Thứ Ba, 1 tháng 11, 2016

Tesla Gigafactory Investor Thread part 4

  • Feb 28, 2014
    Discoducky
    From page S-8

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  • Feb 28, 2014
    ggies07
    MF!!! I really hate this state and it's corruption. Do they not understand we are the second biggest area for Model S sales!?! I work in North Dallas around all the private schools and I'm seeing them pop up everywhere, every day.
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  • Feb 28, 2014
    Causalien
    There are a lot of emotions in his tone, even though he has a very well practiced poker face. Mostly anger, indicating their previous meeting with Elon was more than frustrating and this is a vendetta.

    On second note, I do not think the Texas lawmakers will be too pleased with this. He is speaking as if he owns the lawmakers, which a normal person would usually deviate to the lawmakers and only pretend to "guess" at what the lawmakers might think. He also let slip that the auto dealers are businesses passed down from father to son and they look like the most powerful business in the state. This is completely against the free thinking of the California crowd, which is mostly against generational wealth. This setup will inherently be against merit based competition as generational wealth are usually used to squash smaller rivals. Even Warren Buffett said the same. Leave them each enough to be fed, but not enough to do nothing.

    It is very funny that he says Tesla should choose based on merit and that Texas has the most merit. We all know that's bull dung in the world of business and laws. As the numbers of state "unchosen" begin to compete for Tesla's attention with even sweeter deals and the lawmaker's attitude towards the autodealers change, (because customers have more vote than dealers) I expect his tone to change as well. However, this will probably not happen until Tesla has a Truck that blows all the truck away in the hot weather of Texas.
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  • Feb 28, 2014
    ggies07
    Ah, good points. :)
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  • Feb 28, 2014
    Causalien
    Yeah going through it. So far the juiciest part:

    Equivalent conversion price of $359.78 so that is going to be one target, however it requires 30 consecutive trading days above 130% of the conversion price. So a second target of $467.
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  • Feb 28, 2014
    justdoit
    So all we need to do is get above $467 and that will be a base (at least for 30 days) :) Keep the squeeze going... almost there!
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  • Feb 28, 2014
    dmckinstry
    And cars.
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  • Feb 28, 2014
    kenliles
    yes as ducky posted; and from scattered reports, the demand is strong, so expectation is the optional allotment will also be sold yielding Tesla just under $2.3B;

    Elon- I recommend buying $2.3B of TSLA, then just spend it as your GF needs it over the next three years (those GFs can really be expensive as you know ;) )
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  • Feb 28, 2014
    Gwgan
    Any word on who the other partners will be? The stock wants to know. Seems the market was waiting for the other foot to fall but with no conference call and no announcement there may be doubt that it is a done deal.
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  • Feb 28, 2014
    772
    Sorry for the late reply... almost forgot I had to be somewhere tonight :redface:

    I'm not sure what makes you say that, though. I just received the prospectus today and we are going to try to put some of our money into this offering. We're probably going to try for the 7 year notes... I don't see any major downside of going for the longer term notes. Will update on Monday.
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  • Feb 28, 2014
    Krugerrand
    +1 Causalien

    I chuckled (out loud) when he mentioned the dealership laws were there to protect the consumer and then spent the last minutes of the interview talking about the protection of the dealerships themselves, never again mentioning the consumer. I actually think he believes his own do-do.
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  • Feb 28, 2014
    772
    I actually hope the Gigafactory doesn't become a bargaining chip for being allowed to make direct sales... it may have the undesired effect of other states trying similar extortion/quid-pro-quo tactics with their own dealership laws (Ohio being one of the troublesome states). Those laws should be upended on their own "merits" (or lack thereof :rolleyes:)
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  • Feb 28, 2014
    sleepyhead
    In my mind, there is no way that Elon tries to play this as a quid-pro-quo card. I bet that he will go there if it makes the most economic and logistical sense.

    If Elon builds a GF here and a SpaceX launch center in Brownsville, TX then he is going to be a hero. The lawmakers will come around quickly and he will get these stupid laws reversed.

    Elon is a business person first, and will go to Texas if it makes the most sense. I don't think he is going to be giving ultimatums or using that to negotiate. If Texas doesn't make sense then he will not go there.

    But Texas is a very strategic location for Tesla and Elon wants to plant his seeds here ASAP. The politicians will come around in due time, there really is no hurry, other than to get these old laws off our books since they don't belong in this era.
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  • Feb 28, 2014
    772
    I agree, it should go where it makes the most sense. I don't think the dealerships laws in place should affect that decision one way or another.
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  • Feb 28, 2014
    jeff_adams
    Dave T, I like your business park analogy for the Giga factory. It makes a lot of sense to me that Elon would only want to be in the pack assembly business.

    Think about this, what if someone comes up with a better battery than the current lithium ones Tesla is using? If Tesla is only building the packs, they can easily switch partners to take advantage of any future breakthroughs. If Tesla was actually making the lithium batteries themselves, they are wed to that technology for a very long time because of the huge investment.

