S70D investor implications

felt like I stumbled onto the set of fox news reading the comments section of that WSJ article.

drinkerofkoolaid said:

Someone should inform the Wall Street Journal they cited a very biased (probably fake) hedge fund manager, who spends his entire day ranting about Tesla on Twitter and talking with himself via another Twitter account , as an authority for an article.

Tesla to Upgrade Slower-Selling Version of Model S - WSJ

The 70D will likey sell very well. I'd be willing to bet Tesla is going to offer anyone who owns a 60kwh Model S to upgrade to the 70D. The 70D will be very relevant when Tesla begins to promote the CPO program. The 60KwH Model S will likely be $35,000 $45,000 after 3 years, and will depreciate at a very slow rate, because of the warranty.

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The word "likely" has bitten me many times. Those darn beanie-babies...

I like the 70D over the 85D because, number one, I don't need those extra miles. And I bet many people don't as well. In fact, how many 85D owners would rather have a 70D for $10K less? I bet a good number. 70D may sell very well and may erode, somewhat, the 85D buyer base.

Hogfighter said:

The reason for the 70D has nothing to do with demand. It's commonality with the Model X. There's no way Tesla would offer a vehicle with less than 200 mile range, and the 60kw battery pack would approach that in the X. Same with the front end...why not make every vehicle offered a 4WD?

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Nice theory, but here's an alternate explanation to consider that will affect short term value of TSLA...
The release of the 70D means that Tesla has raised the minimum mileage of Model S to 240 miles. I expect the minimum miles of Model X to be 240 at least too. Why? Because 240 is the new Tesla minimum, which leapfrogs the proposed 200 mile range of upcoming competitive cars.

Remember when Elon said Model 3 will have 200 "real-world" miles? He meant 240 mile range so that you can realistically go 200 miles. I personally expect to see all Tesla vehicles including Model 3 with starting ranges of about 240 miles. Zoooommm, Tesla has once again left the competition in the dust.

Another implication of 240 miles for Model 3 is that the basic model is slated to begin at about $35,000. Something positive is happening in battery technology if Tesla can offer 240 mile range in a car that has a basic price of $35,000.

Here is my theory. Panasonic has increased production of batteries quite a lot over the last couple years. I think they are in fact being "capacity binned". That is, the spec for the P85 is X kWh, and panasonic downmarkets the cells which are functional but don't meet spec. eventually, the factory output has produced too many lower capacity cells and TM is working with them to put them to use.

After all, why go into home storage right now? Really, battery overproduction of lower density cells, or weakening model S demand are the only theories that make sense. The 70D is about making a use for the lower density cells. Since the "60" class has unused space in the pack, you can simply fill it up with lower density cells. I will be very curious about the first 70D pack breakdown to see if the cell count has gone up.

So the good cells, call it 60% of production goes into 85 class cars. The other 40% is going to the 70D and home storage. This theory replaces the "70D is using awesome new batteries". I think its the less awesome. This theory predicts we will not see a 100kWh class any time soon, which Elon has already said is true.

I think the first published supercharge on a 70D could tell us a lot about what is inside the battery. Maybe someone who takes a 70D for a "Test Drive" can do a "Test SuperCharge" as well and post it here. Thank you in advance.

Edit, sorry mods wrong thread for this discussion.

On topic: nice to see we are still holding green

Just got an email regarding an event at the factory store in the 17th: Double Black - Dual Motor TourTesla invites you to learn more about our digital all-wheel drive system as part of our Dual Motor Tour. Along with the chance to experience the performance of Model S 85D and P85D, we are also pleased to offer you the opportunity to drive the all-new 70D. Uniting ultimate road handling and great value, the new All-wheel drive Model S 70D has a 0-60 time of 5.2 seconds and a 250 mile range at 65 mph. Navigation, Trip Planner, Range Assurance, and Supercharging come standard. DatesFriday, April 17th –Sunday, April 19thLocationTesla Factory Store(Open in Google Maps)Time10am – 4:30pmTesla specialists will be on hand during our Tech Talk sessions to answer questions and discuss our groundbreaking vehicles, and you’ll also be able to take a tour of the Tesla production line. Your drive will last approximately 20-30 minutes, but plan about two hours for the entire experience. You are welcome to bring guests to enjoy the event with you. Double Black begins in Fremont on April 17th. Spaces are limited. Register today. RSVP TESLA3500 Deer Creek Road | Palo Alto, CA 94304Privacy Policy | Unsubscribe

Notice the 250 mile claim?

