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Battery factory planned would handle all aspects of battery construction

One of the most expensive and important components in any hybrid or electric car is the battery pack. Companies like Tesla are working hard to bring the price of battery packs down to more affordable levels to help boost interest in electric vehicles.
 
Tesla and Panasonic have started talks focusing on jointly building a $1 billion lithium-ion battery factory (aka giga factory). Panasonic is also inviting other firms to join in on the factory plan. The overall goal is to lower the price of lithium-ion batteries that are used in a wide range of products from smartphones and tablets to full-size automobiles.
 
The facility the two firms are expected to handle much of the battery making process from processing raw materials to assembly in an effort to further control costs.
 
The goal is to get the new battery facility into operation by 2017. That is around the time that Tesla hopes to launch its “affordable” electric car that is for the time being is called the Model E.

 
"The factory is really there to support the volume of the third generation car," Musk said on a recent earnings call. "We want to have the vehicle engineering and tooling come to fruition the same time as the giga factory. It is already part of one strategy, one combined effort."
 
Some analysts don't think the plan would add much to the bottom line for Panasonic if it comes to fruition. Analyst David Rubenstein from Advanced Research Japan said, "The story is just a talking point. Panasonic's margins on its battery business are razor-thin, so it's little more than wishful thinking that this kind of project, if true, would actually add meaningfully to its bottom line."
 
Tesla recently announced that a sale to Apple was unlikely and that it was delaying the launch of the model X SUV again. And today, TSLA hit an all-time high of $264/share after the opening bell.

Sources: Business Insider, Reuters



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Why isn't this a bubble?
By TSS on 2/26/2014 9:45:21 AM , Rating: 2
Asking a honest question here.

GM's market cap: $57,40 Billion
Tesla's market cap: $32,20 billion

GM's total sales 2013: 2,786,078
tesla total sales 2013: <20,000

So anybody tell me, why is tesla worth 56% of the marketcap of GM with sales only amounting to ~0,7% of total GM sales? I'm really looking for a justifyable, non-bubble awnser here. I really hope tesla succeeds and rings in the new era of the electric car because we're going to run out of oil sooner or later.... but i'm just not seeing it....




RE: Why isn't this a bubble?
By SublimeSimplicity on 2/26/2014 10:03:42 AM , Rating: 1
Stock price is based on the likelihood of a company reaching some potential in the future. Success today (cars sold this year in this case) is not indicative of what a stock price should be. Margins today, sure. Expected cars sold in 10 years, definitely.
When you look at Tesla, they're setting themselves up to be a force in the next 10 years.

IF, I repeat, IF they can continue to execute they have the market cornered and the Big3 are on the outside looking in. Tesla is rolling out the charging network and building the battery plant that will allow them to sell more EVs 10 years from now than GM sells ICEs.

Their ducks are in a row to put out a $30k 200 mile range car, IN VOLUME, well within the next 10 years. The total cost of ownership of a car like that would beat anything the Big3 make and likely crush it in ride quality and performance.

That's my take on the price justification.


RE: Why isn't this a bubble?
By Spuke on 2/26/2014 10:16:01 AM , Rating: 2
quote:
Tesla is rolling out the charging network and building the battery plant that will allow them to sell more EVs 10 years from now than GM sells ICEs.
Did you see that 2.7 MILLION sales figure for GM? It takes more than a battery plant to sell 2.7 million cars. GM sells a FULL line of cars, Tesla does not nor will it within 10 years. 2017 for their first "affordable" car (which really isn't). We don't even know if the Model S will still be sold alongside the Model X.


RE: Why isn't this a bubble?
By Mint on 2/26/2014 10:58:17 AM , Rating: 3
Yeah, Tesla is not going to approach the sales volume of GM in 10 years, but Apple isn't going to match Samsung in that respect either.

Tesla is going to be a high margin company. It's a rather shocking development for a new car company, but the Model S has 25% margins because performance cars is where EVs show their biggest strengths, and as they acquire knowledge for cutting costs (which the big car makers have decades of experience in) they'll boost that further.

Still, the valuation of TSLA is ludicrous. Stockholders are not only presuming wild success of the third generation model, but the fourth, too. A $30B auto market cap is justified only if Tesla hits a net profit of at least $2B/yr within 10 years. They're going to need 500k+ cars sold per year to achieve that (e.g. 500k * $40k ASP * 20% gross margin minus $2B fixed costs).

If I'm a Tesla exec, I issue 20M shares of stock right now and build a war chest. Even if the stock price drops to $200, that's $4B cash.


