TSLA - Tesla Motors

[Palantir]

What about the idea that Tesla doesn't really want to be a car company?

 

The real business is to become the defacto battery and charging infrastructure suplier to all other car companies.  The vehicles that Tesla creates today are simply a proof of concept.  Tesla battery is Android, Model S is Nexus, and BMW is Samsung to use a weak analogy.

 

This version of Tesla is much more appealing to me.

 

But why? Tesla has shown that they can build better cars than BMW or Mercedes....why would they throw that away?

[MYDemaray]

Just want to throw this out there -- I had a conversation with a friend who is in the clean tech space. Ultimately he is a Tesla bull (our conversation started because he was wearing a Tesla hat, and visited their production facility last week). That said, he laid out what he saw as the threats to their business.  The one that caught my attention was this:

 

New battery chemistries can come along which don't require the scale to reach these cost targets.  For example, last week I hosted a meeting at [undisclosed top 5 VC] with two of their partners, and 5 battery companies...these other companies are focused on the game changing chemistries, and not the incremental improvements that Lithium Ion provides.

 

He is a Chem E. by training and also an MBA. I guess the threat here would be a technology that comes out of the blue, which makes their Gigafactory obsolete. Still, I think commercializing one of those would take a long time by which Tesla may have already realized some return from their investment.

 

One additional positive he focused on was leveraging the Gigafactory for other uses, specifically backup power supplies. Just thought I'd pass it along FWIW.

[rkbabang]

Just want to throw this out there -- I had a conversation with a friend who is in the clean tech space. Ultimately he is a Tesla bull (our conversation started because he was wearing a Tesla hat, and visited their production facility last week). That said, he laid out what he saw as the threats to their business.  The one that caught my attention was this:

 

New battery chemistries can come along which don't require the scale to reach these cost targets.  For example, last week I hosted a meeting at [undisclosed top 5 VC] with two of their partners, and 5 battery companies...these other companies are focused on the game changing chemistries, and not the incremental improvements that Lithium Ion provides.

 

He is a Chem E. by training and also an MBA. I guess the threat here would be a technology that comes out of the blue, which makes their Gigafactory obsolete. Still, I think commercializing one of those would take a long time by which Tesla may have already realized some return from their investment.

 

One additional positive he focused on was leveraging the Gigafactory for other uses, specifically backup power supplies. Just thought I'd pass it along FWIW.

 

Interesting.  Someone sent me this link the other day.  http://powerjapanplus.com/.

 

I wonder if Tesla is doing any internal research on battery chemistry?  Or are they just going to run with Li-ion?  To me that is the largest threat to their business. If another company, say BMW or Mercedes, had exclusive use of a much superior chemistry which was cheaper, could charge quicker, hold more charge, and last longer, it wouldn't matter much their cars aren't 100% as good as a Model S in some other minor aspects.  Tesla would become just another in a long line of promising new car companies that ultimately failed.

[Liberty]

Just want to throw this out there -- I had a conversation with a friend who is in the clean tech space. Ultimately he is a Tesla bull (our conversation started because he was wearing a Tesla hat, and visited their production facility last week). That said, he laid out what he saw as the threats to their business.  The one that caught my attention was this:

 

New battery chemistries can come along which don't require the scale to reach these cost targets.  For example, last week I hosted a meeting at [undisclosed top 5 VC] with two of their partners, and 5 battery companies...these other companies are focused on the game changing chemistries, and not the incremental improvements that Lithium Ion provides.

 

He is a Chem E. by training and also an MBA. I guess the threat here would be a technology that comes out of the blue, which makes their Gigafactory obsolete. Still, I think commercializing one of those would take a long time by which Tesla may have already realized some return from their investment.

 

One additional positive he focused on was leveraging the Gigafactory for other uses, specifically backup power supplies. Just thought I'd pass it along FWIW.

 

The way I see it:

 

1) Tesla probably keeps as close tabs on battery tech as anyone else. They wouldn't be disadvantaged or caught off guard in a shift.

 

2) Better chemistries or not, you still need a certain amount of volume to make a mass-market car. A factory to make enough packs for 500,000 or 1 million cars is going to be big regardless of the chemistry. There's always going to be a need for scale and benefits that come from it.

 

3) Toyota is still selling hybrids based on NiHM chemistry and outselling its competition, some of whom are on lithium-ion. Tesla will have enough time to switch if there's a breakthrough. It won't be mass adopted instantly by the competition, and it probably won't utterly crush lithium ion at first (new techs need time to incrementally be polished for real-world applications).