Something I didn't consider yet is that the Model S 70D now being the base model at $75,000 means that the Model X will also get a bump in base price versus what we had originally projected it to be. When the Model S was $69,900 I had been assuming the Model X would start around $74,900. Now I think the Model X will start around $79,900, and many technologies in the Model S will be standard in Model X like navigation. ASP will still be much higher... it just portends well for revenues out to EOY 2015.

sub said:

Just got an email regarding an event at the factory store in the 17th: Double Black - Dual Motor Tour Tesla invites you to learn more about our digital all-wheel drive system as part of our Dual Motor Tour. ...

Notice the 250 mile claim?

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If it's all about Tesla's Dual Motor vehicles, I'm hoping they show of the Model X, which only comes with dual motors.

As for the 250 mile claim, Tesla has been doing that sort of thing for a while, e.g. 300 miles at 55 mph.

Room_A113 said:

If it's all about Tesla's Dual Motor vehicles, I'm hoping they show of the Model X, which only comes with dual motors.

As for the 250 mile claim, Tesla has been doing that sort of thing for a while, e.g. 300 miles at 55 mph.

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I would have to double check but I thought I saw on the website it was 240 miles 65mph. I would like to go to this event, I will see what the wife says. I'll need to leave the checkbook at home though.

250 mile range at 65 mph, 240 mile EPA. And another blog reference for 240 mile at 65 mph that is probably a mistake.

austinEV said:

Here is my theory. Panasonic has increased production of batteries quite a lot over the last couple years. I think they are in fact being "capacity binned". That is, the spec for the P85 is X kWh, and panasonic downmarkets the cells which are functional but don't meet spec. eventually, the factory output has produced too many lower capacity cells and TM is working with them to put them to use.

After all, why go into home storage right now? Really, battery overproduction of lower density cells, or weakening model S demand are the only theories that make sense. The 70D is about making a use for the lower density cells. Since the "60" class has unused space in the pack, you can simply fill it up with lower density cells. I will be very curious about the first 70D pack breakdown to see if the cell count has gone up.

So the good cells, call it 60% of production goes into 85 class cars. The other 40% is going to the 70D and home storage. This theory replaces the "70D is using awesome new batteries". I think its the less awesome. This theory predicts we will not see a 100kWh class any time soon, which Elon has already said is true.

Click to expand...

This is a pretty dismal theory. It amounts to saying that Tesla does not have any new higher density technology to roll out. Plus it has a surplus of cells with lots of capacity variation per cell such that it has to cull out second and dump them into low margin products. This could be the new bear thesis: Tesla is demand constrained with a surplus of bad cells it must dump.

This theory assumes that while Panasonic has ramped up production, it has not also refined its process to reduce variability, basically that Panasonic fails at total quality management. If so, the Japanese manufacturer should hang its face in shame.

Furthermore, the range does not scale so well. 270×70÷85 = 222 < 240, but 208×70÷60 = 242. So it is more like scaling up from a 60 pack with higher density cells than scaling down from a 85 pack with lower density cells.

My theory is that both Tesla and Panasonic have learned something about making batteries over the last three years. The process quality has improved, reducing seconds. The efficiency has improved, reducing the manufacturing cost. And the chemistry has made at least modest gains over three years, resulting in cells with at least 17% more energy density. Note that doubling in ten years would suggest a 23% gain in three years. So a mere 17% is a little subpar. So under my theory, Tesla does have a modestly higher density cell to roll out. It will take time to ramp up production, meanwhile other uses for existing cell line capacity must be found. That is why it is time to get into stationary. But in the near term Tesla is supply constrained for the new highER density. So what should Tesla do with the first 1 GWh of this new supply? What product would deliver the highest incremental profit on this first 1 GWh of supply? It may seem counterintuitive to many in the market, but feeding this supply into 70D will deliver 2 to 3 times as much incremental profit as putting it into any of the 85 kWh products. I have been working this out on my own mathematical model. I do not have the time to detail that model here, but I would encourage other analytical people to try out their own modelling. By far the 70D is the most profitable vehicle for this new highly constrained supply.

