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

[JustSaying]

I've lived here since 1960. CA home prices, over sufficient time, can vary widely in both directions. Plus peoples' circumstances change and there's the famous taxpayer revolt with Proposition 12, which was biased against small business and favored larger ones which did not have a higher valuation unless sold. Right now we are in a boom. I don't know real estate but may even sell some TSLA to buy real estate in Thailand for my wife who would probably buy much more when I pass. She says the stock market is not tangible for me. Land is.

On the market politics thread I've discussed the import of Larry Fink's letter and am bemused by my wife's textbook used in her business class in organizational behavior. There is conventional and sustainable OB. My mother-in-law is in the sustainable camp. "The land, however used, will always be there." "It doesn't matter whether it earns a lot of money. It should rent for enough money so you don't have to send us the $300-500 a month to help us out." Plus, and here's the real kicker, "We've known their family for three generations. And we know where they live in the village." Apparently where they live broker's and lawyers are not involved, but banks are to some extent. Word of mouth about transactions. My wife's mother has a real gift of gab and a large network of customers. She arbitrages rice directly from the mill for sale to neighbors--some on her credit--and must keep all of this in her head since she cannot read and write. She teases me about languages since she does business in at least four.

My old boss always told me "the two most important assets are people and the dirt they walk on"..
My other favorite was that " we didn't over pay for that building we just bought too early... "

 

[CorneliusXX]

Mark Spiegel levels of delusion

View attachment 507082

Doesn't bother me. I'm on android.

 

[Cosmacelf]

Yes, Tesla recently patented such an integrated design. Teslarati published this article last Oct:

Tesla patent paves way for compact battery systems that are easier to produce



Cheers!

Thanks, I’ll have to read that patent more closely. The Teslarati article didn’t really provide enough details to really understand what Tesla might be doing here.

 

[theschnell]

Actually there is incentive to swing it in both directions! Perhaps drop in throughout the morning to get call holders to sell for fear it goes even lower and their call expires worthless. Then in the afternoon, run it up to shake off the put holders in a similar fashion. Or something similar. There still of course are limits to how far they can swing it, but I think that's probably workable for 3 strikes ($15).

Swings also allow them to sell more out of the money options, thereby both changing the max pain calculation and making more money on the volatility in the process.

 

[MikeAtkinson]

Overall exciting times for Tesla investors. I also expect this transition to take 10 years, even if the roll-out begins close to the schedule I've outlined above. But by 2030, Tesla could well have annual capacity of 3M Models 3/Y, 6M Model 2, and 10M Model 1. Then 1 million of everything else (S/X, Roadter, Cybertruck, Semi) gets us to a cool 20M Tesla per year, and allows the EV transition to be functionally complete by 2040 with about one third of a billion Teslas on the road (Yes, 333M Teslas by 2040)

That's my crystal ball view for 2020-40. Have I missed anything?

Cheers!

An alternative vision would start by noting that Tesla now have three distinct lines: cyber, luxury (S/X/Roadster) and premium (3/Y). And that all three lines can be filled out (+ semi).

Cyber exoskeleton seems to work only with large vehicles, and has benefits mostly for rugged work vehicles, so Cybervan (several sizes), CyberSUV, smaller Cybertruck, larger Cybertruck, etc.

The luxury brand can have stretched and limo versions, a CUV.

The premium brand can be extended with SUV, estate and sportscar versions, then extended up (SUV and CUV) and down (Model 2 variants and Model 1 variants) in length.

So all told about 25 models, of which about 10 are potential million+ sellers.

All versions would share battery technology (a few different batteries for the various physical sizes, some under-provisioned with cells), motors, FSD and electronics, many other components can be shared between multiple models.

Gigafactories have 4 blocks each capable of producing 250,000 cars of the same family (so e.g. 3 & Y can be made in the same block), so about 20 gigafactories needed, plus a few more for energy products. With 2 gigafactory announced this year, 4 in 2021 and 8 in 2022 and a build period of under 2 years to the first block and 1 block per year afterwards this would give capacity of 1 million at end of year 2020, 1.5 million at end 2021, 2.5 million end 2022, 4.5 million end 2023, 8.5 million end 2024. Actual production in those years would be less. The volume growth rate would be 80-90%, revenue growth rate would be less due to a reduction in ASP.

