries NOW (in April), not later, seems one more reason for TSLA longs to hang onto their heinies and their shares.

 

[Bet TSLA]

Hmm I derisked a bit before the end of regular trading. Bought back 30 Jan 31 660 puts, then sold 40 Feb 7 590 puts. I suspect that given the pop I'll make less on the position, but it's much safer (make money at anything over $553, plus have an extra week).

As of close today the position I got out of would have made me $192,750 more if I'd stuck with it. The replacement safer position made me $131,275. Complaining about winnings is absolutely forbidden. Safety first! We'll see how things look after the close on Friday.

 

[Fact Checking]

LOL, Elon changed his profile pic on Twitter:

Also note the encoding of his birthday: "Born 69 days after 4/20".

 

[Right_Said_Fred]

The in-depth-corona-discussion resurfaced again. Six of those posts can now be found here: Corona Virus

 

[StealthP3D]

If Tesla announces dramatically better battery technology coming SOON, won't that hurt sales of cars with the inferior batteries? Even if only Plaid S/X and Semi get the new batteries first, won't a substantial number of 3/Y buyers assume they are coming to 3/Y and wait?

I believe battery improvements tend to be incremental in nature and the most important/needed improvement is cost. And of course it has to be available in volume. The battery technology in our two 2018 Model 3's is great - low degradation, fast enough charging, long enough range and reasonable weight. Sure, these metrics will improve gradually with new battery developments but the batteries aren't deficient enough currently to need major breakthroughs - they are AWESOME. The biggest breakthrough needed is simply to lower the cost and (from a manufacturers perspective) increased availability in volume.

I wouldn't worry about Osborning because battery improvements tend to be small incremental improvements.

 

[StealthP3D]

LOL, Elon changed his profile pic on Twitter:

View attachment 506253​

Also note the encoding of his birthday: "Born 69 days after 4/20".

That's quite a coincidence!

And it's exactly true (I checked).

 

[Ameliorate]

LOL, Elon changed his profile pic on Twitter:

View attachment 506253​

Also note the encoding of his birthday: "Born 69 days after 4/20".

Elon, which way is the stock headed??? (maybe this can be the new article cover photo)

 

[Fact Checking]

Frankfurt trading opened 25 minutes ago, it's tracking the closing after-hours Nasdaq so far:

€584.5 is ~$643.

 

[PeterJA]

I wouldn't worry about Osborning because battery improvements tend to be small incremental improvements.

Would small incremental improvements "blow our minds" as Elon promised for Battery Day?

 

[Krugerrand]

We are still waiting for you to post a Wine List for these Islands, so we can be sure not to visit... lack of information can spark curiosity.
I don't need to tell you about curiosity...

 

[MC3OZ]

I believe battery improvements tend to be incremental in nature and the most important/needed improvement is cost. And of course it has to be available in volume. The battery technology in our two 2018 Model 3's is great - low degradation, fast enough charging, long enough range and reasonable weight. Sure, these metrics will improve gradually with new battery developments but the batteries aren't deficient enough currently to need major breakthroughs - they are AWESOME. The biggest breakthrough needed is simply to lower the cost and (from a manufacturers perspective) increased availability in volume.

I wouldn't worry about Osborning because battery improvements tend to be small incremental improvements.

Elon described Panasonic as a great partner on the 3rd Row Podcast Part 2.

My hunch is Tesla will be making their own batteries for Plaid Model S/X, Roadster and Cybertruck, (initially..).
Panasonic may announce an expansion of capacity a GF1 to increase Model 3/Y production at Fremont.

These things are not contradictory or impossible, a business relationship is not like a personal relationship.... there is no need for exclusivity in fact multiple partners and different agendas are expected... What both sides typically want is for contracts to be fair, and to be honoured.

We will know more on Battery and Drive-train Investor day...

From all the hints there is a lot more to Plaid than simply the battery...

As you say the existing battery does the job in Model 3/Y, if people want the latest battery they can buy a Plaid Model S/X or wait a number of years... there is no competitor car that it at all compelling...

I expect Tesla will one day make all their own automotive batteries, and perhaps Panasonic will keep making energy storage batteries..
But we are talking maybe 5 years down the track, there is time for both parties to enter into contracts for increased production, if they want to, or otherwise, they will simply honour the existing contracts..

For Panasonic to expand at GF1 the main issues are capex and workforce... either one may or may not prove problematic...

 

[StealthP3D]

Would small incremental improvements "blow our minds" as Elon promised for Battery Day?

Yes, if the part that blew our minds was less cost and massive increases in production. These are two things that don't cause Osborning.