I would challenge anyone to come up with a pro forma showing that putting the new supply into the P85D or 85D would result on higher incremental returns than the 70D. I'm sure Musk would like to see this too as it would imply that Tesla just made a stupid mistake launching the 70D. BTW, it's even harder to make the pro forma case for a P100D. It's much more profitable per kWh just to put higher density cells into a lighter 85 pack than to pack 100 kWh into a pack. Again I invite people to work through their own math and prove me wrong.

For Tesla investors, this is a curious opportunity. Because the 70D move is counterintuitive, the market will not understand it correctly and misprint it in the short run. So I think we have yet another opportunity to beat the market on an information advantage. So I would not expect the stock price to go much higher on this in the short run. But the impact of the 70D will be felt in the next two quarters. So we've got an opening to buy before the market comprehends just how genius the 70D move is.

Anecdotally, it seems people that are stepping down from an 85 to a 70D are not lowering the price paid.

They are replacing kWh with options. Pano roof ,premium paint, next gen seats, air suspension, high fidelity sound system etc.

RobStark said:

Anecdotally, it seems people that are stepping down from an 85 to a 70D are not lowering the price paid.

They are replacing kWh with options. Pano roof ,premium paint, next gen seats, air suspension, high fidelity sound system etc.

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And that's very good news to TSLA shareholders. Options have a much better gross margin than basic cars.

vgrinshpun said:

I have a theory what could be the big announcement at the Thursday's press conference, aside from improvements to the Energy App that I described in my previous post (this part was covered in Elon's tweet about range anxiety).

This CNBC interview with James Albertine of Stifel has some very interesting information about the Thursday’s press conference. Here are the significant quotes:

(About Thursday’s press conference) “I think this is very important opportunity for Tesla to draw attention back to where they stand, from competitive stand point, with regards to range.” “When we were at the factory last week, one of the things we saw was transition from the 4[SUP]th[/SUP] generation to the 5[SUP]th[/SUP] generation of battery cell production technology. We think that they are going to show that they further extended their leadership as it relates to range. Quite frankly we think that this is most important catalyst for 2015.

Here is my interpretation what was said in this interview.

1. I think that transition from the 4[SUP]th[/SUP] t0 5[SUP]th[/SUP] generation of battery production technology relates to transition from D version of battery packs to E version. For those not familiar E version battery packs started to ship around December (VINS of approx. 56,000)
2. According to this TM thread E battery packs maintain high (higher than earlier variants of the pack) charging rate up to a higher state of charge. One explanation for this would be that TM tweaked composition of the battery so it can take higher charging rate longer. The other is that E-battery has bigger capacity than the previous variants.

So it seems that, similar to how they retrospectively released information about the auto-pilot hardware, TM shipped all cars with E pack with a slightly bigger battery (same 7104 cells but each having about 10% higher capacity). Utilization of this additional capacity will be enabled via a software release.

The reason that James Albertine assigns such significance to this, I believe, is that for D cars the range could be extended to hit symbolically important 300 miles EPA. I think that this will be accomplished via combination of increase capacity of the battery (additional 27 miles) and improved efficiency of the control of power electronics (via software changes) as well as improved efficiency of the motor, particularly at very low power consumption levels as in coasting (additional 3 miles of range). so the total EPA rating would be 270+27+3=300.

There is some level of speculation involved in this (on my part, as I believe James Albertine was not speculating, but pretty much conveyed the facts as he knows them), but the potential impact of hitting the 300 miles of EPA range could be very significant (the most important catalyst for 2015 in Albertine’s analysis).

