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Tesla as an opportunity of investment

Tesla as an opportunity of investment

I belive that all people that are reading this post think that Tesla is a great Car Company, the most advanced, the most innoative and the most oriented at the future.
This is the reason for which I'm evaluating tesla as an opportunity of investment and i would like to discuss with you about this.

Brian H | 21 gennaio 2014

I see my de-FUD prediction is working out, at $175 now!

jk;
Elon was betting on a minimum, hardly "silly".
And the revenue to TM from pre-owned cars will only net to the markup they put on trade-ins. Not large compared to new sales.

Brian H | 21 gennaio 2014

And $199/mo is, indeed, crazy. Even double that is dubious.

jk2014 | 21 gennaio 2014

Brian,

FUD is what makes the journalistic(narrative) go round... it's built into our DNA to be interested in something the creates fear, uncertainty, and doubt around person/object/thing we care about... we want to determine if it's true or not so we pay attention. If we didn't, we wouldn't read, watch, or participate. Journalist know this, so the put it out there to start a conversation, any conversation.

Where you stand will determine if it's a happy, sad, or bitter sweet ending when reality actually hits that Tesla is going to make a significant contribution to our energy production/consumption infrastructure...

jk2014 | 30 gennaio 2014

Another thought... how much could working in bitcoin raise/reduce cost of capital for Tesla (Solarcity included)?

Cut out the middle man fees going direct to investors or capital sources, however the currency has a high volatility at the moment. But, could this be a way to cut capital costs in a significant way in the future?

Brian H | 30 gennaio 2014

jk;
That's private marketing of shares, the opposite of being "public", and would require continuous handling of transactions.

jk2014 | 31 gennaio 2014

Confirmed... Elon stated in Amsterdam today residential Tesla made energy storage product to be ready for market by end of 2014, beginning of 2015 at latest.

Solarcity should announce this monumental step by Q2 (long shot would be this 24Feb conf call). Can't wait. Going to really turn utilities on their head for many years to come. And for those that invest now, you'll be pleasantly(more like wildly) surprised by your returns in Tsla/scty 4-5 years. Beyond that, Bershire Hathaway share prices, IMO.

jk2014 | 1 febbraio 2014

Confirmed... Elon stated in Norway today Model S will have a significantly higher residual value compared to the 51% guarantee. Can't wait to see how far this pushes the leasing prices. This should really shock the auto world (and market) if it turns out to be the best residual in the business.

SamO | 1 febbraio 2014

They are pulling a trick where they can hide revenue by reducing GAP and treating the lease as financing by Tesla.

But when the first few years of residual values exceed projected amounts and Tesla recognizes the revenue after the expiry of the option period (3 year quasi-lease) then Tesla will have a huge amount of GAP earnings.

Bubba2000 | 2 febbraio 2014

At this stage, I see the completion of the SC network in the US/Canada, EU and even China as the main driver of value of Tesla BEVs and the company itself. The SC networks will result in exponential demand. Yes, the majority of charging is local, but long distance driving is a deciding factor.

Tesla could sell 100,000 MS/X worldwide loaded with ASP of $100K, especially with maintenance contracts, chargers, etc. with economies of scale, falling electronics prices, 30% gross margins. 12.% net margins after tax. Within 2-3 years. PE for this disruptive company? 30? 40?

JZ13 | 4 febbraio 2014

PE should be north of 60 until Gen III enters mass production in 2018.

SamO | 4 febbraio 2014

@JZ13

Even then, once Tesla figures out how to allow the cars to buffer the grid, then all bets are off. Tesla will be in the energy storage business, with a side of cars, solar panels and rockets.

jk2014 | 5 febbraio 2014

Big moves going on right now. Major strategic shift in Panasonic business to batteries, solar, and home automation. 20% gain in profits is a big eye opener. They are going to push all in on the giga factory. Elon said capital investors have to see this as a money making proposition, and boy, Panasonic has seen it big time. Can't wait to hear the announcement coming soon. Tsla/Solarcity gonna have another 2013 this year.

http://finance.yahoo.com/news/shift-business-focus-boosts-panasonic-0823...