Also note that economies of scale and the learning curve (Wright's law), which are similar but distinct effects, would indicate that model prices could drop by 5% a year without affecting margins, so potentially a model 3 could sell for $30K in 5 or 6 years time, and that a high volume Model 2 version would be under $25K. There would be little reason for Tesla to make non-premium cars. This ability to lower prices would help to ensure there was no demand problem.

If production can be scaled up so quickly there could be a pool of 5-10 million cars available for the Tesla network in 2024 rather than the 1-2 million that I've seen assumed elsewhere. This is hyper-bullish, possible but not probable in my opinion (is that just under-optimism in the long term?).

 

[Chickenlittle]

Does this mean it’s about time to get out or at least deleverage?

Related, I was surprised by the strength going into close on Friday. I feel like the the squeeze or at least a much tighter hug may be about to commence. If so, it seems like being prepared to deleverage if things look squeezy might be a good idea. Like if we hit $1,000 in a month or two type of squeeze...

I think I’ll take some off at that price.

However, keep in mind I also took some off at $430. I converted to a call position, but rolled that up and out too early as well and left a lot of money on the table.

I am being more patient now...

No I am not telling people to get out and understand taking some money off the table. I have sold less than .1% of my tsla shares and used to proceeds to increase cash position and buy some intermediate OTM calls. I am only pointing out that there are others looking at Cramer who may be reluctant to get involved in tesla based on his track record, although he also has a following and there are some who follow him. Prior to earnings report he was Luke warm saying tesla could really drop if they miss and didn’t state what would happen either way.

 

[MikeAtkinson]

Yes, Tesla recently patented such an integrated design. Teslarati published this article last Oct:

Tesla patent paves way for compact battery systems that are easier to produce



Cheers!

Yes, that was for cells integrated into modules, several of which make a battery, the next step is cells directly integrated in entire batteries.

Edit: that is very hard for cell supplier (Pana, LG, CATL, etc.) or OEMs to reproduce. Integrating batteries into the car under body is just about impossible for OEMs to copy.

 

[Chickenlittle]

That is correct. My Model S was March 2013. There was an app at the time. Only 6 Superchargers worldwide.

When I purchased my modelS, the superchargers weren’t even announced yet. Then the 6 with one being in the East (Delaware). It was in incredible to me. Then we were keeping track of the number of supercharger sites. Before any superchargers would use RV camp sites to charge on a long trip

 

[jerry33]

When I purchased my modelS, the superchargers weren’t even announced yet. Then the 6 with one being in the East (Delaware). It was in incredible to me. Then we were keeping track of the number of supercharger sites. Before any superchargers would use RV camp sites to charge on a long trip

I still use RV parks, but now only at night. Originally, that was the fastest way to charge unless you could find a 100 amp HPWC on PlugShare.

 

[CorneliusXX]

An alternative vision would start by noting that Tesla now have three distinct lines: cyber, luxury (S/X/Roadster) and premium (3/Y). And that all three lines can be filled out (+ semi).

Cyber exoskeleton seems to work only with large vehicles, and has benefits mostly for rugged work vehicles, so Cybervan (several sizes), CyberSUV, smaller Cybertruck, larger Cybertruck, etc.

The luxury brand can have stretched and limo versions, a CUV.

The premium brand can be extended with SUV, estate and sportscar versions, then extended up (SUV and CUV) and down (Model 2 variants and Model 1 variants) in length.

So all told about 25 models, of which about 10 are potential million+ sellers.

All versions would share battery technology (a few different batteries for the various physical sizes, some under-provisioned with cells), motors, FSD and electronics, many other components can be shared between multiple models.

Gigafactories have 4 blocks each capable of producing 250,000 cars of the same family (so e.g. 3 & Y can be made in the same block), so about 20 gigafactories needed, plus a few more for energy products. With 2 gigafactory announced this year, 4 in 2021 and 8 in 2022 and a build period of under 2 years to the first block and 1 block per year afterwards this would give capacity of 1 million at end of year 2020, 1.5 million at end 2021, 2.5 million end 2022, 4.5 million end 2023, 8.5 million end 2024. Actual production in those years would be less. The volume growth rate would be 80-90%, revenue growth rate would be less due to a reduction in ASP.