    Panasonic and some of the other potential partners might be realizing this and that's why they are not jumping in with both feet. They may be trying to negotiate guarantees with Tesla on future purchases.
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  • Feb 28, 2014
    kenliles
    I think he will build the factory to make adjustments as different cell technologies and chemistries form, but my understanding is that GF will build cells from raw materials first, then then also assemble packs. The GF is not just building packs (they do that now at Fremont), it's building cells (customized licensed) fashioning electrode, cathode, and separator. Followed by pack build for Tesla cars (and likely storage for SCTY)
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  • Feb 28, 2014
    pz1975
    Imagine that one day years from now when Tesla is one of or the major car producer, we will think back and remember that certain US states did not allow Tesla cars to be bought within their borders! How bizarre that will seem.
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  • Feb 28, 2014
    jeff_adams
    Your understanding is correct, but read Dave T's post about Tesla using a "business park" setup. Panasonic would occupy a section of the factory and convert raw materials into batteries. Tesla would have a different section and take those batteries and make packs out of them. I'm saying that if another company comes along with a better battery, Tesla might buyout Panasonic's investment and move the new company into the factory. Tesla would never touch the raw materials, just focus on creating safe battery packs.
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  • Feb 28, 2014
    kenliles
    Ahhh Gotcha. Yes I see your point. Thanks for that clarification
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  • Mar 2, 2014
    KYCurry
    If I was Panasonic I'd be bending over backwards to be involved with the GF. Tesla is a big customer and a giant future customer they are going to lose if they don't figure out how to stay involved. If Tesla does this gigafactory without Panasonic, Panasonic is royally screwed.
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  • Mar 2, 2014
    kenliles
  • Mar 2, 2014
    sleepyhead
  • Mar 2, 2014
    palmer_md
    What a horrible article.

    Musk speculates that an iPhone is thicker than 18mm. Not a big revelation. And this is newsworthy?
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  • Mar 2, 2014
    ItsNotAboutTheMoney
    I see it as much more symbiotic than that due to mutual interest. Tesla thinks the factory can deliver 30% cost reduction, but they still want Panasonic to keep improving their cells, just as Panasonic wants Tesla to hit target.

    If I were Panasonic I'd be keen, but wary. Tesla has delivered, but delivered late and above price target with both generations. Tesla is asking for a massive investment with a return that depends on the price Tesla can get to with Gen 3.
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  • Mar 2, 2014
    kenliles
    Hilarious. I had the same reaction!
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  • Mar 3, 2014
    dhanson865

    you got that backwards, Musk says iphone is thinner than 18mm + packaging thus wouldn't want to make their product thicker by switching to 18650 cells.

    For example

    iPhone 5 is 7.6 mm thick
    iPhone 4 is 9.4 mm thick
    iPad 4 is 9.4 mm thick
    iPhone 3GS is 12.3 mm thick
    Macbook Pro is 18mm thick but couldn't fit a 18650 inside it
    18650 cell is 18mm thick and you'd have to put a phone/tablet/laptop case around that meaning the device would be well thicker than any recent iPhone and in fact even thicker than a Macbook Pro.

    The significance of the whole exchange is that super thin phones / tablets can't use cheaper batteries like a thick laptop or Tesla can.
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  • Mar 3, 2014
    palmer_md
    yep, typo on my part....sorry.
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  • Mar 3, 2014
    kenliles
    still, I agree a bad article - enjoyed the video of the exchange though;

    ---
    iModS = 1435.1mm thick :)
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  • Mar 3, 2014
    austinEV
    I see this whole Tesla/Panasonic thing as a very delicate negotiation. Tesla is Panasonic's customer, and partner, and investment. Now Tesla is bringing on internal supply, in essence becoming a competitor too. So I think the conversation is:

    1) Tesla will keep buying Panasonic's output now and forever essentially, thus allaying fears that Panasonic factory investment is a loss or not worth pursuing. Panasonic should be rewarded with sales and encouraged to keep investing and innovating.
    2) Tesla will bring on internal supply to try to meet some fraction of it's need, but not 100%. Even if they build another factory(s) they will not aim for 100%. They will negotiate some mix.
    3) Tesla does not currently know how to make a battery or battery factory. They need Panasonic to partner with them to help them become their own competitor, with the stated purpose of bringing down the cost of batteries.

    This is a complex deal. It must be done such that it is a win-win. I tend to see some theories on this thread about how Tesla has all the bargaining power, but really it is a delicate interdependence. I think it will be a simple two party deal with requirements that Tesla take Panasonic's output for a price set now for about 5 years, and in exchange Panasonic goes in making the factory knowing that their mix is guaranteed for a while even if the factory is a success in bringing down the price. In other words, Panasonic is needed to make the factory, and Panasonic will require guarantees that the factory doesn't put them out of business.
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  • Mar 3, 2014
    kenliles
    I was having similar thoughts- another aspect might revolve around Tesla licensing of the (no-doubt)large set of Panasonic cell level patents that Tesla would have to obviate somehow without Panasonic. I can see that being a part of the symbiotic relationship as well.
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  • Mar 9, 2014
    macpacheco
    I need to go somewhat off topic to explain my whole train of though, sorry for the long post. In the end it's totally about the Giga factory.