JZ13 | 5 febbraio 2014

+1 Samo Sam

jk2014 | 5 febbraio 2014

Pure spec, but, Panasonic will probably get 2.5mln shares($500mln) in the giga factory deal. However Elon will buy $100mln-150mln in common stock to assure investors and maintain ownership%.

Feel he's going to come into a few hundred million or more soon on his Stripe investment. Stripe will be bought by twitter as did eBay with PayPal. Elon will most likely direct his funds toward tesla in this way since I feel he'll do whatever it takes to get the giga factory going as soon as possible.

jk2014 | 7 febbraio 2014

Just a thought... I wonder how much the manufacturing numbers would've been influenced negatively this past year and now if Tesla didn't exist? I also wonder how the construction jobs numbers would've been influenced negatively it Solarcity didn't exist? Not to mention the overall job numbers for both Solarcity and Tesla?

With institutional investors increasing moving funds to renewable energy and associated ideas, how would this create volatility in the market place this year and next? Seems to me a lot of selling high and buying low strategies happening at the same time (just look at how all the talking heads act on down and up days, manic depressive journalism pushing positions is at an all time high).

Seems like Tesla/Solarcity are leading the charge into this new American economy/market place. Solarcity had doubled its work force last year, and Tesla including Solarcity seems to ready to triple its work force. Not sure about Tesla yet, but the average solar industry employee makes over $21/hour. What's the average construction labor make an hour? With 8x the growth of the American economy as a whole last year, I can see why many construction workers might seek employment in solar installation. Stable good paying domestic jobs. Wonder if the national job outlook is taking this into account? I also wonder if they take into account the number of solar installation permits given during the year? Does this count as construction permits? If so, is this reflected in the growth numbers that determine our economic strength?

Also, as more solar power is generated and more electric miles are driven, how does this affect the consumption of natural gas, petrol, and coal? If consumption goes down in relation to the success of both, does this mean we should be consistently increasing energy exports minimizing/neutralizing trade deficits over time? Does this reflect in our economic numbers?

Can't forget about Spacex... how many jobs have been created there, as well as how has Spacex affected domestic manufacturing numbers.

Overall, I have to say it seems to me if an investor is looking at the the domestic economic outlook based on the positioning/strength of Tesla/Solarcity/Spacex, then the country is clearly on the right path to better times.

PS, thinking about Twitter, Facebook, and even google, or anything where "clicks," "views," or "hits" are important, I think we can't forget about the Tesla app and the Solarcity app. How many times a day do you open your Tesla app? How many times a day do you check your Solarcity app? I have a feeling once both Tesla and Solarcity scale, they will see a tremendous amount of activity on their apps. Could this be a source of future revenue? Could this be a round about way of getting a piece of the social media/search market? Just so many possibilities with Tesla/Solarcity to generate revenue, its is increasingly hard to see growth slowing down many, many years to come and thus, more evidence for strong domestic economic future.

jk2014 | 7 febbraio 2014

Also add, that emerging markets could skip all together developing their nat gas, coal, and petrol infrastructure and save billions. We are at a crossing point where the investment in solar, wind, energy storage specifically, could really accelerate economic stability and growth there. I think it will be the phenomena of building from nothing that will win the day here. The legacy infrastructure is what keeps sustainable energy development from accelerating in the first world right now.

Solarcity is already thinking about this now with the new give light foundation they've created where they will install one PV/energy storage system in an emerging market location for every one megawatt they install in the US. It is absolutely brilliant and forward looking and could have a substantial impact not only on accelerating sustainable energy production and consumption around the world, but also be a catalyst for self sufficiency/stability for many countries around the world. Wow...

jk2014 | 7 febbraio 2014

(forgot)... and in helping accelerate stability/growth in emerging markets, overall American investment in emerging markets will yield greater returns and thus create more incentive to invest further... a positively reinforced, much needed cycle.

jk2014 | 10 febbraio 2014

Giga factory announcement imminent... Not only are good car reviews coming in from fund managers looking forward to Geniii (in addition to china clearing the way for tesla to make a splash) but, Solarcity just finalized a $250mln aggregation facility with Bank of America in addition to an increase to its corporate revolver now at $200mln. In addition to a soon to be announced $150-200mln asset backed securitization, Solarcity is looking at nearly $450mln in new funds soon. Not only will this accelerate creating the market for tesla made battery energy storage for residential rooftops, but also demonstrate a greater need/demand for a giga factory ASAP.