Also note that economies of scale and the learning curve (Wright's law), which are similar but distinct effects, would indicate that model prices could drop by 5% a year without affecting margins, so potentially a model 3 could sell for $30K in 5 or 6 years time, and that a high volume Model 2 version would be under $25K. There would be little reason for Tesla to make non-premium cars. This ability to lower prices would help to ensure there was no demand problem.

If production can be scaled up so quickly there could be a pool of 5-10 million cars available for the Tesla network in 2024 rather than the 1-2 million that I've seen assumed elsewhere. This is hyper-bullish, possible but not probable in my opinion (is that just under-optimism in the long term?).

I really like the ideas in this post and understand that to keep the growth rate at 50%+ p.a. many new factories need to be built. But my lizard brain refuses to believe that Tesla will announce a new factory every other month in 21-22. It is logical to meet the growth rate...... but feels surreal.

 

[willow_hiller]

Are billboards a relatively new development for Tesla? I was driving around Bethesda, MD and spotted this ad outside the Westfield Montgomery mall. Yesterday it showed the S, 3, and X and said "Schedule a test drive today." Didn't have the chance to snap a pic, but an older billboard can be seen on Google Streetview:

 

[MikeAtkinson]

Thanks, I’ll have to read that patent more closely. The Teslarati article didn’t really provide enough details to really understand what Tesla might be doing here.

See my analysis at Tesla, TSLA & the Investment World: the 2019-2020 Investors' Roundtable and subsequent posts.

Edit: which is (as it was spread over two posts):

That battery module patent is really clever, I take my hat off to the patent lawyers who wrote that, it describes everything, while being opaque about what the real innovations are.

What I think it is describing is a new way to manufacture cells, a module at a time.

1. The cell casing for a group of modules is created as a single unit. [ cheaper, faster, no waste material ]
2. Those cells are filled with electrolyte in parallel. [ faster ]
3. Instead of an end cap, the collector plate(s) are used to seal the cell. [ cheaper ]
4. The collector plate(s) are used connect to the anode and cathode, and contain the circuitry to connect them in parallel. [ cheaper, more robust ]
5. Modules (collector plates) have overlaps, which allows them to be connected together in series. [ cheaper ]
6. Protection systems which where on a per cell basis are now on a per module basis. [ fewer redundant systems, cheaper ]
7. Optimisation of battery, module and cell at the same time. [ cheaper, faster, better energy density ]
8. Better more consistent cooling. [ longer lasting, higher power ]
9. Dry electrode cells (Maxwell) eliminate drying ovens, which may make this scheme possible.
10. "This system-level design may be performed such that all the discrete, high precision, high-part-count operations occur in the same part of the manufacturing process, whereby reducing complexity and improving net cell to system yield."

This was filed in March so given time for drafting, this is the state of Tesla's thinking about 9 (Edit: now 12) months ago. I'm not sure how solid state electrolyte fits in with this.

 

[MP3Mike]

They really didn't say much about the purchase and IIRC Elon downplayed it a bit when he did talk about it.

They are a small company (~20 employees maybe?), and he just said they might be kinda useful...

I suspect it was more about obtaining the engineering talent than the product they were working on. i.e. DeepScale had attracted a number of really good engineers which are in short supply, and Tesla wanted to "recruit" them all at once.

 

[PeterJA]

There's too much technical risk in rolling out both a new manufacturing facility [GF3] and a new generation battery technology at the same time.

I agree, but you are assuming Tesla has not already "rolled out" the new technology at GF1. We have no proof of that. As I said, Tesla has proved they can keep secrets and reveal new technology only when they are putting it in all cars.

Also, as I said in a (too snarky) reply to @ReflexFunds , the new technology does not require a complete overhaul of the cell production process. The new cells could use the same size cans (2170 and 18650) and can-packing lines (my non-expert guess). So the risk is maybe small in switching to dry electrolyte that eliminates the large, expensive, time-consuming cell drying rooms.

Also, the new battery tech has several components (dry electrolyte, new cathode, other new chemistry?) that could be rolled out independently to reduce risk. We don't know which, if any, already have been.

