Tesla Gigafactory Investor Thread

[RobStark]

Just a thought... while Tesla Motors is in the business to accelerate the change to sustainable transport (and note, the words "make profit" are not contained in that phrase), the other manufacturers are still in the business to "make as much profit as we can every year." This means, they will price their electric cars as high as they possibly can - and claim that batteries are just darned expensive. If this means pricing them at n-500 where n is the price of a Tesla Model 3, they might do that. If Tesla can't produce enough cars to meet demand, the other manufacturers might be able to get a taste, and buyers won't mind paying n-500.

Something else to watch: Tesla says "no servicing required to meet the warranty." Will the other manufacturers also say this? The dealer-service cartel may be hard pressed to match it.

(sort of OT, apologies)

Tesla needs big huge profits to fund expansion.

It can't get the capital otherwise.

Wall Street won't fund unprofitable business that have no plans to be profitable.

Unless Apple or Google hands over billions interest free.


I don't think GM can sell the Bolt for N-500.

The Bolt will be seen functionally as a $15k econobox with a $22,500 premium for being electric.

Dealers will need big discounts to move anything more than compliance numbers.

Supply and demand will work itself out in the long run.

 

[Robert.Boston]

Tesla is profitable on an operating basis. If Tesla had stopped all R&D, it would have earned profits of $39.4 MM in 2015Q1. Probably, its SG&A would have been lower, too, if Tesla were content with its current scale. But doing those things would result in the stock price collapsing. Tesla is a growth play, and as long as investors think that Elon Musk has great plans for their money, he will have no problem going to Wall Street for capital.

 

[AudubonB]

Along gigafactory investor possibilities, here is a heads-up: consider following the fate & fortune of Canada's Inco (founded in part, by the way, by none other than TA Edison...).

Controlled for the past ten years now by Brazil's Cia. Vale do Rio Doce, ("Vale"), this largest producer of nickel in the world now is up for being spun off - at least in part. There might be a role for Tesla to secure a position in the world's lowest-cost, North American based, supplier of nickel.

17 June news: Vale Said to Hire Canada’s Stikeman Elliott for Base Metals IPO - Bloomberg Business

 

[austinEV]

I think we are lucky the general market has our back today.

 

[MitchJi]

Hi,

Where and when did JB say this? Do you have a link?

I apologize. I made a mistake. Here are two links, and the quote, by EM:
http://edge.media-server.com/m/p/hdd83nv6

http://www.thestreet.com/story/13142191/1/tesla-motors-tsla-earnings-report-q1-2015-conference-call-transcript.html

Elon Musk (Chairman and CEO):The gross margin revenue obviously is going to change with time. When it's low volume, made in three months, it will be relatively low margin.

Once we get to Gigafactory up and running and high-volume, get the economies of scale working, this is just a guess right now, but maybe it's somewhere around 20%. This is not like -- it's like we don't have enough information to say exactly what that would be, but probably 20% is a reasonable guess.

I got a little confused, because the numbers don't work, unless they are selling the Powerpacks for zero profit.

Here's an interview with Jim Chen, in which he states that EM said that the GF will reduce costs by 33% due to economies of scale, logistics (shipping costs), and efficiency (example cells go from cell production straight to packs?).

Interview: Tesla's Jim Chen on the Powerwall, Giga Factory, and Model 3
Published on May 4, 2015

Tesla Motors' new product isn't a new car, but rather a battery pack for the home called the Powerwall. In this video I talk to Tesla's VP of Regulatory Affairs Jim Chen on the new product as well other developments in the works.

I'm sure that they know enough to be sure that they are not losing money on the packs produced in Fremont! Remember that these packs are very similar to Model S packs.

If I remember correctly, the full scale is supposed to hit around 2020.

I wanted some idea of how long it might be until they realized substantial savings. The Jim Chen video helped. I think that they should get to at least close to 20% savings pretty quickly because in addition logistics and efficiency they should negotiate some long term supplier contracts at or very close to the start of production.

So even if we assume 10% profit on the packs produced in Fremont (which IMO would be foolishly low), by the beginning of 2017 they should have costs that are a max of $175 per kWh.

And by the beginning of 2017 they should be able to reduce Model S-X prices, or increase margins, or increase pack sizes due to GF cost reductions.

 

[Model 3]

... they should be able to reduce Model S-X prices, or increase margins, or increase pack sizes due to GF cost reductions.

... or just add some of today's options as standard, and add some new and fancy options with greater revenue. This is what I think they will do, and that is more or less what they have been doing so far.

 

[jvonbokel]

And by the beginning of 2017 they should be able to reduce Model S-X prices, or increase margins, or increase pack sizes due to GF cost reductions.