This earning season is going to be very interesting indeed.

jk2014 | 10 febbraio 2014

To add... It's looking like solarcity will raise nearly a billion dollars this year by year end... And that's without doing a secondary... Wow. All I can say is its a new era regardless of any market correction or not.

Brian H | 11 febbraio 2014

I see the stock set a new all-time high today (touched $202). Anticipating big nooz in the SH meeting/Q4 report?

But I am worried that Tesla was not granted access to the favored low-emissions license pool/lottery in Beijing. It will be hard to get a license there.

Bubba2000 | 12 febbraio 2014

According to the Gorilla Game model explained by Jeffrey Moore in his book, Tesl would need:
1. Proprietary Architectute - Tesla has a unique design using 18650 Li-ion cells with proprietary NCA chemistry, battery pack technology that optimizes life and output, are barriers to entry. The design of the whole Model S, X, E, etc are optimized for BEV. No some ICE with a bolted on battery pack like the RAV. The Supercharging technology itself is unique to Tesla... nobody comes close.
2. Open design - the platform that Tesla uses for the S, will be adapted to X and modified for the E, etc. Unlike the other Gorillas like MSFT, Tesla has not licensed its tech - yet.
3. Value added chain - or Network - The Supercharger Network is unique to Tesla. The power with 480V DC, power management, and spacing of the SCs are optimized for the Model S, X, E, etc ranges and battery packs. Not like some short range golf car such as the Leaf, i3, etc. I am convinced the network effect will really drive demand. Tesla will have to improve on the interior, headroom in the rear, seats, safety features, to match S550, BMW, Audi, etc.
4. Switching cost - Unless some other car company comes with a charging infrastructure, it is unlikely somebody who owns as Tesla will switch to another BEV like a Leaf or even a i3.
5. Battery Gigafactory - From what I know about the economies of scale of manufacturing and chemical processes, the cost/KW-hr should drop way below what Tesla is conservatively predicting and should be closer to $100/KW-hr. If Tesla is using a hi energy density, long life, fast charging proprietary chemistry, etc then this will be a huge barrier to the competition. Don't look like anybody around got the courage to talk "Giga" anything in the BEV field, except for Elon Musk!

Last but not the least, BEV design is much simpler than ICE cars. With the 50 KW-hr battery pack for the E costing $5,000, what should the rest of the car cost? Just a motor/reduction gear,brakes, steering, HVAC, electronics, shell? ASP = $25k with 25% gross margins?

Iowa92x | 12 febbraio 2014

Bubba, no way the Gen 3 will be $25k. Tesla is a premium car company, not Honda. Starting price will be close to $40k.

Also, not sure I'm convinced a large battery factory means cost dips to $100/kWh. Battery costs don't decrease like computers, regardless of how massive the factory is.

Bubba2000 | 12 febbraio 2014

Iowa92x, I am not saying that battery costs will drop per Moore's Law. However, the giga scale with improved manufacturing processes, automation, will reduce the cost of producing the electrodes, electrolytes, and packaging. After all the raw material costs are minimal, except for cobalt and only tiny amounts are being used per battery.

The cost of an electric 150-200 HP motor, step down gear, will fall with automation and volume. Elon is interested in mass deployment of BEVs. The Model E will be priced at $35k base and it is not too far from $25k for the next iteration.

The key enabling technology is the battery. Cost has to come down and the energy density has to go up to reduce the mass. Heard that the $/KW-hr will drop by 30-40% with the giga factory. That is just the for the first iteration. Hard drives used to cost $5,000 back in 1982 for an Apple IIe and only held 5MB. Microwave Oven that is combination of power electronics and mechanical device with turntable etc cost $500. VCR player/recorder at $1,000. Even cooking ovens came down in price and quality improved.

