TSLA's Development business could exceed revenue from selling Tesla cars

edited November -1 in General
We all know that Tesla is selling battery packs and motors to Toyota and Mercedes for their electric cars. Tesla calls this their Development business. I think this is just the tip of the iceburg. In 5 years the Gen III car will be one of the hottest selling cars on the planet. That's because it will be safer, cheaper fuel costs, no emissions, cheaper maintenence, more storage capacity, quieter and smoother and more FUN to drive than any of it's competitors. And by then Tesla will be a household name associated with quality products. So if you are BMW or Honda or GM you will have to offer a competing product. They will be forced to either purchase a drivetrain from Tesla or license Tesla's IP to build their own.

Now, the big assumption in all of this is that no one is able to emulate Tesla's battery performance by then. Here's why I don't think that will happen: They've already tried and they have already failed. GM spent $1B and several years and all they came up with was the Volt. Nissan got a $2B loan from the U.S. DOE and all they could produce was an 80 mile range for the Leaf. No one has come anywhere close to Tesla's battery performance. And Tesla is in this position because of innovative research and design along with a BIG head start. They've been working on this for 10 years. So they are already that much further ahead than everyone else. And they are collecting propietary information about their current batteries at an amazingly fast rate. They are getting info from every Model S on the road and they will be using this data to expedite the advancements needed to improve battery performance. This is information other makers do not have access to.

Plus, Tesla has talked about selling drivetrains to fleet vehicles like delivery vans, freightliners and taxi cabs. That has the potential to dramatically increase it's Development revenue.

If I'm right, then there is a very large earnings potential that most future stock projections are not accounting for.


  • edited November -1
    yep, up is the only way it will go
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    I'm not sure about that. What Tesla Motors has done far better than anyone else so far, is to take advantage of the relatively low price and small form factor of the mass produced laptop batteries. They have engineered a magnificent car around this small battery factor philosophy. This has allowed TM to arrange them in a very efficient way. As far as the battery energy density goes they are pretty much within the range of all the other EV manufacturer's batteries. TM advantage lies in their mastery on using and arranging that small factor batteries. Their electric motor seems pretty above average.

    However, Nissan and BMW have and advantage in that they are able to produce their own batteries and, if needed, would be able to adapt faster to new battery technologies. It's difficult to say without knowing the details of the Panasonic-Tesla agreement, but it would probably take Panasonic a little bit longer to change the chemistry of its batteries just to accommodate Tesla in case a new breakthrough battery technology were to disrupt the market.

    Plus Mercedes and Toyota have only shown marginal interest in EV's. Toyota went as far as to announce that they were cutting all R&D related to EV's for the moment. Given that their interest in EV's is so low I wouldn't count on them being a huge income source for TM "Development business".

    So far the manufacturers who seem to be serious about EV's, in order of importance: Nissan/Renault, BMW, GM and Ford are developing their own technology in house.

    BTW You should check out the BMW i3, it took BMW only 3 years to develop that car from scratch (although to be fair they did have a lot of information from their EV MINI and Series 1 pilot projects in California and elsewhere in the world). If you compare the Model S and the i3, taking into account range, price technology and size differences, you will find that they are more than evenly matched; I do think the i3 is much more environmentally friendly over all in its use of materials as well as far as supply chain and building techniques go.
  • edited November -1
    "I'm not sure about that. What Tesla Motors has done far better than anyone else so far, is to take advantage of the relatively low price and small form factor of the mass produced laptop batteries. "

    That's what they did for the Roadster, but for the Model S, it is their own proprietary battery chemistry developed in conjunction with Panasonic.
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    You are kind of proving my point by highlighting Toyota's elimination of their EV development. They will be starting from scratch when they realize how popular the Gen III car is. They will not be in a position to create their own and will need to outsource it.

    The BMW i3 looks the same as a Leaf to me. A small, unattractive car that goes 80 miles on normal driving. Nice for tree-huggers who live in a city and have no need to drive more than 80 miles in a day. But not desirable for the masses.
  • edited November -1
    I agree with the OP. All you have to do is to extrapolate current trends to see where this is going:

    - 99% (it might be 100%, I haven't heard otherwise) of people who bought a Model S swear they will never go back to an ICE. That, my friends, is called a new product category. The Model S doesn't just "compete" with ICE vehicles, it replaces them. Just like the iPhone and follow on Androids have replaced the ordinary mobile phone, and before that, mobile phones replaced the pager.

    - battery technology is continuing to improve. Elon says by about 5-6% per year. This is a doubling in performance/cost/whatever in 10 years, assuming no new breakthroughs. So we aren't on a 18 month Moore's law doubling, but we are still on a good path.

    - government mandates show no sign of slowing down. And once the politicians realize that EVs are real, you can bet they will put the screws even tighter on car emission standards. And no, not just for "global warming", but actually for urban air pollution. Urban air pollution benefits are real and measurable.

    Given all this, I would very much expect Tesla's licensees to be buying motors/inverters (the drivetrain) and battery packs (that cooling system and battery management system is state of the art) from Tesla for their mass produced cars. Maybe not until five years from now in meaningful quantities though...
  • edited November -1
    JZ13: "Toyota's elimination of their EV development. They will be starting from scratch when they realize how popular the Gen III car is."

    I'm actually reading this as Toyota is outsourcing EV development to Tesla, who is already supplying them with Rav4E battery technology.
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    @holiday - yep. Agreed. It is on a miniscule level now. But I believe there will have to be a massive increase in units purchased in the near future if Toyota expects to sell cars that compete with the Gen III.
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    Who's going to own the rights to hyper loop tech?

    Don't forget partnerships with home builders. Solar, electric car packages, etc...

    Battery storage tech for solar, wind, geothermal energy storage, minimize grid consumption to almost zero. Could see completely distributed energy in 5 years...

    Also could see patented manufacturing tech/software as source of revenue...

    App development cash flow...

    Mini superchargers at hotelsl in partnership with Hilton...

    Tesla deals with Virgin gtlantic, Boeing, airbus...

    There are pleanty more, the list is vast...
  • edited November -1
    If I had extra money laying around right now I'd be investing in Solar City too. Solar represents a tiny fraction of our grid right now and the growth potential is enormous, prices are trending down, and solar city has a great business model in that they don't actually produce the panels, so they can get them from whoever comes out with the best/cheapest technology.

    I would imagine a lot of Tesla owners would love the thought of being able to have their vehicle powered by the sun. I haven't even bought my Tesla yet (goal is to buy by the end of the year) but I've already done some research on the possibility of getting panels installed.

    The sky is the limit for both of these companies if they execute well.
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    At the very least, Panasonic has a dedicated TM battery production line. They are surely totally up to date on TM's expansion and model plans. This mouse could swallow the elephant, in time.
  • edited November -1
    Tesla's battery pack design is not just about cost. It is also about safety. The large battery pack separates the individual batteries so that a single failed battery that bursts into flames limits the damage to itself, and does not cause adjacent cells to burn up. A Tesla battery fire results in a service message, not a fire truck.

    Everyone else thinks large batteries are the right path. A fire in a large battery totals the car. Time will tell if the fires are rare enough for this approach to be competitive.
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