... or just add some of today's options as standard, and add some new and fancy options with greater revenue.

My money is on the bolded parts of your comments, but regardless of my opinion, it's clear they will have multiple options for differentiating the S&X from the Model III, which will allow Model S & X sales to continue unabated (and possibly even keep growing) and fuel profits while the Model III may initially be a drag on profit, or contribute relatively little to the bottom line.

 

[jhm]

Tesla’s first building phase nearly complete | Las Vegas Review-Journal

This report offers some good details regarding the Gigafactory. Tesla is required to give a quarterly report to NV lawmakers. I wonder if this can be made available to investors as well.

So they are moving quickly to complete the first 14% of the GF, 900k Sq ft out out a 6.4M Sq ft footprint. Still shooting for 10M Sq ft manufacturing area. Next come installation of equipment in this first segment.

Tesla is considering making GF1 50% to 100% larger. We've heard some talk earlier about a 50% increase for more stationary capacity, but it may be significant that Tesla is now talking about doubling the size of GF1 with lawmakers. NV stands essentially to get a second Gigafactory for no added incentives from the state. That has got to burn Texas and California. So I'm wondering if we'll see another round of negotiations with all the states that would love to land the second Gigafactory. Nevada may just get it by default. It should be fun to watch.

 

[MikeC]

Tesla’s first building phase nearly complete | Las Vegas Review-Journal

This report offers some good details regarding the Gigafactory. Tesla is required to give a quarterly report to NV lawmakers. I wonder if this can be made available to investors as well.

So they are moving quickly to complete the first 14% of the GF, 900k Sq ft out out a 6.4M Sq ft footprint. Still shooting for 10M Sq ft manufacturing area. Next come installation of equipment in this first segment.

Tesla is considering making GF1 50% to 100% larger. We've heard some talk earlier about a 50% increase for more stationary capacity, but it may be significant that Tesla is now talking about doubling the size of GF1 with lawmakers. NV stands essentially to get a second Gigafactory for no added incentives from the state. That has got to burn Texas and California. So I'm wondering if we'll see another round of negotiations with all the states that would love to land the second Gigafactory. Nevada may just get it by default. It should be fun to watch.

Love to see the progress. I will point out that the "50-100%" was attributed to the ER CC, which is not accurate because Elon only said 50% on the CC.

 

[hobbes]

Tesla’s first building phase nearly complete | Las Vegas Review-Journal

This report offers some good details regarding the Gigafactory. Tesla is required to give a quarterly report to NV lawmakers. I wonder if this can be made available to investors as well.

That sounds very promising! Some more info from the same Nevada official here:

Steve Hill, director of the Governor's Office of Economic Development, told Nevada lawmakers during an interim meeting Thursday that progress on the $5 billion factory was going slightly quicker than the company expected.
"Certainly by one year from now, that factory will be producing batteries," he said to lawmakers.

Economic officials say Tesla factory will open in a year - Yahoo Finance

 

[Rarity]

Tesla’s first building phase nearly complete | Las Vegas Review-JournalTesla is considering making GF1 50% to 100% larger.

The Review Journal's source for that assertion appears to be the Q1 analyst call. However, I recall Musk using much less ambitious language in the analyst call than 50-100%.

Edit: Oops. MikeC got here before me...

And I note that this seems to be the first time that we've caught wind of the footprint: 5.8 million square feet (540,000 square meters).

 

[neroden]

Along gigafactory investor possibilities, here is a heads-up: consider following the fate & fortune of Canada's Inco (founded in part, by the way, by none other than TA Edison...).

Controlled for the past ten years now by Brazil's Cia. Vale do Rio Doce, ("Vale"), this largest producer of nickel in the world now is up for being spun off - at least in part. There might be a role for Tesla to secure a position in the world's lowest-cost, North American based, supplier of nickel.

Probably not, but if they managed to get control or partial control *cheap enough*, it would be a good deal for Tesla's vertical integration plans. The nickel mining also produces cobalt (a lot of people have been wondering where Tesla will get a North American cobalt supply) and managanese (also used in the new Tesla Powerwall batteries). That's three of the metals where supply has been in question.

 

[AudubonB]

For those who follow events in the materials supplier world, two of the junior Lithium plays have just (30 Jun) announced that they are merging: Western Lithium (WLCDF/WLC.TO) and Lithium Americas (LAC.TO).

Corporate announcement here: Western Lithium and Lithium Americas Announce Merger, Consolidating Strategic Lithium Deposits in North and South America - Yahoo Finance

Western bases its hopes on a NW Nevada source; LAC holds positions in the salars of northwesternmost Argentina. Each company has a current market cap on the order of $50-60mm. Western will be the surviving corporate entity.