RE: Why isn't this a bubble?
By Spuke on 2/26/2014 12:09:35 PM , Rating: 2
quote:
Tesla is going to be a high margin company.
Indeed. If anything, they will be a successful niche car company (which is not a bad thing).


RE: Why isn't this a bubble?
By Mint on 2/26/2014 12:31:53 PM , Rating: 2
I don't know if niche is the right word. I could see them hitting a quarter of GM's sales in a decade if everything goes well, and they'll probably make a lot more profit on each car.

But a decade is a loooong time to be extrapolating on a company. I guess that's what investors do when keeping money out of the stock market nets them ~0% ROI.


RE: Why isn't this a bubble?
By Reclaimer77 on 2/26/2014 5:36:46 PM , Rating: 2
Did you just call the Model S a "performance car"?? Just..lmao!!

My $35k daily driver has a higher top speed and better handling than the Model S.


RE: Why isn't this a bubble?
RE: Why isn't this a bubble?
By Reclaimer77 on 2/26/2014 7:24:44 PM , Rating: 2
Oh just wait, he'll bite :)


RE: Why isn't this a bubble?
By Samus on 2/26/2014 9:49:46 PM , Rating: 2
My problem with the model S is infact it has all the downsides of a performance car with only one upside, it's acceleration.

I read all the time about people who need to replace tires every 5K (which cost thousands) because of uneven wear, and the handling is pretty poor because of its weight.


RE: Why isn't this a bubble?
By Reclaimer77 on 2/26/2014 11:06:48 PM , Rating: 1
You basically have to hypermile the Model S to assure you'll actually get to your destination, making any "performance" aspect dubious. The range just gets destroyed from even mildly spirited driving.

Of course anyone who actually tries to demonstrate this in an article or review, gets demonized by Musk then sued.

He's 0 for 2 so far in trying to sue the truth into oblivion, but I'm sure he'll keep trying.


RE: Why isn't this a bubble?
By CU on 2/26/2014 11:00:12 AM , Rating: 2
The Model S and Model X will be sold along side each other. Actually the Model S will gain the new option of being 2WD or AWD. Not sure what is the limiting factor on the Model S's acceleration, but if it traction the AWD should fly off the line.


RE: Why isn't this a bubble?
By tanjali on 2/26/2014 11:13:43 AM , Rating: 3
Would you give your money into company that was bailed out, making mostly crappy products, at best stagnate economically and technologically or the one that is almost doubling production every year enormous demand globally, new tech with so much space to improve, don't forget greener than most, which is trendy, and just cool to have (Apple syndrome).


RE: Why isn't this a bubble?
By Spuke on 2/26/2014 12:07:49 PM , Rating: 2
quote:
Would you give your money into company that was bailed out, making mostly crappy products, at best stagnate economically and technologically or the one that is almost doubling production every year enormous demand globally, new tech with so much space to improve, don't forget greener than most, which is trendy, and just cool to have (Apple syndrome).
What the hell are you talking about?


RE: Why isn't this a bubble?
By Richard875yh5 on 2/26/2014 10:29:57 AM , Rating: 2
I don't think it's as simple as what you say that "Tesla is setting themselves up to be a force in the next 10 years." Tesla has no competition right now and that is soon to change. Rumors are out that GM or Apple will buy Tesla because many know Tesla will be in dire strait before too long. Like I've said before, wait till Tesla gets real competition. Or do you think the competition will not be able to sell their Tesla equivalent cars? Maybe because you think Tesla has more know-how than the big auto makers. If that's what you think, I find that humorous.
Let's get real!


RE: Why isn't this a bubble?
By SublimeSimplicity on 2/26/2014 10:53:58 AM , Rating: 2
What Tesla has learned, is that its not a matter of stamping out body panels. The limiting factor in EV production is the batteries. They are building a plant that will produce more batteries capacity per year than all the battery plants in the world combined today.
What many don't realize is they have been granted several patents in regards to battery manufacturing.
As for the Big3 competing, I'm not saying GM, Ford, etc can't compete, but they're really not more well equipped to compete in the EV space than say Samsung.
The Big3s experience is making engines, transmissions, and tuning bodies to reduce engine noise and vibration. This stuff is useless in the EV market space.
BMW and Nissan are the only two manufacturers that seem to be on a trajectory to compete with Tesla.

This all hinges on if 50%+ adoption of EVs are possible. If the batteries don't get better and the cost of manufacturing doesn't come down... it's all for not.


RE: Why isn't this a bubble?
By Mint on 2/26/2014 11:32:14 AM , Rating: 2
The gigafactory will indeed give Tesla an advantage that nobody else can match, but there's a chance that we'll see similar developments in China.

