Tesla Valuation Based on 5 Year Outlook

[smorgasbord]

Thanks for the insights.
What are your thoughts on Energy Generation and Storage as the second disruptive business? . . . basically turning the Utility industry upside down.
My 5 year plan does not have Tesla disrupting the Utility industry (my growth here is modest). This is due to my uncertainty on battery supply and Tesla's less than stellar track record in growing the Energy business.

We all expect to have Tesla Energy somehow disrupt energy generation/storage, but as you said, Tesla hasn't been executing well there. Why hasn't Buffalo become a giga-solar-roof factory, at least in terms of how many it produces? As for Powerwalls, is there really a shortage of suitable cells? They don't have to be small in size and light in weight. Cycle life would seem to be the primary consideration. It's been half a decade since Tesla saved bought Solar City and this is all we have to show for it, really?

Tesla's current valuation is very future-looking. If you try to value it based on automotive alone, you have to go out more years than Mr. Market ever looks. If you try to value Tesla on new disruptive businesses, well those are hard to predict and certainly the timing is hard to predict. Tesla's EV disruption was actually, in my view, an outlier in that it was reasonably obvious even back in 2012/2013 that it was going to happen. Now FSD/robotaxis or Solar Roof/utility break-up are both much harder to anticipate. Anyway, comparing the current pre-second-disruption Tesla to a very (10 year) post-second-disruption Amazon doesn't feel right to me.

 

[UkNorthampton]

Thanks for the insights.
What are your thoughts on Energy Generation and Storage as the second disruptive business? . . . basically turning the Utility industry upside down.
My 5 year plan does not have Tesla disrupting the Utility industry (my growth here is modest). This is due to my uncertainty on battery supply and Tesla's less than stellar track record in growing the Energy business.

It's a lot of viewing, but maybe browse

for ideas/financials.

Old videos, but still some interesting tidbits that we can easily forget about (even @jbcarioca !).

The Boring Company's ability to change cities excites me the most, but is long term. Tesla providing the cars, people reclaiming roadspace, some as Tesla housing?

One comment on a Now You Know video quoting them & adding their own comment. Truly amazing times/opportunity, hope, joy

"Elon has disrupted more industries than any human who has ever lived"... and he's not through yet!

 

[PeterJA]

We all expect to have Tesla Energy somehow disrupt energy generation/storage...

No, some of us understand the how.

Tesla’s Elon Musk highlights Virtual Power Plants’ importance amid CA launch

Tesla has launched its Virtual Power Plant (VPP) program in California, allowing customers to utilize their Powerwall batteries and solar panels to help the state’s grid. While the VPP seems to be a pilot program in California for now, Tesla CEO Elon Musk has noted that the capability to donate...

www.teslarati.com

 

[petit_bateau]

Because of the Tesla Impact Report that came out recently ( https://www.tesla.com/ns_videos/2020-tesla-impact-report.pdf ) I had another look at some of my own projections.

That Tesla report confirms the previously stated target fof 20m cars/yr by 2030, which is a 40x growth from 0.5m in 2020. It also gives a target of 1500 GWh of storage in 2030, up from 3 GWh in 2020, so a 500x growth. I don't think that has been stated before. Also, at those levels it would be approx 1500 GWh of cell usage at an average of 75 kWh/car. That gives good insight that I don't think we have had quite so explicitly before, they did say a bit in Battery Day, but it was to my ears somewhat ambiguous.

Until now I had assumed that Tesla wouldn't be able to reach those numbers. However given that they are writing them it is likely they have a plan which could achieve them. So I tried to figure out the plan, using my own views on production rates, factory/mchy bold rates, team growth rates, supply chain ramp rates, model adoption in global markets, necessary pricing, necessary profitability, learning curves, etc. And in a way that is internally consistent with (I think) no magic ingredients except for single-minded motivation.

It seems to me that Tesla gets it that they are the driving force to push a post-carbon outcome. Even now we don't see legacy-automotive doing it, so now the fastest path is to break them and discard them. And I think Tesla has reached the same view about the entire fossil fuel chain, and decided that using massively scaled battery systems is the way to break fossils. So two disruptions in parallel - and note that 'energy' is not just 'utilities. Energy is utilities plus the entire fossil fuel supply chain right back to oil & gas well, or coal mine.

So, I've improved my own models so as not to be shamed too much by the glorious work of The Accountant. I was already looking out 10-years but a lot of my stuff was not 'clean' and now I've cleaned it up.