 

4) Even if something comes out that truly revolutionizes batteries, I think that on the net it would be a good thing for Tesla, not a bad thing. Tesla's main competition is gas cars, not EVs. They'd lose money on some of their lithium-ion investments, but they'd immediately jump on the new thing and could now sell Teslas with 500 miles ranges for cheaper or whatever, and they'd still have the best car in the world to showcase that new better battery. It's not like GM, BMW and Nissan are held back from making better EVs than Tesla because they have inferior batteries... (in fact, Nissan's battery cells are custom-made for automotive applications while Tesla uses commodity 18650 cells, iirc).

[Liberty]

Interesting.  Someone sent me this link the other day.  http://powerjapanplus.com/.

 

Every year there are many announcements of lab breakthroughs for batteries that are "so much better". Some are vaporware, or startups raising money, or scientists trying to get a new R&D grant, etc. Some might be real, but what matters is when they come on the market.. That can take a long time.

 

In any case, on this 'dual carbon battery': "Power Japan also claims that their battery has energy density comparable to state of the art lithium-ion, with manufacturing costs that are equal or lower." So not claiming a huge improvement there, and no real-world proof on the costs (things usually turn out more expensive than we expect, not cheaper).

 

As for faster charging, how fast the battery can take power isn't the only limiting factor. It's not like home charging will ever deliver 100+ kW required for such fast charging, and Tesla's superchargers can already deliver around 120 kW of juice iirc, so it's not like current batteries are that limited when it comes to what they can handle.

 

Maybe in a few years some new battery will handle 200kW at a charging station and people will save a few minutes charging when they take that long trip once a year, but definitely not a make-or-break situation. EVs are mostly charged overnight at home and are always full when you leave in the morning, all that matters is that they take less than a night to fully charge. Charging stations are definitely not as important as gas stations are for regular cars...

[jeffmori7]

And let's not forget that Lithium-ion doesn't mean a unique battery, it's rather a family, where you can find an incredible number of anode and cathode combination, designated under the generic Li-ion tag.

[VAL9000]

What about the idea that Tesla doesn't really want to be a car company?

 

The real business is to become the defacto battery and charging infrastructure suplier to all other car companies.  The vehicles that Tesla creates today are simply a proof of concept.  Tesla battery is Android, Model S is Nexus, and BMW is Samsung to use a weak analogy.

 

This version of Tesla is much more appealing to me.

 

So be a commodity supplier of batteries and charging stations rather than a differentiated consumer business? Doesn't sound good to me. As good as the Tesla batteries and power electronics are, if you put them in a Camry, you couldn't sell it for 100k and it wouldn't get 99/100 in Consumer Reports... It's not what make people want to buy that car. If Tesla was a drivetrain/charging station supplier, it would have to compete mostly on price. Bad position to be in.

 

If you listen to what Musk has been saying, he got in the business because he believes that transportation needs to be electrified (it's one half of his vision of 'produce clean energy/run things on clean energy' -- SolarCity is the other side of the coin of Tesla, basically). At first he expected other car makers to do it, but when he saw that they weren't willing/able, he decided to do it himself.

 

So I'm sure Musk will do everything he can to catalyze the industry (he already supplies others, and his success is the best catalyst, creating followers), but now that he's making the best cars in the world, I doubt he'll just voluntarily stop doing that to make drivetrains and build charging stations for inferior EVs made by others... Tesla is an incredible brand that was built by taking huge risks, so why give that up or dilute it?

 

I believe that supplying others could be a big business, but they'll never stop making EVs as long as they don't go out of business.

 

Another way to put it: Batteries and charging stations are a competitive advantage for your product if they are better than the competition, but they're still only a small part of the overall product. But that's not where the business is. These things only store and provide energy, and other people can make decent batteries and charging stations. The real business is in the finished products; nobody else can make a Model S, have the whole package at that level of quality. It's like if Apple stopped making iPhones and became a supplier of A7 chips to others. Sure their stuff is better than the competition, but that's not where the real business is...

 

Gasoline is a commodity and at one point the person who controlled its supply was the richest person in the world.

 

Tesla could scale much faster if they licensed the guts to traditional manufacturers.  Supply batteries, charging infrastructure, and monitoring capabilities.  Let BMW and Mercedes fight it out over styling, branding, configuration, etc.