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So is this prediction looking more accurate with the 70d unveil?

jhm said:

This is a pretty dismal theory. It amounts to saying that Tesla does not have any new higher density technology to roll out. Plus it has a surplus of cells with lots of capacity variation per cell such that it has to cull out second and dump them into low margin products. This could be the new bear thesis: Tesla is demand constrained with a surplus of bad cells it must dump.

This theory assumes that while Panasonic has ramped up production, it has not also refined its process to reduce variability, basically that Panasonic fails at total quality management. If so, the Japanese manufacturer should hang its face in shame.

Furthermore, the range does not scale so well. 270×70÷85 = 222 < 240, but 208×70÷60 = 242. So it is more like scaling up from a 60 pack with higher density cells than scaling down from a 85 pack with lower density cells.

My theory is that both Tesla and Panasonic have learned something about making batteries over the last three years. The process quality has improved, reducing seconds. The efficiency has improved, reducing the manufacturing cost. And the chemistry has made at least modest gains over three years, resulting in cells with at least 17% more energy density. Note that doubling in ten years would suggest a 23% gain in three years. So a mere 17% is a little subpar. So under my theory, Tesla does have a modestly higher density cell to roll out. It will take time to ramp up production, meanwhile other uses for existing cell line capacity must be found. That is why it is time to get into stationary. But in the near term Tesla is supply constrained for the new highER density. So what should Tesla do with the first 1 GWh of this new supply? What product would deliver the highest incremental profit on this first 1 GWh of supply? It may seem counterintuitive to many in the market, but feeding this supply into 70D will deliver 2 to 3 times as much incremental profit as putting it into any of the 85 kWh products. I have been working this out on my own mathematical model. I do not have the time to detail that model here, but I would encourage other analytical people to try out their own modelling. By far the 70D is the most profitable vehicle for this new highly constrained supply.

I would challenge anyone to come up with a pro forma showing that putting the new supply into the P85D or 85D would result on higher incremental returns than the 70D. I'm sure Musk would like to see this too as it would imply that Tesla just made a stupid mistake launching the 70D. BTW, it's even harder to make the pro forma case for a P100D. It's much more profitable per kWh just to put higher density cells into a lighter 85 pack than to pack 100 kWh into a pack. Again I invite people to work through their own math and prove me wrong.

For Tesla investors, this is a curious opportunity. Because the 70D move is counterintuitive, the market will not understand it correctly and misprint it in the short run. So I think we have yet another opportunity to beat the market on an information advantage. So I would not expect the stock price to go much higher on this in the short run. But the impact of the 70D will be felt in the next two quarters. So we've got an opening to buy before the market comprehends just how genius the 70D move is.

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I have the same theory as jhm, see my post in the Tesla cuts "60kWh Model..." thread for additional musings on the subject..

And yet the 70D to me seems like a much better bargain than all previous Model S versions.
It's a bit of the best of both worlds really. Big enough battery, dual motor, AWD, better standard equipment, SC included as standard, and even with a few options a far better deal than the 85, especially the standard.
I think Tesla could/should drop the S85 completely as I suppose from now on it will see the least sales of the remaining variants. Plus, it would streamline production (no more single motor/dual motor differentiation).
Would be a nice lineup: 70D, 85D, P85D

Yes, I see it as a writing on a wall: S85 is about to be axed.
They just need to empty inventory of RWD only parts before they do that.
The next thing to go will be 85kWh battery. If not before then with Model X launch, tesla will replace 85 with 100kWh battery.

Not much sense in introducing a new model with same battery as the model introduced 4 years before it. Not after continuous talk about batteries getting better with time.

WarpedOne said:

Yes, I see it as a writing on a wall: S85 is about to be axed.

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That's what it looks like. But they would sell better if they kept the RWD option for S. X is OK to have AWD in all variations.

But they would sell better if they kept the RWD option for S.

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Why? What is it that you loose with dual motors?
Model 3 will have a RWD option, S being more upmarket does not need it.
Also, Model S can't really sell better - they still sell every car they make, 2 month before they actually make it.