    Except that a 30% cost reduction enables much more than Tesla Gen 3 vehicles.

    Actually the issue is today there is zero over production of li-ion for other huge scale usages. That's the real issue.
    Consider the China Solar PV dump enabled the Germany mass installation of Solar. We actually need the same to enable mass adoption of grid storage with li-ion packs.

    In 2010 Bill Gates stated that if we scavenged all chemical batteries in the world for grid storage, it wouldn't last 10 minutes storing 100% of electricity production, let's say we need to store 5% of production for 24 hrs, those 10 minutes at 100% are now just 200 minutes for 5%, we still need 7x more. So maybe today it would last 20 minutes. We need 24 hours just to get started with a grid running on 50% solar PV + wind.
    Even with 2 Giga factories operating at full capacity before Gen 3 hits the market, the world would find good economical use for those batteries, considering all PV+Wind subsidies and tax breaks in play, easy peasy. Ok, maybe I'm going overboard, but I don't think I'm too far from the mark.
    I believe we can put 10TWh worth of li-ion battery packs to good use for large scale grid storage. Quickly.

    The Giga won't come to full production overnight, it's a 3+ year project after than plant begins to produce until peak capacity is reached, many levers that can be fine tuned.

    If we could obtain huge li-ion battery packs, let's say 10GWh for US$ 100/KWh, that's US$ one billion for 10GWh. That should be enough to stabilize electricity production for 100GW worth of Solar PV or 1TW worth of nameplate Wind capacity.

    The real pressing problem isn't storing Solar PV produced in the day and use it in the night. The real problem isn't storing wind electrons today for usage tomorrow. The real problem is high efficiency natural gas / coal plants want to run at 100% output, and hydro doesn't have hyper agility in throttling second by second. If wind and solar could have a 3 hour buffer, instead of using very low efficiency load following thermals, we could use high efficiency baseload fossil plants instead (60% efficiency instead of 20-30%).

    That's the main reason why I prefer nuclear to solar and wind. The main reason is we're being lied to. There is no economical solution right now to even run a grid with 50% solar PV + wind, because of the lack of battery pack production capacity (regardless of price). That's the reason the German renewables plan has been seriously scaled back.

    With 2 Giga factories running at full capacity then we can do the experiment of migrating Hawaii to zero fossil fuels, since their oil thermal plants are very low efficiency, and installing 50GWh worth of batteries plus lots of extra solar PV capacity would make long term economical sense there.

    Same for Puerto Rico. And other islands close to the equator (where Solar have negligible discrepancy between the summer and winter solstice in output). What you need is about 300% of peak electricity demand in installed Solar PV (if peak demand is 1GW, then you need 3GW worth of solar PV installed). Add wind turbines if wind is regular enough, could be done without a single wind turbine if wind is too low. Blanket all buildings with good solar view with solar PV. Cover every parking space with a PV canopy, heck, cover streets, roads, highways with PV.

    Got it ? Great for solving climate change. Whatever capacity Tesla will actually use is just a bonus.
    In actuality I firmly believe Tesla will come through, and before we know it another 2 Gigas will be announced.
    I'm solely showing there is zero reason for Panasonic to be concerned. Those in the Li-Ion business are safe until the next gen chemistry enters the market.
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  • Mar 9, 2014
    chickensevil
    Nuclear is the only true chance for high efficiency on demand power generation. Maybe that's just me and my nuclear bias. There is good reason to still have other forms of power generation even if you had a heavy favoring toward one technology. Problem with grid storage is the sheer amount of power you will lose in Ineffiencies in the lines, dumping the power into the batteries and then draining it back out.
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  • Mar 9, 2014
    JRP3
    How quickly can nukes respond? I know older types were strictly baseload but I think newer designs use different control rods I believe that can change the output, but not that quickly as I understand it. I'm also not sure of the demand response of potential LFTR designs, which to me seems like the only rational way to do nuclear power.
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  • Mar 9, 2014
    chickensevil
    Maybe I am wrong, but I thought that was one of the selling points for LFTR was it could be more of an on demand power source.
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  • Mar 9, 2014
    macpacheco
    I heard a quote that on CANDU (Canada Heavy Water reactors) the reactor itself can throttle faster than the turbines. This doesn't mean all CANDU's have that feature. I'm sure you need one of the latest ones to have this feature.
    Studies have been done that show proposed Thorium LFTR reactors would have the same characteristics.
    We know the newest French Areva reactors have this feature as well (it's in operation right now in France).
    Meaning that they both are perfect for load following consumer consumption patterns.
    The problem is Solar PV + wind generate far more extreme power transients on the grid than consumers themselves do.
    You see, Solar PV + wind creates lots of trouble to be 20% of grid power, in a sane world, it would only be used on smaller islands that are too small for nuclear power plants.
    The current Solar PV and wind frenzy is 2/3 a jobs program, 1/3 a energy source.
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  • Mar 19, 2014
    AlMc
  • Mar 19, 2014
    palmer_md
    Yep, I saw that arizona news article just before I read about the Ohio bill that just got introduced. Too bad Ohio is not in the running.
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  • Mar 25, 2014
    neroden
    The grid stability problem is being solved with mathematics. The papers should be published this year. Don't worry about it. (I should really get on my friends to publish that ASAP.)