I've ignored FSD. Also anything that may come from wider adoption of FSD into generalised robotics. Also I've ignored infotainment and connectivity. Also I've ignored revenue from operations of energy systems, or energy trading, and only counted revenue from selling kit.

I'll post some screenshots up next. Let me get to the end of that please before commenting.

 

[petit_bateau]

Here is the basic P&L, which is where the action takes place in a company like Tesla

So first the top half

Then the lower half, with a share price computation using much the same PE ratios as The Accountant picked

 

[petit_bateau]

What lies behind that is this capacity build in automotive

and this model introduction and cell usage in automotive

 

[petit_bateau]

I won't bore you with all of the detail, but I think this is the CoGS and GM% by model that I think Tesla will need to achieve in order to deliver that - to an extent the magic sauce is the software and the casting, plus of course ever-reducing cell costs

 

[petit_bateau]

And then this is what will be needed on the energy storage side, where Tesla need to start getting better quality data into the public domain

and the basic assumption I have made is that Tesla use their Powerpack & Powerwall products to enforce the scaling of solar PV to those client bases, but that Tesla are unable to do that at the utility scale Megapack

 

[petit_bateau]

And that leads to some interesting tables of value per cell

 

[petit_bateau]

These prices, and the scale, will break the business models of both legacy automotive and of the entire fossil-fuel and trad-utility sector. Quite apart from anything else that wrecks the economies - and the political legitimacy - of most of the Middle East, Russia, and a few other countries.

And they know that of course.

Should be a fun ride !

 

[petit_bateau]

Some graphs

 

[petit_bateau]

OK, that's enough p0rn for now. Time for me to go sailing. I'll address any queries and comments later.

 

[CorneliusXX]

And then this is what will be needed on the energy storage side, where Tesla need to start getting better quality data into the public domain

View attachment 695651

and the basic assumption I have made is that Tesla use their Powerpack & Powerwall products to enforce the scaling of solar PV to those client bases, but that Tesla are unable to do that at the utility scale Megapack

View attachment 695652

Great set of numbers. I should just quit my job now .

Why do residential solar roof sites increase to 1.2m/yr in 2023 before dropping back to 50k/yr from 2024 onwards?

 

[kbM3]

@petit_bateau Wonderful work. So much thanks to you for doing this for all of us. I love seeing that relatively conservative assumptions yield such a price. Maintaining 30% gross margins throughout those ASP declines and after competition really actually does arrive, might seem optimistic, but I feel they’re fair given Elon’s companies‘ technological dominance.

1. Did you realize you predict a steep share price decline from 2028-2030?
2. Curious about the constant share count. I guess you predict that share buybacks will offset Elon’s 2nd comp package and other stock awards?

 

[Mengy]

Awesome data and charts @petit_bateau ! Going to take me some time to study it all and compare it to my own model.

 

[Artful Dodger]

If Tesla's goal is 3 TWh a year by 2030, I'd expect they would be over 1 TWh by 2026, which to me implies that energy storage will ramp much faster to much higher volume.

Another possibility is that they license/sell packs to other auto manufacturers.

Yeah, that's linear thinking. Exponential growth doesn't work that way. We know from the 2021Q2 CC that Telsa hopes to be at a 100 GWh run rate by the end of 2022 (Elon said 50/50 chance, so that's the central estimate of the production range).

To get to 3,000 GWh is a 30x increase in production. End of 2030 is 8 years. CAGR on 30x over 8 yrs is 53% (sounds legit). So armed with the end points and the equation, let's produce an production rate table thru 2030:

• 2022 100 GWh
• 2023 153 GWh
• 2024 234 GWh
• 2025 358 GWh
• 2026 548 GWh
• 2027 838 GWh
• 2028 1,283 GWh
• 2029 1,963 GWh
• 2030 3,003 GWh

So we can see that by the end of 2026, Tesla should be at a bty production run rate of ~548 GWh/yr, and it's not until sometime during 2028 that Tesla passes the 1 TWh/yr run rate.

#MATHS

Cheers!

P.S. Bonus points if you can estimate the year during which Tesla could produce all the batteries the world needs, by THEMSELVES, if they just keep running this exponential growth business model. (hint: how long until Tesla could be at 20 TWh/yr run rate?)

 

[winfield100]

Yeah, that's linear thinking. Exponential growth doesn't work that way. We know from the 2021Q2 CC that Telsa hopes to be at a 100 GWh run rate by the end of 2022 (Elon said 50/50 chance, so that's the central estimate of the production range).