Tesla seems to be only company betting big in BEVs, complete with automated factories, new product pipeline, Supercharger network going to entire continents. Market cap? Only a measly $24B... not to far away from Twitter and a fraction of FB. Yes, Tesla will generate huge profits once they reach economies of scale. It is disruptive tech... with cost of a fill up about 1/10 of gasoline depending where you live and with comparative ICE auto.

jk2014 | 12 febbraio 2014

+1 @Bubba2000

jk2014 | 13 febbraio 2014

Every home builder in the America has a deal with a solar installer or in the midst of one... This means all new homes in America(with small exceptions of course)will provide PV system.

The writing is on the wall, folks. If there are people out there that don't believe the market for residential energy storage is going to be gigantic very soon, they are beyond delusional. Tesla is the only one ready for it. Can't over look this in valuation. Growth in this revenue stream will sky rocket by next year and beyond, even without the giga factory...

Bubba2000 | 13 febbraio 2014

Jk2014,
I can see the advantages of battery storage for PV and may be for wind turbines. Since space and weight are not an issue, would NiMH be the preferred choice due to cost?

Iowa92x | 13 febbraio 2014

Is every home with their own solar array more efficient/lower cost per kWh compared to generating power at a large centralized plant?

Geothermal is becoming a thing, nearly 100% of new homes around here are heated and cooled by geo.

jk2014 | 13 febbraio 2014

I think whatever energy storage solution works for the situation is the best choice. However, Tesla's solution is very compact, less space needed. Also it will be monitored and maintained by Solarcity (or whomever does the energy lease). I'm feeling Tesla/Solarcity option will win the day in the end.

Example Energy storage from Teslamotorsclub.com...

jk2014 | 13 febbraio 2014

I think whatever energy storage solution works for the situation is the best choice. However, Tesla's solution is very compact, less space needed. Also it will be monitored and maintained by Solarcity (or whomever does the energy lease). I'm feeling Tesla/Solarcity option will win the day in the end.

Example Energy storage from Teslamotorsclub.com...

Brian H | 14 febbraio 2014

The share volume has been very low recently, as the price rises. Not many sellers! I guess the shorts are hunkering down, hoping not to be squoze again. >:P

Bubba2000 | 15 febbraio 2014

Short interest is still huge at 29M shares and I doubt it has gone down by much since the last report at the end of last month. With the Supercharger network being deployed rapidly and driving demand as well as improvements in manufacturing, Panasonic batteries, etc... the shorts could get burned on the outlook after Feb-19. The shorts will have a hard time covering nearly 40% of the available float.

jk2014 | 18 febbraio 2014

Gigafactory company (or whatever Elon calls his future energy storage cooperation) will exceed Tesla in worth in 10-15 years time... Gigafactory is not only the future of energy storage with utilities/homes/buildings, but also of propulsion in cars/planes/hyper loops, etc.. to include recycling/refurbishing business. Big time value scale here.

Elon's official announcement tomorrow of it's future construction plan will be just another monumental moment in our sustainable production and consumption transformation. Investors should be proud and excited...

Bubba2000 | 18 febbraio 2014

Tomorrow will be volatile after hours. On the short side got nearly 30M shares short or 35% of float. Long side got the stock past the old hi. Market will look at Model S guidance, Model X and battery gigafactory plans. At this price, I would like to see Tesla raise $3B at least to fortify the balance sheet. Will give more credibility to Gigafactory and Model E factory plans.

The Fed has been accommodating and that has helped valuations. Does not last forever. Best to take advantage. If the economy tanks, having $3B+750M cash helps.

jk2014 | 18 febbraio 2014

@Bubba2000,

Would have to disagree on the secondary offering. Cash will come from partnership agreement. There are many interested companies circling the giga-factory investment. Lots of competition for Tesla union on this in any shape or form right now. For any company to associate themselves with Tesla will be a big boost for their brands. Wouldn't put it past Cisco, Samsung and Sanyo among others (in addition to Panasonic) to be right there at the table with preliminary offers. Also, have to include many states trying to vie for factory like Colorado, Arizona, Texas, New Mexico, and California. Lots of state incentives will influence capital requirements.