    The overnight problem is a bigger one. Huge batteries will just solve it, though. The other obvious solution is transmission lines which cross time zones. There's going to be a general decline in electricity usage for a few years: LEDs will eliminate lighting demand and superinsulation will eliminate heating and cooling demand. So the overall needed energy storage may be a lot smaller than people think.
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  • Mar 26, 2014
    stevezzzz
  • Mar 26, 2014
    ckessel
    Probably just his way of asking the dealers to funnel him more money, give him their endorsement for another presidential run, and, uh, I forgot the third thing.
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  • Mar 26, 2014
    JRP3
    Or possibly some of the GOP are realizing their anti Tesla, anti EV stance they took in the last election didn't serve them well.
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  • Mar 27, 2014
    Auzie
    Priceless. Unforgettable
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  • Mar 28, 2014
    PeterJA
    TSLA bears keep saying Tesla's competitors will match or beat Tesla's battery technology very soon and produce a mass-market EV that competes with Model E. But the CEO of Johnson Controls (described by CNBC as the largest maker of automotive batteries) says they can't for at least a decade.

    CNBC interview:
    "We're not as bullish on electric vehicles for at least a decade.... we see battery technology evolving but we're not sure electric vehicles will be the mass market product in the near future.
    Q: Are you ramping up production in anticipation?
    A: We're ramping up production for higher voltage batteries, so lithium ion batteries for micro-hybrid, [mild?] hybrid batteries, we're not as focused on electric vehicles.
    Q: What about the cost factor? How are you going to bring down the cost of the battery packs?
    A: i think that's exactly why we think that over a period of time cost will come down but the technology is really not there yet. Manufacturer scale is there, supply chain is in place, but we still have technological hurdles in order to get the cost down and the infrastructure. And cost relates not only to the form factors but the weight and distance and all these things are related. That's why it's still a decade away. We can can do it in the laboratory but not in real life yet."
    Electric cars a decade away: CEO - CNBC

    Elon says he can do it in three years.
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  • Mar 28, 2014
    Familial Rhino
    That's because Elon operates on a logarithmic scale.
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  • Mar 28, 2014
    Student_Forever
    Just a thought:

    Would it be possible that both TM and Panasonic are now flirting with state legislatures not only on favorable laws & tax incentives but possibly on some capital contribution incentives from those states?

    Let's assume for a moment that all four states have similar proposals. What would differentiate them from another? Geography & logistics are obvious considerations. However, those are variable costs and over time could be managed more or less.

    If the overall cost of building GF is $4-5 billion and TM has committed $2 bil., then there is room for another $2-3 bil., right? Hence, some seed capital from the local legislature would definitely stand out.

    I do realize that $2-3 bil. is a lot of money and most states are not in the position of being able to quickly meet such expectations. In fact, it's quite risky for them as well. On the other hand, in most cases the local legislature eventually comes forward to support construction of new stadiums for professional sports in a meaningful amount.

    Aside from providing the land and infrastructure development, states could possibly contribute by forgoing sales taxes for N-years (i.e. compensating by revenue growth from overall increase of business activity).

    What else can states do? -- Is it possible for states to forgo state income taxes for example? What would be other good examples?

    Thanks!
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  • Mar 28, 2014
    Familial Rhino
    I'd be extremely surprised if governments actually put money down. States aren't swimming in money, plus after all the crap Tesla had to take because of their government loan, I don't see them going there ever again.

    I think it's going to be about tax incentives and maybe avoiding excessive environmental regulations.
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  • Mar 28, 2014
    Cosmacelf
    Yes, it'll be tax incentives. As in reduction or elimination of state income tax, property tax, etc.
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  • Mar 30, 2014
    kenliles
  • Mar 31, 2014
    hummingbird
  • Apr 1, 2014
    hummingbird
  • Apr 2, 2014
    JRP3
  • Apr 2, 2014
    pz1975
    Interesting quote from that article regarding cobalt. Looks like cobalt mining companies (especially North American if they source their cobalt from NA as planned) will be a good investment:

    "Erin Chutters, the chief executive of Global Cobalt Corp., a mining company with plans to open a mine in Russia, says the "Gigafactory" demand, even if it reaches only a third of the anticipated size, would either lead to a sharp rise in cobalt prices or force several new mines to be opened."
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  • Apr 2, 2014
    uselesslogin
    I find it humorous that so many people seem to doubt the demand. I work in a small office of a small web application developer. We have a variety of cars like an '01 Bronco, '05 Scion TC, '07 BMW Z3, '03 Honda Accord, and a '12 Mercedes E-Class. The owners of each of these cars have expressed a moderate to strong interest in owning a Tesla. I would be surprised if half of us did not end up Tesla owners by the end of the decade. 500,000 cars by the end of the decade sounds ridiculously under-supplied. I own the '05 Scion TC. If a Tesla were not an option for me I would buy a Toyota Corolla. The Model S has gotten many people to make the step up to luxury from mass-market vehicles but the Model E will do so at a much larger scale in my opinion. The lower fuel costs come into play here as well as having a reason to get luxury. I really think there are a lot of tech guys who aren't interested in the luxury marketed by the German luxury brands and their competitors. However, Tesla is something they are willing to put their money into.