To get to 3,000 GWh is a 30x increase in production. End of 2030 is 8 years. CAGR on 30x over 8 yrs is 53% (sounds legit). So armed with the end points and the equation, let's produce an production rate table thru 2030:

• 2022 100 GWh
• 2023 153 GWh
• 2024 234 GWh
• 2025 358 GWh
• 2026 548 GWh
• 2027 838 GWh
• 2028 1,283 GWh
• 2029 1,963 GWh
• 2030 3,003 GWh

So we can see that by the end of 2026, Tesla should be at a bty production run rate of ~548 GWh/yr, and it's not until sometime during 2028 that Tesla passes the 1 TWh/yr run rate.

#MATHS

Cheers!

P.S. Bonus points if you can estimate the year during which Tesla could produce all the batteries the world needs, by THEMSELVES, if they just keep running this exponential growth business model. (hint: how long until Tesla could be at 20 TWh/yr run rate?)

hows this, using your numbers.............., somewhere mid 2034, around 13 years from now......, using a multipler of 1.53/year, 53%/yr
\
personally i think the numbers get a little silly after 2035, but technology is accelerating and the future "red shifted" past me around 20 years ago,
(it was a big deal getting a non dial telephone in the late 1950's with a "hello operator, please get me 606W3" (party line with 3 homes so 3 rings but anyone could pick up and listen))(row 6 and jack 6 on a gigantic switchboard where they plugged in a plug and pressed the ring button 3x, waited, then again3x, waited, etc)
so if neuralink really works and becomes ubiquitous and actual telepathy happens, then group linked minds linked to computers for speed, then punctuated singularities will occur
(Read "a fire upon the deep" by Vernor Vinge about creatures that have group linked minds aka neurolink for a small taste)
edit: using ground based lasers as engines, you could have "beam rider" spaceships pushed by the lasers, so interplanetary trips could be literally days, not years, boosting and decelerating @ 1g and planetary based mass drivers flinging stuff here and there, maybe sending volatiles from Venus atmosphere to Mars 'n such

 

[adiggs]

party line with 3 homes so 3 rings but anyone could pick up and listen

I remember those days! We were 2 long rings (our apparently more technologically advanced party line also supported short rings )

 

[Artful Dodger]

hows this, using your numbers.............., somewhere mid 2034, around 13 years from now......, using a multipler of 1.53/year, 53%/yr

personally i think the numbers get a little silly after 2035

Good estimate! Of course, to get to these level of bty output implies roughly 80 million tonnes of finished batteries per year (a mix of NCM and LFP). This level of output demands a strategic minerals assessment by the CIA! (and of course, they already did one).

How much is 80 million tonnes? Well the Great Pyramid at Giza weighs 6.5 million tonnes, so its about 1 of those every month by 2030... :O

Sounds colossal, right? But by comparison, the world's output of steel in 2020 (1,878 M tonnes) was equivalent to 24 Giza Pyramids per month. Surely we can reach 4% of that output in batteries in 15 years?

We can if there is the will to do so. As the economics become more compelling each year, and the consequences of inaction become more stark, I'm hopeful we will choose to accelerate the change!

Cheers!

 

[adiggs]

Good estimate! Of course, to get to these level of bty output implies roughly 80 million tonnes of finished batteries per year (a mix of NCM and LFP). This level of output demands a strategic minerals assessment by the CIA! (and of course, they already did one).

How much is 80 million tonnes? Well the Great Pyramid at Giza weighs 6.5 million tonnes, so its about 1 of those every month by 2030... :O

Sounds colossal, right? But by comparison, the world's output of steel in 2020 was equivalent to 24 Giza Pyramids per month (1,878 M tonnes). Surely we can do 4% of that output in batteries within 15 years?

We can if there is the will to do so. As the economics become more compelling each year, and the consequences of inaction become more stark, I'm hopeful we will choose to accelerate the change!

Cheers!

That's an interesting view into things. Fortunately if the economics works then I expect the financial side to be readily available. Whether the necessary mines can get permitted / environment assessment completed successfully - that might become our constraining factor.

Something of a sidebar with some relationship to the thread - an important mistake I see being made in the environment / climate change community is treating decisions like they are absolutes. All decisions have costs/benefits, risks/rewards. In this specific instance we're going to need a lot of raw materials and at least some of them are going to come from seemingly environmentally destructive work. Clearly we want to minimize the direct environmental impact - but do we want to stop the work completely? I've seen situations where it looks to me like we're fine with allowing the house to burn down in order to save a bush growing next to the foundation.

Like all decisions there are a range of factors that go into them and they all need consideration. The raw material acquisition is something I worry about - will the environmental lobby be the most effective block to progress to a renewable energy economy? I really hope not.