 

I don't really believe that Tesla is going this way, but it could. And for me it's more interesting than the vertically integrated approach.

 

The iPhone comparison is fine but there are counter examples.  It's like when IBM opened up the PC architecture and someone made a fortune providing chips for everyone else.  Intel's business model has a much longer track record of success than Apple's.

 

 

[Liberty]

Gasoline is a commodity and at one point the person who controlled its supply was the richest person in the world.

 

I'm currently reading The Prize. Great book. You know how they got so rich, though, right? I don't think Tesla can have that level of control over the market today.

 

Tesla could scale much faster if they licensed the guts to traditional manufacturers.  Supply batteries, charging infrastructure, and monitoring capabilities.  Let BMW and Mercedes fight it out over styling, branding, configuration, etc.

 

They are already licensing. They are already doing what you're saying, and will no doubt sell batteries from the gigafactory to others. It would just be incredibly stupid to stop making cars, which is where most of the value is for them, since cars are a lot more differentiated and value-added than batteries and such. It's a lot harder for a competitor to replicate the Model S than to replicate a battery factory...

 

I don't really believe that Tesla is going this way, but it could. And for me it's more interesting than the vertically integrated approach.

 

If by 'more interesting' you mean 'less interesting', then I agree ;)

 

The iPhone comparison is fine but there are counter examples.  It's like when IBM opened up the PC architecture and someone made a fortune providing chips for everyone else.  Intel's business model has a much longer track record of success than Apple's.

 

If Tesla stopped making cars, it would be IBM in that example, not Intel. It would be giving an important part of its value chain to competitors through a strategic mistake.

 

Apple's a lot more successful than Intel these days. For most of Intel's big run, PCs were not really sold as consumer products, but rather as beige boxes sold on price and performance, mostly to businesses. Cars will never be beige boxes sold purely on price (except maybe those sold to fleets), so that parallel doesn't work.

[Palantir]

Here is the real issue. Val9000 is a value investor, and value investors like unsexy firms in boring, mature industries. So it follows that his recommendation is to turn "I'm too sexy" Tesla into a parts supplier.  ;D

 

*runs away*

[VAL9000]

We can disagree on this stuff.

 

Interesting and sexy are two different things.  You guys are just too easily seduced by what is sexy :P

 

[Liberty]

You guys are just too easily seduced by what is sexy :P

 

Seduced? I never owned a share of Tesla, I think it's probably pretty overvalued. But the stock and the company are two different things. I think I understand the company pretty well. You're the one saying that the best car maker in the world should stop making cars; maybe you are seduced by a certain business model and are trying to force it into places where it doesn't make sense?

[VAL9000]

You guys are just too easily seduced by what is sexy :P

 

Seduced? I never owned a share of Tesla, I think it's probably pretty overvalued. But the stock and the company are two different things. I think I understand the company pretty well. You're the one saying that the best car maker in the world should stop making cars; maybe you are seduced by a certain business model and are trying to force it into places where it doesn't make sense?

 

Easy killer - that was a light-hearted joke more intended for Palantir. 

 

I am exploring an idea for a different model.  Tesla has done very well, but businesses evolve in different ways all the time.  It makes perfect sense to me that they might go the fuel infrastructure route.  So does the current model.

 

[Liberty]

Easy killer - that was a light-hearted joke more intended for Palantir. 

 

I wrote that totally calmly. No killer here. I just didn't like the sub-text of  "you write this because you've been seduced, not because you've thought it through".

 

But if that's not what you meant and it wasn't directed at me, apologies. That's the problem with the ambiguities of text.

 

I am exploring an idea for a different model.  Tesla has done very well, but businesses evolve in different ways all the time.

 

That's awesome. I'm just telling you what I think of it and why. Isn't that a discussion?

 

It makes perfect sense to me that they might go the fuel infrastructure route.  So does the current model.

 

To me it sounds like saying that the original iPhone was a proof of concept and that Apple should then have stopped making it and become a supplier of parts to the smartphone industry, mostly focusing on phone chargers and batteries.

[gary17]

If there is a very severe power outage for a few days (can happen in parts of Canada) -- how would Teslas get charge?

[Liberty]

If there is a very severe power outage for a few days (can happen in parts of Canada) -- how would Teslas get charge?

 

How would anything electric work? If you live somewhere where that happens with enough frequency, you probably have a diesel generator  (or even better, solar panels).