But one clue that Tesla already has been doing such things is in the latest conference call. Elon and others said:
"Well, actually the core chemistry inside the 18650 cell has improved many times over the years... it won't be long before Model S is 400 -- has 400 mile range.... And actually the Model S and X actually have more range than we are currently stating on the website."

And no need. The current process 2170s are fit for purpose, profitable, and the fastest route to market. This is a slam dunk decision.

There is always a need for lower cost and higher performance. And if the new process is faster (no drying required), it may be the fastest route to market higher production.

Of course this is all speculation. Your prediction of a gradual roll-out may be more probable. But I think a faster roll-out is possible, so I disagree that anyone's prediction is "slam dunk." We'll see in April.

 

[MikeAtkinson]

I really like the ideas in this post and understand that to keep the growth rate at 50%+ p.a. many new factories need to be built. But my lizard brain refuses to believe that Tesla will announce a new factory every other month in 21-22. It is logical to meet the growth rate...... but feels surreal.

In the US, China and EU they can use the strategy of "Your city [, state, country] did not succeed last time, but make us a better offer and you too will have a gigafactory". Elsewhere (India, Brazil, Turkey) they can use the strategy of "China could build a gigafactory in 10 months, prove that you can do just as well.". Tesla will have places falling over themselves to cut through bureaucracy and find sites that do not need extensive environmental work.

 

[dw4ngg]

China to inject $174 billion of liquidity on Monday as markets reopen

Good or bad?

 

[MikeAtkinson]

Also, as I said in a (too snarky) reply to @ReflexFunds , the new technology does not require a complete overhaul of the cell production process. The new cells could use the same size cans (2170 and 18650) and can-packing lines (my non-expert guess).

Just implementing the dry electrode technology allows them to get rid of the drying ovens, freeing up a lot of space at GF1, This then allows them to improve the cell/module production process and/or add new lines.

 

[woof]

I bought my Model S in early 2013, and to the best of my recollection, there was an App available Day 1...

My App Store logs show I downloaded on Feb 4, 2013. As we had an S in December 2012...I probably downloaded it very shortly after it came out.

 

[UnknownSoldier]

In the US, China and EU they can use the strategy of "Your city [, state, country] did not succeed last time, but make us a better offer and you too will have a gigafactory". Elsewhere (India, Brazil, Turkey) they can use the strategy of "China could build a gigafactory in 10 months, prove that you can do just as well.". Tesla will have places falling over themselves to cut through bureaucracy and find sites that do not need extensive environmental work.

This is basically the Amazon HQ2 strategy? Make cities and municipalities compete with each other to be the site of a new facility? What happened with HQ2 amazes me to this day, Amazon had them on their hands and knees begging like dogs at the dinner table. I still can't believe they got away with it. The media coverage was very unfavorable though and it makes me think Tesla would want to avoid that kind of thing just because of that.

 

[Words of HABIT]

Super Bowl Sunday .... I sure hope we see a lot of commercials for EV's. It is great knowing that other companies are going to pay hundreds of millions of dollars (over the course of the next few years) to educate the public about EV's, after which people will check out Tesla's offerings and find out how superior they are!

I had a discussion with two people yesterday ... one of which had just purchased a new car that day about EV's. Neither of them knew or could understand that Tesla's did not even use traditional motor oil? I was explaining the benefits of ownership and mentioned how little maintenance was involved. They were both floored ....the one who had not purchased a car was telling me his car was going to be replaced soon and he was going to check out a Tesla.

It amazes me how little the average person knows about EVs .... the revolution is just starting.

Cheers to the longs

gtrpyr1, excellent post. I can't agree more with your last statement: "It amazes me how little the average person knows about EVs."

All here on TMC, whether from years past or just recently found, are at an amazing advantage over the general population on Tesla, we are the 0.001% that truly know were Tesla is headed. I say Tesla instead of EV because if it was not for Tesla, the EV future outcome would be very different and take significantly longer to scale. So I will add to gtrpyr1's statement "It amazes me how little the average person knows about EVs, and even how littler the average person knows about Tesla."

Step 1 - Learn about EVs
Step 2 - Learn which is the best EV
Step 3 - Direct your resources accordingly