Patents aren't even close to Tesla's biggest weapon in the future. Their strength is the lack of EV commitment from other automakers aside from a few exceptions, and thus being way ahead of them in their platform and charging infrastructure.

Listen to Marc Tarpenning last year:
http://www.youtube.com/watch?v=hf15nMnayXk&t=52m9s

It does seem like some companies are turning the ship, however:
http://www.autocar.co.uk/car-news/industry/audi-qu...

Assuming they win most legal battles against auto dealers, that's another advantage they'll have. You can't sell the advantages of an EV without pointing out the downsides of an ICE. Dealers have no interest in making 99% of their product look bad, so they're going to hold back on selling the EV. Even Nissan said that the LEAF is a way to get buyers into the showroom, and then they wind up buying an ICE. So not only will Tesla be able to pocket the dealer markup, but they don't have this barrier to promote sales that competitor EVs will have.


RE: Why isn't this a bubble?
By Spuke on 2/26/2014 12:13:51 PM , Rating: 2
quote:
Their strength is the lack of EV commitment from other automakers aside from a few exceptions, and thus being way ahead of them in their platform and charging infrastructure.
This is definitely an advantage but the other automakers have more money than Musk and can catchup quickly. Besides, why spend that money now if you're Toyota? Just wait and see how Tesla fares and go from there.

quote:
Assuming they win most legal battles against auto dealers, that's another advantage they'll have.
Why would you assume this? Right now it looks like they'll have to setup dealerships in these states OR pull out.


RE: Why isn't this a bubble?
By Mint on 2/26/2014 1:50:32 PM , Rating: 2
That "wait and see" approach is creating a hurdle that will make catching up harder and harder. The supercharger network is a big one, and will require a massive investment from another automaker to match Tesla in a vehicle category they don't even know that they'll succeed in.

In other words, I agree that Toyota has the money to catch up, but do they have the balls? Toyota is actually a poor candidate as a competitor, as they seem to be the most resistant to EVs/PHEVs.

As for the dealer battle, Tesla only lost in a few states, and fundamentally dealers have no leg to stand on, legally or publicly. We haven't seen anything yet in how much public anger can be generated against dealer laws.


By SublimeSimplicity on 2/26/2014 2:05:54 PM , Rating: 2
The dealership network is catching heat from the public over car that most want, but 95%+ can't afford. If Tesla comes out with a car people want AND can afford... I think dealerships will find a lot less support from local politicians.


RE: Why isn't this a bubble?
By tanjali on 2/26/2014 11:02:29 AM , Rating: 2
I find it humorous also that NASA, Boing, General Dynamics, Lockheed, General Electric cant built economical rocket for launch in space but some unknown Space X company did it and stayed profitable in the same time.
Car industry is literarily owned by oil companies and they will never transition from that model, even there is no oil left for a year globally, they'll die with last drop of oil.
Not talking about electric, They will never transition to hydrogen, algae or some other impossible, unfounded, uneconomical theories.


RE: Why isn't this a bubble?
By Spuke on 2/26/2014 12:14:29 PM , Rating: 2
quote:
Car industry is literarily owned by oil companies and they will never transition from that model, even there is no oil left for a year globally, they'll die with last drop of oil.
I was wondering when the crazy people would show up.


RE: Why isn't this a bubble?
By josh_b on 2/26/2014 10:35:16 AM , Rating: 2
Speculation. Many investors are bullish with respect to Tesla's future.


RE: Why isn't this a bubble?
By josh_b on 2/26/2014 10:39:18 AM , Rating: 2
Also I believe Tesla sold more than 20K vehicles. (To be fair it wasn't that many more cars... a smallish ~22,000 or so.)

http://www.latimes.com/business/la-fi-hy-fourth-qu...


Tesla hype
By Richard875yh5 on 2/26/2014 10:08:37 AM , Rating: 3
Being a billionaire, Elon Musk has the money to keep the hype going to the gullible public. To me that's the only reasoning I can think of. Here you have a startup company who has sold maybe 30,000 cars and people compares it to Ford and General Motors......quite hard to believe! Tesla has gotten the jump on such a car, but what happens to Tesla when the truly big companies comes out with their Tesla fighter? When that happens, I would not want to be a Tesla stock holder! You'll need more good luck Tesla, because I think yours will run out.




RE: Tesla hype
By josh_b on 2/26/2014 10:37:59 AM , Rating: 2
Major automakers have had ample time to come up with an equivalent vehicle. They don't seem all that interested. In fact Elon has stated that part of Tesla's goal is to goad these same automakers out of the status quo. (To no avail, so far it seems.)