 

[Krugerrand]

Now, you talk a good game...but there's one obvious teeny tiny flaw in this plan.

You'll have to sell some of those TSLA shares to pay for all this. Weak.

Sticks and stones, sticks and stones.

Do you really think I’ll care when I’m on my CYBRATV and drag racing against my Cybertruck and Roadster 2.0, all three on FSD?

That’s a negatory.

 

[Singuy]

I wouldn't worry about Osborning because battery improvements tend to be small incremental improvements.[/QUOTE]

Yes, if the part that blew our minds was less cost and massive increases in production. These are two things that don't cause Osborning.

I'm afraid "alien technology that I don't think I thought was possible" would cause some osborning. Tesla is not big on segmenting powertrains. So whatever plaid is will end up with all the product line up. The number of motors would be the only segmentation.

 

[StealthP3D]

For those who didn't listen to Part 2 of the Third Row Podcast:

Elon said one of the best short-sellers arguments that Tesla will go bankrupt is not being used by short-sellers:

Much of the profit of existing ICE manufacturers is due to profitable replacement part sales. ICE cars need a constant stream of oil and air filters, alternator belts and alternators, brake pads, fuel injectors and filters, etc. He said sometimes they are basically selling the cars at breakeven and ALL profit comes from parts sales. But electric cars need many fewer parts and thus BEV manufacturers are denied much of this import source of after-sale profits.

The funny part is that if short-sellers made this argument, it would basically be like more free advertising for Tesla (BEV's don't require very many part replacements).

 

[Artful Dodger]

Whatever it is it’s not battery. He stated the consumption in terms of miles per kwh. I think he said 4.20 mi/kwh. So 238wh/mi. Which gives 315 miles @75kwh. It’s always 4s and 2s isn’t it.

From the 2019Q4 Earning Call transcript:

Elon Musk:

"Now this is thanks to a great effort of our engineering team and we managed to achieve by far the highest energy efficiency of any electric SUV ever produced at 4.1 miles per kilowatt hour, which means Model Y four wheeler drive got EPA rating of 315 miles and this improvement is reflected on the configurator as of today."​

Redoing the math: 315 miles / 4.1 kwh/mi = 76.8 kwh (+/- 0.9 kwh) [range adjusted for precision due to rounding]

Alternately, measuring the height of the bar graph Tesla provided on pg 8 of the Q4'19 Update letter, the efficiency rating is closer to 4.067 kwh/mi, which implies a 77.5 kwh pack. That falls into the range calculated above.

GF1/Sparks began manufacturing the Rev.C battery packs using higher energy density (but fewer) cells to keep total energy capacity constant.

A 77.5 kwh pack would be a 3% higher capacity pack than the Model 3 LR/AWD, which is a reasonable increase in energy density at the cell level.

So its likely a slightly larger capacity battery in the Model Y, and its now possible the Model 3 could get an upgrade.

Cheers!

 

[CorneliusXX]

It would be insane to buy back stock. Pretty bad to retire debt early (unless to refinance at lower rate).

Tesla needs all the money they have (and more).
- Auto business is capital heavy - the working capital needs are themselves really big.
- Euro giga won't be as cheap as GF3 - no cheap loans there (though FCA cash will help).
- A macro downturn can happen anytime.
- They need money to expand battery production from 35GWh to 2,000 GWh.

Infact, it might be a good idea to raise money through capital or debt - when they see signs of a macro downturn.

Completely agree. They should only buy back shares once they have enough cash to weather any storm and if they can't think of a better way to generate better returns (unlikely with Elon at the helm) and if the stock price is relatively cheap.

Until batteries are scaled and Tesla has designed all the new electric planes and boats that will use them I don't see a buyback happening.

 

[Singer3000]

To those wondering whether Tesla will do a stock buyback.

Management expectation is that they are on the cusp of delivering robotaxis. In this event, the ROI from Tesla buying their own production to add to the fleet is BONANZA%.

 

[dakh]

Good lord it has been over two hours since this info was released and none of you slackers posted it!

All the newly minted millionaires are drunk off their asses and can't pay attention

 

[Fact Checking]

Redoing the math: 315 miles / 4.1 kwh/mi = 76.8 kwh (+/- 0.9 kwh) [range adjusted for precision due to rounding]

Alternately, measuring the height of the bar graph Tesla provided on pg 8 of the Q4'19 Update letter, the efficiency rating is closer to 4.067 kwh/mi, which implies a 77.5 kwh pack. That falls into the range calculated above.

There's an emergency reserve set aside that EPA range testing won't capture: the full Model Y battery pack is likely very similar to the Model 3 LR one, 4 modules that add up to slightly over 80 kWh capacity.