    Edit: I think my thoughts can be summed up this way: With the ICE luxury cars you are buying luxury for luxury's sake. But with an electric luxury car you are buying luxury to support a cause. This is the key difference in my mind. I also think that cause might be stopping global warming but could also be the desire to see an end to energy dependence.

    And to further that it doesn't leave out luxury for luxury's sake. For those who want only the best performance and luxury regardless of any causes the Tesla is a great option, especially performance wise.
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  • Apr 2, 2014
    hummingbird
    Can you share your thoughts, JRP? I am not sure what you meant by "Exactly".

    One very important issue I don't understand: Tesla has been in business ten years now. Why haven't Tesla sourced the cells from multiple vendors already? There are several good cell makers in several different countries. What's the real reason for sole sourcing from Panasonic? I can't imagine price being the main issue when you can get three suppliers to bid. Is it because of IP? keeping secrets? Is Panasonic so much ahead of others in cell chemistry and quality? Quality can always be an issue, but that can be worked on over time with proper management.

    In last Q3's conference call Elon said this about working with Panasonic: "Well, we are contributing a fair bit to the optimization of the cell for automotive purposes. In a lot of ways, the cell still looks the same from the outside because it is roughly the same 18 millimeter diameter by 65 millimeter long cell, we [may have] tiny changes like 18.3 or 18.4 millimeter, that type of thing, but the internal of the cell are evolving quite a lot and we are trying to be as helpful as we can with working with our partners, really our primary partner [is] Panasonic on that. I think Panasonic is doing a really great job and has really exciting things in the pipeline for future cell chemistry improvements and we want to bring those to fruition with them as [soon as] possible."

    (transcript is from SA, some words may not be exactly correct)
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  • Apr 2, 2014
    Cosmacelf
    Among other things, Tesla has a world class battery testing team. They can characterize any battery for power density and longevity better than anyone. At the very least, they test whatever the latest chemistry is from Panasonic and tell them if it is any better or not. Tesla also works on the module and pack structure, the engineering of which may very well fold back into design suggestions for the cell.

    I don't know if Tesla actually works on the anode, cathode and electrolyte chemistry itself. Would be interesting to find out.
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  • Apr 2, 2014
    FluxCap
  • Apr 2, 2014
    ecarfan
    This article made me laugh when it quotes the president of VW saying "I don't quite get it," regarding why Tesla wants to build such a huge battery factory.

    Wow, he really doesn't get it. He has no idea of the potential demand for a high quality 200+ mile range EV for under $40K. It is huge. Musk sees that and knows that batteries are the principal constraint to meeting that demand. He has to have his own source for them.
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  • Apr 2, 2014
    JRP3
    That was in reference to the quoted statement from the VW exec.
    Price, energy density, life cycle, quality and consistency of product would be my guess. Tesla can't afford to be taking chances at this point while some other company figures out their quality control.
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  • Apr 2, 2014
    Skotty
    Spot on. I'm a tech guy and this describes me almost exactly.
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  • Apr 2, 2014
    adiggs
    The quote from the article I found most telling was the end of the article:

    "Erin Chutters, the chief executive of Global Cobalt Corp., a mining company with plans to open a mine in Russia, says the "Gigafactory" demand, even if it reaches only a third of the anticipated size, would either lead to a sharp rise in cobalt prices or force several new mines to be opened."The only question I have is whether they will actually be able to sell that many cars," she says. "Are there really enough people out there that will switch over?""

    This is like a humorous version of the early Model S launch, when suppliers were editing Tesla's orders and shipping 10's or 100's of parts, instead of the 1000's that were being ordered. I remember somewhere along the line, a comment that some of the suppliers had looked at some source for estimated worldwide demand for Tesla in 2012 and seen something in the 100's, when Tesla was busy ordering parts for multiple 1000's of vehicles.

    We seem to have that straightened out at the current order of magnitude of production and ramp.

    And now it's like we're starting all over again as Tesla prepares (years in advance) to move to a new order of magnitude of production. My immediate reaction to that quote "will they be able to sell that many cars" - if they had batteries for 5,000K cars instead of 500K cars, they would make and sell that many (I know it's not that simple, but thinking that demand for 500k of Gen 3/ year is somehow going to be difficult - that's just unfathomable to me). The Model X reservation list is already impressively long - the Gen 3 reservation list all by its lonesome is going to start cutting into other companies shipping volumes as Tesla takes car buyers out of the market, and gets them to wait for Gen 3 to ship.