 

But if it's just your home/neighborhood that loses power, you can always go charge at a public charging station/Supercharger Station/a friend's house/a mall with electric car stations/whatever. Here some grocery stores and dollar stores have started getting electric car charging stations, they'll be everywhere soon.

[jeffmori7]

If there is a very severe power outage for a few days (can happen in parts of Canada) -- how would Teslas get charge?

 

How would anything electric work? If you live somewhere where that happens with enough frequency, you probably have a diesel generator  (or even better, solar panels).

 

But if it's just your home/neighborhood that loses power, you can always go charge at a public charging station/Supercharger Station/a friend's house/a mall with electric car stations/whatever. Here some grocery stores and dollar stores have started getting electric car charging stations, they'll be everywhere soon.

 

And we could also say that if there were a severe outage, using your electric vehicle wouldn't necessary be a priority. And that could also be part of the solution, providing energy stored in all the batteries to the important equipment.

[gary17]

power outage could happen - for example after a hurricane -  and after that people need to drive to get to places -

 

All I am trying to think is that's perhaps one obstacle in making  electric vehicles as competitive as gasoline...  we know how to store gasoline at home  - but not many of us know how to store electricity.  this question would probably surface some point down the road.

 

it really comes down to the infrastructure - chicken& egg question....    it is coming i think...  Gary

[Liberty]

power outage could happen - for example after a hurricane -  and after that people need to drive to get to places -

 

All I am trying to think is that's perhaps one obstacle in making  electric vehicles as competitive as gasoline...  we know how to store gasoline at home  - but not many of us know how to store electricity.  this question would probably surface some point down the road.

 

it really comes down to the infrastructure - chicken& egg question....    it is coming i think...  Gary

 

Most gasoline stations have pumps that work on electricity, as far as I know. There are all kinds of problems that have been solved for that infrastructure that will be solved for electric cars as they become more common and it becomes worth solving those problems on a larger scale, but I don't think that any of them is much bigger than the equivalent problem for gas/diesel cars.

 

Another way to think about it: There's a thousand ways to make electricity and in most places electricity is everywhere, but there aren't that many ways to make gasoline and apart from gas stations it isn't found around much. You are more vulnerable to supply shocks with a gas car than an electric car.

[ERICOPOLY]

Tesla CTO says they are breaking ground on Giga factory in next few weeks:

 

https://www.greentechmedia.com/articles/read/Tesla-CTO-on-Energy-Storage-We-Should-All-Be-Thinking-Bigger

 

 

The CTO spoke of attacking the battery's cost with the Giga factory by "doubling the worldwide capacity in a single factory and reinventing the supply chain." He said that Tesla would be "breaking ground in the next few weeks." A total of 35 gigawatt-hours of cell production from the new plant will be devoted to meeting the needs of the Fremont plant, and 15 gigawatt-hours will be devoted to stationary battery packs. Straubel said that Tesla was "bullish" about the California energy storage mandate. Straubel also said he was bullish that stationary energy storage "can scale faster than automotive."

[fareastwarriors]

S&P Throws Tesla's Surging Shares on the Junk Heap

 

 

http://www.businessweek.com/articles/2014-05-28/s-and-p-throws-teslas-surging-shares-on-the-junk-heap#r=hpt-ls

[Liberty]

S&P Throws Tesla's Surging Shares on the Junk Heap

 

 

http://www.businessweek.com/articles/2014-05-28/s-and-p-throws-teslas-surging-shares-on-the-junk-heap#r=hpt-ls

 

So S&P puts them above Sears, the supposedly unkillable forum darling. Not bad ;)

 

“We believe there is considerable uncertainty in Tesla’s long-term prospects and believe that the company is less likely (compared to larger, more established automakers) to successfully adapt to competitive and technological displacement risks over the medium to long term,” S&P analysts wrote.

 

How laughable is that? In the time it takes an established player to do a model refresh on an existing vehicle, Tesla has basically built a whole supply chain, factory, and ground-breaking vehicle from the ground up, getting the best reviews of any car ever, along with a network of charging stations, service points, and company owned stores on 3 continents. Oh, and their brand is now highly respected and there's huge pent-up demand just waiting for a more affordable model, and they did all that going through the worst financial crisis in generations, surviving what made 2 US car makers go bankrupt. Meanwhile, they were working on plans to double world lithium-ion battery production with one factory. And that's while top management was spending 50% of its time building space rockets going to the ISS and attempting full reusability with vertical landing.

