I definitely would see this as enhancing demand for the Model S. I'm indifferent to the ratio of S to X. Combined sells are what matters to me. I think with Model X coming on line we'll be sharply supply constrained for quite a while. So it won't be necessary to goose demand for the Model S for a year or so.
Nevertheless less this would be good for the stock. First it will be important just to know that Tesla is making higher density cells. I suspect that this is the case with the S70D, but Tesla TMK has not conformed this. So confirming this would be a good deal.
Second, rolling out the S100D would establish that Tesla is not constrained in its supply of the higher density cells. If they are constrained, then they need to give priority to an X100 and X70, before S100. But doing so could also produce a serious Osborne effect for the S85D and SP85D. That is, if buyers know that a X100 is possible then it's just a matter of time before the S100D is available. So all this messiness is resolved once S100D is shipping. We'll know that there is not a substantial constraint on the supply of higher density cells.
Third, once investors know that higher density cells exist and can be produced in high enough numbers to market the S100D, then the final way this increases bullishness is by actually enhancing the demand for the Model S. Specifically, the Osborne effect is mitigated. To be sure, substantial demand for both an X100 and S100 exists, but Tesla will not be able to unlock the value of this demand until it can actually deliver these products.
Let me just speculate on one more thing. We know that with the Powerwall Tesla has two different cells, a heavy cycling cell with with 5000 cycle life and a light cycling cell with 1250 (?) cycle life. Now I know that these are not likely the cells Tesla would use in autos, but it still raises the question of whether Tesla can make a heavy cycling cell with high density suitable for auto. Imaging a 100kWh pack where 20 kWh has 5000 cycle life and the other 80 kWh is higher density cells with 1250 cycle life. This sort of hybrid pack would need a little more programming to cycle they heavy cycling cells heavily while protecting the other cells from over use. The resulting pack could have something like a 15 year / 250,000 mile warranty. That would be damn impressive. It gets to a level of durability that exceeds exceeds most ICE drivetrains. Of course if the heavy cycling cells are just a high density and no more costly than the other cell, then there may be no rationale for the hybrid battery design, just go with the more durable cells. Regardless, I'm wondering if we may see a longer lasting, higher density, cheaper to manufacture battery sometime soon. The combination would seal the fate of conventional ICE and would be very hard for automakers to fight against. There are many performance dimensions for batteries. Improvements along any dimension would be welcome news for shareholders.
James, to your discussion of the timeline of introducing a new Model S battery... I'd be quite surprised if a bigger battery comes out for the X without one virtually immediately being offered for the S, for the very reason (undermining Model S sales) you mentioned. Indeed, if a bigger battery is coming, it's very likely a new chemistry, and Tesla has to wrestle with getting supply of the new cells up to levels that could handle their offering new packs in the S and X. In fact, it's occurred to me a few times in the past several months that one element in the delay of the Model X AND Tesla's guidance of lower first half volumes for the Model S vs. second half might actually be about transitioning to a new chemistry. To do this, Panasonic would have to produce cells with the old chemistry at lower volumes as they transition lines at their plants in a controlled manner to the new chemistry. That is, if this transition is occurring, as lines are being changed they're not producing cells, and so supply to Tesla would be down as the transition rolled through Panasonic's plants. We may be in a multi-month period of continually lowering supply of the old chemistry (consistent with low first half Model S volumes), and ramping up supply of the new chemistry (consistent with the 70D already having the new chemistry, as you suspect, from what's been ramping up of the new supply).
Consistent with this idea that a new chemistry is being transitioned in already, I'd mention that:
-Tesla has said the GF will use a new chemistry
-There will be Tesla Energy product shipments this year, but volumes will pick up in 2016 as the first GF production comes on line
-I find it somewhat unlikely that Tesla would sell Tesla Energy products now, which we know do not have GF cells in them, with a different chemistry than what the GF will produce and go into the products in less than a year... it's possible but I think unlikely. I realize there have been various versions of the battery packs in the Model S, but I don't believe they've had different energy density.
-if the above is correct, Tesla Energy is going to be shipping products this year with cells from Panasonic with a new chemistry... so, why not Panasonic cells for a larger S/X pack? Comes down to how nimbly they can transition existing lines at Panasonic to manage the allocation of falling old chemistry cells, rising new chemistry cells, and various Model S and Model X offerings.
fwiw, on the last earnings call, Tesla said either the 10 kWh or the 7 kWh pack was using cells like the vehicles. I do not recall if they explicitly said the same cells, or just suggested they were similar. Of course, the transcript is available if you want to look into it.