    But JRP3 said it so much more succinctly than me. No, they just don't get it. But hey - at least they can say that much!
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  • Apr 2, 2014
    dhanson865
    I wonder if you meant that as a dig to pre car transportation era or just didn't realize the century to xxxx translation?

    1814 = 19th century
    1914 = 20th century (when most cars were made)
    2014 = 21st century

    from wikipedia car epochs are

    Veteran era (1888-1904)
    Brass / Edwardian era (1905-1918)
    Vintage era (1919-1929)
    Pre WWII (1930-1945)
    Post WWII (1946 - 25 years ago)
    Modern (25 years ago - now)
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  • Apr 2, 2014
    FluxCap
    It was a goof, I meant 20th-century.
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  • Apr 2, 2014
    Familial Rhino
    I liked it better with the goof :).
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  • Apr 3, 2014
    tigerade
    It sounds like Panasonic is still pretty gun shy about the Gigafactory. I can't say I blame them, I would scrutinize every detail before deciding to invest >$1 billion into a major project that's never been done before.

    Tesla Gigafactory Faces Skepticism From Panasonic, Analysts - Yahoo Finance Canada

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  • Apr 3, 2014
    uselesslogin
    It looks like more details as to what Kazuhiro Tsuga actually told reporters last week. It actually sounds a little more positive than what I saw quoted last week.
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  • Apr 3, 2014
    hummingbird
    It's not in Panasonic's interest to jointly do the Gigafactory with Tesla.

    Why should Panasonic share their battery IP and know-how with Tesla?

    Panasonic would rather sell their batteries to many gadget makers, not just Tesla.

    Further, two years from now what if Samsung/Chinese come up with better batteries and Tesla needs to switch vendor/technology?

    Assuming $3/cell, last year Tesla paid Panasonic approx. $450 million for their batteries ($3 x 6700 x 22,500). This year it might be $900 million

    In the world of big business these are not huge numbers. Why don't Panasonic make more batteries? I suspect it's because they don't want to. By keeping supply scarce, pricing can remain firm.

    The 4-year deal for 1.8 billion cells the two companies recently signed is good for approx. 268,000 cars (1.8b / 6700).

    That's not enough cells for the demand we see for the Model S & X in the next four years.

    Why is Panasonic not cooperating? Perhaps it's because they are very careful and like to take little steps at a time. By going slow they can keep battery prices higher, for longer. I am sure there are other reasons we are not privy to.

    Another very important issue we are not privy to is this: Tesla has been in business ten years now. 18650 form factor is supposed to be a commodity. Why haven't they second sourced this most important component? I am sure there are good reasons, but we just don't know.

    On the positive side, Elon has a track record of make if he can not buy. I suspect he will get this done one way or another.
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  • Apr 3, 2014
    MikeC
    Why? Because (from the article): "He also noted that Panasonic's battery production 'depends' on Tesla sales, which it monitors closely."

    Obviously, the numbers have to make sense for them to join but that is simply a matter of negotiation. If they don't join they lose their biggest customer. If they do join they can increase sales by an order of magnitude.
    �
  • Apr 4, 2014
    tigerade
  • Apr 4, 2014
    hockeythug
  • Apr 4, 2014
    Familial Rhino
    They're implying those "various factories" were propped up by the government because there is not enough demand for the batteries they make ("all of which are operating well below full capacity.")

    They are probably right on that one. It's irrelevant for Tesla, of course, who cannot get/make the batteries they need fast enough.
    �
  • Apr 4, 2014
    JRP3
    I did, in the comment section:

    �
  • Apr 4, 2014
    tigerade
    Your response to the troll is much nicer than mine would be. Thanks for the answer. I am not that familiar with battery manufacturing.

    Do we know if Tesla has finalized a format for the Gen3 batteries, or is that still up in the air?
    �
  • Apr 4, 2014
    JRP3
    I'm not aware of any formal statement, and there is plenty of time to decide on a format.
    �
  • Apr 4, 2014
    kenliles
    Sure it's possible. And about as likely as that ICE factory they invested in would make cars nobody wants.
    Oh wait that's the same one that currently makes the batteries nobody (everybody) wants
    �
  • Apr 4, 2014
    Theshadows
    The solar industry is drooling over that battery. No I do not believe it is possible
    �
  • Apr 4, 2014
    Cosmacelf
    That WSJ article is pretty dumb. Who said anything about Tesla continuing to use the same format cells? And it doesn't matter anyways, since the only customer for the battery factory is Tesla - Tesla doesn't need to make cells for other car companies.

    I did like how they inadvertently showed up all the other car makers. They are STILL trying to get their large format cells down in cost to where Tesla's batteries are.