If the economy is stalling, this would be the first place to invest as it will ultimately reduce electric bills for homes and businesses around the country, not to mention reduce environmental pollutants(air&ground), CO2 emissions, and nat gas, petrol, coal consumption. Win-win, good or bad economy from "prepers" to "tree huggers", conservatives to liberals and everyone in between...

elephant in a bottle | 19 febbraio 2014
ian t.wa.us | 19 febbraio 2014

Ha! Maybe not so fire retardant on those shorts! More like highly flammable shorts!

Currently over 216 in the aftermarket!

jk2014 | 19 febbraio 2014

@Bubba2000

You're right. Secondary will happen. Probably At 200+/share and Elon will buy 100mln+. Maybe also see secondary with Solarcity after ER next week as well. Elon will make the giga-factory announcement just before Scty ER release.

hummingbird | 19 febbraio 2014

The last paragraph in today's earnings release said this about the Gigafactory: "This will allow us to achieve a major reduction in the cost of our battery packs ... With this facility, we feel highly confident of being able to create a compelling and affordable electric car in approximately three years. This will also allow us to address the solar power industry's need for a massive volume of stationary battery packs."

Correct me if I don't have my facts right, but the cost of today's S 85 battery pack is just about $20,000. How much will they be able to reduce the price of these battery packs with the Gigafactory?

The Gigafactory on its own may become a very significant business for Tesla. Tesla could become a major merchant supplier of batteries to the electric car industry someday down the road.

Heck, if they develop some secret sauce such that they have the best and cheapest battery for storage, they can supply them to the solar storage industry.

Cost and quality of the battery is very key to Tesla's long-term success.

How cheap can they produce the s 85 battery packs in 2 to 3 years with this Gagafactory?

Brian H | 20 febbraio 2014

Half-price or less with a Gogofactory!

hummingbird | 20 febbraio 2014

Half? Who are the people saying that? What's that guess based on? When? 15 years out?

Timo | 20 febbraio 2014

Battery development alone reduces price about 30% in three years. Volume production takes care of the rest of the 50%.

noel.smyth | 20 febbraio 2014

cheap storage for home based solar arrays is a huge oppurtunity. it may be bigger than the car revenue in time... the entire problem with renewables is the intermittancy of solar/wind as well as the lack of distribution network.
one of the challenges in utilities is peak demand.
massive distributed energy storage solves this nicely.. not only can you store energy for when the wind stops/ sun sets, you can also through software controls use the energy stored during peak loads and then regenerate when electricity is nearly free (ie at night). and of course you dont need new utility wires run because the elec generation is at the point of need.
and anothe benefit with the local storage, power outages are much less impactful to folks.

hummingbird | 20 febbraio 2014

When it arrives the Model E will be at the same price point as today's Nissan Leaf.

Currently with $3,000 down you can lease the Nissan Leaf for $90, $130, or $180/mo, depending on which model you pick.

But the Leaf's 75-mile range and styling is holding it back from mass adoption.

Imagine a world three years from now when we can lease a beautifully styled Model E for $89/mo with its 200-miles range.

Imagine a world 5 years from now when Tesla's lead in battery technology is significant, which in turn enables the company to become a major supplier of batteries to the world's electric car industry. How many electric cars per year is possible? (2013 the auto industry produced 65,140,268 cars) How much gross margins should each battery pack generate? Would GM of $2,000 x 1 or 2 or 3 million be possible?

Imagine a world when battery storage of the sun's energy becomes cost effective and practical.

We look forward to learning about the Gigafactory next week!

How big is the TAM?

The next question will be: How many Gigafactories will this world need? And when?

Ten years from now will Tesla Motors be changing its name to Tesla Energy? (because it will no longer make cars?)

Is it possible today's market cap of $26 billion is a good buy? A steal?