Many people I've spoken with also point out that Tesla's battery management is the "secret sauce" and that the patents filed in its name are extremely valuable.


RE: Tesla hype
By CU on 2/26/2014 11:11:27 AM , Rating: 2
Not to mentions its battery plant can sell to the big 3. And couldn't it charge big 3 owners to use its supper charger network also. All the money doesn't have to come from cars.


RE: Tesla hype
By Spuke on 2/26/2014 12:15:42 PM , Rating: 2
quote:
Major automakers have had ample time to come up with an equivalent vehicle. They don't seem all that interested. In fact Elon has stated that part of Tesla's goal is to goad these same automakers out of the status quo. (To no avail, so far it seems.)
They don't have to, they hold all the cards. They can afford to wait and see how Tesla does.


RE: Tesla hype
By Mint on 2/26/2014 12:23:09 PM , Rating: 2
Tesla has four major advantages over other automakers in selling a compelling EV:

1. Free supercharger network. No 200-mile EV from a competitor will be able to charge so quickly, and I seriously doubt they will see the value in building a network themselves due to the chicken and egg issue. Nissan's much slower chargers at dealers is the biggest competition.

2. No Dealers. Not only will Tesla pocket dealer markup, but dealers don't want to make gas look bad to promote EVs. EVs will cost more up front for a long time, and therefore need that selling point.

3. Huge technology headstart, both in their drivetrain platform and mindshare.

4. Gigafactory. Tesla will have a battery cost advantage for a long time.

So Tesla's main competition in the coming years isn't a "Tesla fighter". It's the gas powered automobile, and maybe the PHEV (assuming Tesla doesn't make an EREV of its own, and automakers get over points #2 and #3 above). Tesla's future competition is very well defined.

In a way, these advantages are like those that Apple had: Superchargers = App Store, No dealers = Apple store, big headstart in a previously half-assed market (tablets/EVs), and gigafactory = supply chain.

The difference is that Tesla actually builds stuff themselves, unlike Apple, and will keep manufacturing IP (batteries, motors, etc) as secret as possible. Also, while devs can simply port apps to another ecosystem, Tesla won't be so kind with superchargers unless they get paid.


RE: Tesla hype
By 1prophet on 2/26/2014 1:12:27 PM , Rating: 2
5. The entrenched corporate mentality that knows what is best for their clients/customers

Many companies are led by like mentality yes men at the top, not innovators or risk takers and that is what causes them to fail when something new comes along.

It's called disruptive innovation, real world examples at link.

http://en.wikipedia.org/wiki/Disruptive_innovation

quote:
The current theoretical understanding of disruptive innovation is different from what might be expected by default, an idea that Clayton M. Christensen called the "technology mudslide hypothesis".

This is the simplistic idea that an established firm fails because it doesn't "keep up technologically" with other firms. In this hypothesis, firms are like climbers scrambling upward on crumbling footing, where it takes constant upward-climbing effort just to stay still, and any break from the effort (such as complacency born of profitability) causes a rapid downhill slide. Christensen and colleagues have shown that this simplistic hypothesis is wrong; it doesn't model reality.

What they have shown is that good firms are usually aware of the innovations, but their business environment does not allow them to pursue them when they first arise, because they are not profitable enough at first and because their development can take scarce resources away from that of sustaining innovations (which are needed to compete against current competition).

In Christensen's terms, a firm's existing value networks place insufficient value on the disruptive innovation to allow its pursuit by that firm. Meanwhile, start-up firms inhabit different value networks, at least until the day that their disruptive innovation is able to invade the older value network.

At that time, the established firm in that network can at best only fend off the market share attack with a me-too entry, for which survival (not thriving) is the only reward.


RE: Tesla hype
By Mint on 2/26/2014 2:03:13 PM , Rating: 2
I provided a link above about that from a Tesla cofounder:
http://www.youtube.com/watch?v=hf15nMnayXk&t=52m9s

I agree that this works in Tesla's favor, but it's not as big a hurdle to overcome as the other four, IMO. Leadership from the top can turn it around quickly, but it's a big part of the Tesla's current tech lead.


RE: Tesla hype
By captainBOB on 2/26/2014 7:23:39 PM , Rating: 2
Replace Tesla with "Apple" or "Android", and replace Ford and General Motors with "Microsoft" or "Blackberry".

Go back to 2007, and voila!

Oh yeah, Microsoft would like to have a word with you about "iPhone fighters".


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