    I wouldn't call the article FUD, just clueless. Happens all the time, actually.
    �
  • Apr 5, 2014
    hummingbird
    Some may label this article as promoting FUD, but the author asked perfectly reasonable questions. For sure, there is too much group think here on TMC. So much so, it's definitely unhealthy for evaluating this stock.

    Most here are fans of Elon Musk and logical thinking. Pros on Wall Street who short stocks for a living are definitely some of the smartest people in the market. They definitely do their homework. For anyone who owns TSLA stock, it would be best to understand what they have to say.

    For those who think only if everyone just posted positive comments here about Tesla then this stock will go up is delusional.

    As to the form factor of 18650, I agree with the person who commented below that WSJ article:

    David W wrote: "I think the guy who co-founded Paypal, made the simultaneously quickest and most efficient car (at the time) Roadster Sport, makes a car that will pulverize an alternator if it runs over it, sends satellites into space and makes a rocket that can take off and land vertically knows what he is doing when choosing a battery form factor."
    �
  • Apr 5, 2014
    JRP3
    Since the entire premise of this article was based on the choice of the 18650 form factor, and since you agree that the form factor choice is not an issue, what exactly are the reasonable questions the author raised, and what "group think" do you feel we are engaging in?
    �
  • Apr 5, 2014
    hummingbird
    I am relatively new here on TMC. My observation is that in the investment threads here there is whole lot of one-sided group think. Good reasoning from the short side are never debated here. If you don't see that then nothing I say will be able to convince you of my view.
    �
  • Apr 5, 2014
    JRP3
    You seemed to be referring to group think in relation to that article. You acknowledged the flaw in that article, which was it's entire premise. Since the premise was flawed, the article was flawed. How was that group think?
    I think most of us are open to valid criticism, it's not our fault that there seems to be very little of that to be had. The fact is we have been studying this company for much longer than most people, especially the critics, so it's easy for us to see the flaws in their arguments and quickly dismiss them, especially when they are based on incorrect data.
    �
  • Apr 5, 2014
    TSLAopt
    +100
    i personally have studied Tesla Motors for hundreds of hours (if not over a thousand) over the past 2-3 years. I am always looking for realistic weaknesses in the future of Tesla. Many of us on here are in the same boat with this and we can very quickly and easily spot errors in the thinking of reports/articles written by people who have studied Tesla much less than we have.

    If you can come up with a new realistic threat to Tesla's future then we are all ears and looking for that data constantly to help us understand the risks we are in with owning TSLA stock long term.
    �
  • Apr 5, 2014
    kenliles
    i THINK i'm in this GROUP
    �
  • Apr 5, 2014
    WarpedOne
    Just as a sample - registered on 08-17-2006, 2788 days ago.
    All this time I've been spending somewhere between one and two hours a day reading *anything* Tesla, that is over 4000 working hours studying and thinking about it from almost all perspectives.
    It hadn't happen for years that I heard a novel view from a guy *outside* this forum. I cannot even read a newspaper article on tesla anymore without bitching about erros, misconceptions, false assumptions etc.
    �
  • Apr 5, 2014
    Norbert
    The biggest problem with the Gigafactory, at this point, appears to me to be a lack of confidence (on Panasonic's side), not overconfidence. Even though there is some of the spirit here that sport fans have for their favorite team. Yet especially in the beginning, we have discussed a lot of contra points about the Gigafactory.

    However, for Panasonic, it may be such a large investment that it comes close to betting their company on it, and the current (or recent) shortage of battery cells is likely a result of Panasonic being cautious about sales predictions, in the first place. So I can understand that they think twice before jumping into the deep end of the pool.

    Nevertheless, I'd think that Panasonic should be in a good position to make a judgement about the possibilities of reducing the battery cell cost in 3+ years, and at that large scale. And if that can be achieved to some good degree, then the success of Model E is more than likely. Based on that condition, which I assume to be almost a given, I think Panasonic should be able to make a positive decision about its investment.
    �
  • Apr 5, 2014
    ggr
    The reason for the original 18650 form factor is that that is what was being produced in huge quantities already, and it lent itself to the required packaging and cooling requirements. Elon and JB have said a couple of times that while it's good for their purposes, it isn't optimal. ISTR "maybe a little bit bigger" would be better. Tesla clearly doesn't believe in the much larger form factor that most others have gone for though.
    �
  • Apr 5, 2014
    hummingbird
    The following three entities may at times have conflict of interests: Elon Musk, TSLA stock holders, Panasonic.

    Elon's primary goal is to save the planet from global warming ASAP.

    Panasonic's primary goal is to make the most amount of money with the least amount of risk. Panasonic is not interested in sharing its battery IP and know-how with anyone. It's in Panasonic's interest to keep supply slightly below demand to keep cell prices high for as long as possible, which I suspect they might have achieved with the recent 4-year 1.8 billion cell deal with Tesla.

    By the end of 4 years they would have been supplying cells to Tesla for 7 years. Will cell costs have declined by 7% per year, or 40% in 7 years? ( note: $1 * (0.93)**7 = $0.60 ) I suspect not. Hence Elon Musk wants to bring the production in-house.