Bubba2000 | 20 febbraio 2014

According to the transcript of the cc, Tesla may partner with Panasonic, suppliers of electrodes, separators, electrolytes, etc. I would hazard a guess that it would include Solar City too, and along with Tesla would have controlling interest. Besides the battery, the factory would produce battery packs. On the giga scale, I would expect costs to drop to 50%. Read somewhere that quoted JB saying that $/KW-hr could drop by 40% and he is conservative.

Battery tech along with the Supercharger Network are the key enablers of BEV. Again, I would like to see Tesla raise $2.5B in equity (10% dilution) and $500M is debt while the market is hot and the cost of capital is low. Tesla could move quickly to build the battery gigafactory, expand the Model S/X manufacturing (100-200k/year), Supercharger network in US+Canada, Europe, China, Japan, Australia (500 total, cost $75M)... there would be still money left for Model E initial production.

I think the market is underestimating Tesla. A disruptive company in such a huge market could easily have a market cap of between $100 to 200+M... instead of a measly $25B. Again, the key enabler is the battery tech and cost.

hummingbird | 20 febbraio 2014

Bubba: I'm with you on raising capital. But I think the CEO is very aware of this. He sees the stock going higher due to solid demand for S and X and his own ability to execute in 2014/15. He will issue more stocks when the price is better. Last time he did it over one weekend. Not to worry, he will pull the trigger because they need a better balance sheet IMO.

BTW, do any of these suppliers of electrodes, separators, and electrolytes you spoke of have names? TIA :-)

Bubba2000 | 20 febbraio 2014

Another possible business model would be for Tesla to supply the skate board, the electronics and software:
Battery Pack,
Electric Motor with reduction gear,
Inverter and controller
Display touch panel+electronics+software.

Let folks like Honda, etc build the body, add the wheels, tires, sell and service. Honda sells the Civic LX for $18k complete with engine, transmission, etc. Weighs 2750 lbs and is made of thin but hi quality steel. They certainly could build a body, etc without the engine for $10k and weigh close to 1,800 lbs. Tesla 40 KW-hr battery pack could cost just $5,000+drive train+electronics + 30% profit=$13k. SC use extra $2,000.

Tesla could just stick to Model S, X. Play the Intel/MSFT Gorilla Game in the mass market. Just a thought. Elon seems determined to vertically integrate. OK by me... the stock has been a winner and not complaining.

bevguy | 20 febbraio 2014

Batteries aren't made of silicone and don't follow Moore's
law. They will not get 30% cheaper per year. Improvement is at a rate of somewhere between 7& and 10%, probably closer to the smaller figure.But that's still a lot, compounded that means they will be twice as good in 10 years.
If you believe Elon has some secret sauce in the giga factory that could be twice as good in 7 years. Or maybe even less time because of the sheer size of this factory.
Mass production of Gen 3 is 4 years away so even these figures give Tesla time to produce a Gen 3. Which probably will not need all the range of the S and may have an even lighter method of construction. It will be a clean sheet design.

jk2014 | 20 febbraio 2014

Just randomly heard a big, shaved head, UFC fighter(missing one of his front teeth) fighting this weekend in UFC 170 co-main event say his ultimate dream car would be to own a Tesla... not exactly the type of buyer typically the media portrays as Tesla's market.

I'm seeing this type of Tesla desire from unexpected demo/professional/cultural backgrounds every day now it seems. If any analyst thinks Tesla is not going to be production constrained for a very long time, that demand will taper off any time soon, needs to look for a new job.

GenIII/Model E is going to be a monster on the market. Would probably easily get 100k reservations today and people would wait 3-4 years without question....

hummingbird | 20 febbraio 2014

I think the CEO should raise $1 billion interest free the following way.

Start a waiting list for the Model E. I think they will immediately receive 200,000 deposits of $5,000 each. I would reserve 10 because I know I will be able to sell my spots on eBay.

$5,000 x 200,000 = $1 billion

Interest free for 3 to 4 years

Iowa92x | 20 febbraio 2014

Maybe Elon will create a new company for the battery factory and raise capital under a new stock ticker. Current stock price of $210+ for Tesla is expensive for buyers to latch on to. New company could isse stock for say $30 per share. Factory will supply juice for both cars and SolarCity solar backup, so a new company focused on batteries makes sense.

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