 

[AlMc]

For those who follow events in the materials supplier world, two of the junior Lithium plays have just (30 Jun) announced that they are merging: Western Lithium (WLCDF/WLC.TO) and Lithium Americas (LAC.TO).

Corporate announcement here: Western Lithium and Lithium Americas Announce Merger, Consolidating Strategic Lithium Deposits in North and South America - Yahoo Finance

Western bases its hopes on a NW Nevada source; LAC holds positions in the salars of northwesternmost Argentina. Each company has a current market cap on the order of $50-60mm. Western will be the surviving corporate entity.[/QUOTE
yes and the share price has dropped on the news. I think I will stand pat though

 

[jhm]

The Review Journal's source for that assertion appears to be the Q1 analyst call. However, I recall Musk using much less ambitious language in the analyst call than 50-100%.

Edit: Oops. MikeC got here before me...

And I note that this seems to be the first time that we've caught wind of the footprint: 5.8 million square feet (540,000 square meters).

The source seems to be Steve Hill, who is referencing the earnings report conference call. The journalist did not fact check Hill. So did Hill simply misrepresent the CC, or does he know additional information which he inaccurately attributes to the CC? Given his privileged access to Tesla he very well may know more than was released in the CC, and he may have believed there was no breach of confidentiality on the matter because the CC is public information.

If my memory serves me, didn't Musk make some statements suggesting that Tesla would not be pursuing a second Gigafactory any time soon? If someone has that quote handy, that would be helpful. My concern about that quote was that it s
did not really jibe with GF1 at only 50 GWh while reaching for a larger stationary market. GF1 at 75 GWh buys Tesla just 12 months that they can delay pursuing GF2. So my ears tingle at the suggestion that GF1 could be expanded to 100 GWh because that allows Tesla to delay GF2 by about 20 months.

 

[Rarity]

All good thoughts. Musk could change his mind, of course. But some 80% of the factory costs are in the equipment rather than the structure, meaning that the distinction between a plus-sized GF1 and a normal-sized GF1 & GF2 combo is somewhat arbitrary.

Perhaps Tesla should seek to limit the growth in the size of GF1 given that one of the major points of the factory is that it can be replicated -- as Intel does with its fabs. There probably are not too many places on the globe where you can site a factory with a footprint of, say, 12 million square feet.

 

[WarpedOne]

That's not a problem as GF has modular design. One replicates modules as many times as he chooses.
Say GF1 has 8 modules and GF2 can have just 6 or 10.

 

[jhm]

All good thoughts. Musk could change his mind, of course. But some 80% of the factory costs are in the equipment rather than the structure, meaning that the distinction between a plus-sized GF1 and a normal-sized GF1 & GF2 combo is somewhat arbitrary.

Perhaps Tesla should seek to limit the growth in the size of GF1 given that one of the major points of the factory is that it can be replicated -- as Intel does with its fabs. There probably are not too many places on the globe where you can site a factory with a footprint of, say, 12 million square feet.

I'm not concerned about the cost. The ROI on the Gigafactory is too high to worry about that. What concerns me is the ability to scale up production in a timely manner. Growing revenue at 50% per year places great demands on battery production capacity, and shifting more capacity to stationary places even greater demands on this capacity. At 33% stationary, Tesla will need 40 GWh of capacity in 2019, but at 66% stationary, 60 GWh capacity is needed. So if Tesla is serious about the stationary, additional Gigafactory capacity will need to come online in 2018. So if GF1 is limited to 50 GWh, this gives only 3 years to site and build GF2. That is a seriously tight timeline. Now if GF1 is expanded to 75 GWh, then 2019 is covered, but 90 GWh of capacity will be needed in 2020. So this gives Tesla 4 years to site and build GF2. If GF2 is expanded to 100 GWh, then 2020 is covered, but 135 GWh will be needed in 2021.

So growing at 50% annually imposes a relentless timeline for Gigafactory development. In my opinion, Tesla should be selecting a site for GF2 right now. The difficulty, however, is in bringing investors along for GF2 before the pilot facility has demonstrated the desired capabilities. This is why GF1 needs to be expanded at least to 75 GWh and the pilot needs to demonstrate success in 2016. Without both of these, Tesla will not be able to pursue aggressively the stationary market.

 

[JRP3]

On the other hand, density improvements and possible manufacturing improvements, such as being developed by 24M, could significantly increase production within an existing facility.

 

[pmadflyer]

I recall about the same time as Project Tiger was first theorized to be the ground for GF1, there was another massive ground clearing operation that ended when the gigafactory was officially announced as being in Sparks, NV. Does anyone else recall this, or am I confused?