 

But they're less likely to "adapt" than established automakers..? Heh.

[rkbabang]

S&P Throws Tesla's Surging Shares on the Junk Heap

 

 

http://www.businessweek.com/articles/2014-05-28/s-and-p-throws-teslas-surging-shares-on-the-junk-heap#r=hpt-ls

 

So S&P puts them above Sears, the supposedly unkillable forum darling. Not bad ;)

 

“We believe there is considerable uncertainty in Tesla’s long-term prospects and believe that the company is less likely (compared to larger, more established automakers) to successfully adapt to competitive and technological displacement risks over the medium to long term,” S&P analysts wrote.

 

How laughable is that? In the time it takes an established player to do a model refresh on an existing vehicle, Tesla has basically built a whole supply chain, factory, and ground-breaking vehicle from the ground up, getting the best reviews of any car ever, along with a network of charging stations, service points, and company owned stores on 3 continents. Oh, and their brand is now highly respected and there's huge pent-up demand just waiting for a more affordable model, and they did all that going through the worst financial crisis in generations, surviving what made 2 US car makers go bankrupt, and they were working on plans to double world lithium-ion battery production with one factory. And that's while top management was spending 50% of its time building space rockets going to the ISS and attempting full reusability with vertical landing.

 

But they're less likely to "adapt" than established automakers..? Heh.

 

How many grains of salt should S&P ratings be taken with?

http://www.standardandpoors.com/ratings/articles/en/us/%3FassetID%3D1245199028707

 

[deadspace]

Tesla CTO says they are breaking ground on Giga factory in next few weeks:

 

https://www.greentechmedia.com/articles/read/Tesla-CTO-on-Energy-Storage-We-Should-All-Be-Thinking-Bigger

 

 

The CTO spoke of attacking the battery's cost with the Giga factory by "doubling the worldwide capacity in a single factory and reinventing the supply chain." He said that Tesla would be "breaking ground in the next few weeks." A total of 35 gigawatt-hours of cell production from the new plant will be devoted to meeting the needs of the Fremont plant, and 15 gigawatt-hours will be devoted to stationary battery packs. Straubel said that Tesla was "bullish" about the California energy storage mandate. Straubel also said he was bullish that stationary energy storage "can scale faster than automotive."

 

How are they paying for this.  bYD had to dilute investors with a stock offering this week to increase their capacity by a few gigawatt hours.  These guys are going to 35 gigawatt hours which is more than the entire planets capacity of 27 gigawatt hours without any apparent need to capital.  This is like magic ?!

 

[no_free_lunch]

The luxury electric-car maker announced yesterday that it’s selling at least $1.6 billion of convertible notes to finance the project and exploring locations in Texas, Nevada, Arizona and New Mexico for a 10 million-square-foot facility. Tesla declined to comment on whether any negotiations had begun.

 

http://www.bloomberg.com/news/2014-02-26/tesla-plans-1-6-billion-note-offering-to-fund-gigafactory.html

 

I think the remainder will come from partners.

[yadayada]

S&P Throws Tesla's Surging Shares on the Junk Heap

 

 

http://www.businessweek.com/articles/2014-05-28/s-and-p-throws-teslas-surging-shares-on-the-junk-heap#r=hpt-ls

 

So S&P puts them above Sears, the supposedly unkillable forum darling. Not bad ;)

 

“We believe there is considerable uncertainty in Tesla’s long-term prospects and believe that the company is less likely (compared to larger, more established automakers) to successfully adapt to competitive and technological displacement risks over the medium to long term,” S&P analysts wrote.

 

How laughable is that? In the time it takes an established player to do a model refresh on an existing vehicle, Tesla has basically built a whole supply chain, factory, and ground-breaking vehicle from the ground up, getting the best reviews of any car ever, along with a network of charging stations, service points, and company owned stores on 3 continents. Oh, and their brand is now highly respected and there's huge pent-up demand just waiting for a more affordable model, and they did all that going through the worst financial crisis in generations, surviving what made 2 US car makers go bankrupt, and they were working on plans to double world lithium-ion battery production with one factory. And that's while top management was spending 50% of its time building space rockets going to the ISS and attempting full reusability with vertical landing.

 

But they're less likely to "adapt" than established automakers..? Heh.

 

How many grains of salt should S&P ratings be taken with?

http://www.standardandpoors.com/ratings/articles/en/us/%3FassetID%3D1245199028707

Well I would say results would be standard to poor if you really follow their advice.