    The WSJ articles above by Mike Ramsey reasonably suggested other reasons why Panasonic would be apprehensive about jointly doing a large factory with Tesla. The same applies to Sumsung, LG, Chinese.

    Tesla has been in business for ten years but this vital component is still single sourced. We don't know all the reasons why.
    �
  • Apr 5, 2014
    EnergyMax

    But then would not Panasonic be delaying an inevitability, and risk losing their GF position to others, which then leaves them on the sidelines forever?

    I think the only two reasons for a Panasonic delay could be (1) they truly believe there might not be enough demand for Gen3, or (2) they're trying to negotiate the best possible deal.

    If the delay is due to (1), then Tesla must go elsewhere.

    If the delay is due to (2), then I wonder if Panasonic really in such a position of strength with so much proprietary knowledge that no other potential partners posses? As you say, we don't know why Tesla is single sourced here.

    (I'm not all that impressed by the WSJ article by Ramsey)
    �
  • Apr 5, 2014
    JRP3
    We can make some educated guesses.
    1. Panasonic and Tesla have a partnership agreement.
    2. Panasonic had the best energy density, best cycle life, and best quality control at the right price point.
    3. Integrating a different cell from a different provider could have resulted in a number of issues that outweighed the benefits of having a second supplier.
    4. Panasonic and Tesla both have battery IP that they have been sharing with each other.
    5. Panasonic may wish to keep prices high as long as possible but they probably don't want to lose their largest current and certainly future customer.

    The article by Ramsey did not suggest any reasonable reasons why Panasonic would be apprehensive about the gigafactory because, as has been pointed out repeatedly, his reasons were based on a falsehood.
    �
  • Apr 5, 2014
    Taj
    I think you could have a good point with Samsung as the maker of the battery for the Teslas'. I don't know if the media has already pointed out that Samsung could be a possibility.
    �
  • Apr 5, 2014
    Norbert
    Or Panasonic might be interested to help growing the EV market quickly, in order to sell in 10x, and later in 100x volumes. By reducing cost as quickly as possible. Whichever company is going to partner with Tesla on the Gigafactory, while carrying a risk, will in the success case have Tesla as a guaranteed customer, and thereby become the first mover in an exponentially growing market.

    In the case of the Gigafactory, Elon is expecting a cost reduction of at least 30%, and perhaps noticeably more. I'm assuming this is compared to the cost at start of Model S production.
    �
  • Apr 5, 2014
    Auzie
    Having particular point of view is often a matter of perspective. My views on Tesla's future stem mainly from years of being a frustrated driver. My son, a "Wall Street finance pro", is a Tesla bear who never really owned a car nor does he plan to own one in the future. We see Tesla's present and future very differently and trying to convert one another to a common view is an impossible and a painful exercise. So far my account leaves his in the dust, not that I am happy about that, nor can I be unhappy about that.

    Being delusional is also a matter of perspective. So far I feel fine living in my delusional world:biggrin: As long as I don't crash, which is a possibility.

    After having "bear arguments discussions" I often think that both sides are correct in their own ways. Longs talk about car, bears talk about numbers (simplified). Where we diverge is how our correct assessments of different facts will influence the stock price. So far longs arguments seem to be prevailing.

    These strong convictions on both sides are part of the reason that stock behaves as it does, almost like a predictable yo yo. Time will come when that pattern might change and the trick is to recognize that moment.
    �
  • Apr 5, 2014
    Jackl1956
    Panasonic Announces Reorganization of General Power Supply Business

    http://panasonic.co.jp/corp/news/official.data/data.dir/2014/03/en140327-5/en140327-5.pdf

    I know this is dated, my apologies for not searching to see if this subject has been covered. It seems to me that Panasonic is taking definitive steps to partner with Tesla.

    If any of the stock gurus can elaborate on what an "absorption-style company split" is, I would greatly appreciate it.

    Am I reading to much into this?
    �
  • Apr 5, 2014
    TSLAopt
    If Panasonic was an American company I would say there is no way they don't go in on this GigaFactory deal with Tesla. However, I am not so familiar with Japanese culture and how it might affect Japanese business decisions. Anyone on here have good insight on this?
    �
  • Apr 5, 2014
    Auzie
    At this point we can only speculate about the gigafactory and Panasonic involvement. Facts that are known are that Tesla has committed to build it and they raised funds for it. Unknowns are partners and location. As soon as any positive news is out, regarding either the partner or the location, or any other concrete fact related to the progress of building it, stock might go up. I am not sure if negative news will be released. Say Panasonic already declined to partner into this venture, I find it unlikely that news like that would be released by either party. On the other side, positive news are more likely to be announced. If that is correct (it might not be) then the period with no news is more likely to have a negative influence on the stock and that is happening now.
    �
  • Apr 6, 2014
    Cankooo1
    The reaction of Panasonic wonders me a lot, but from their point of view it makes sense to try to extract as much as possible from the deal with tesla. From their perspective if they enter the agreement with tesla and join venture in the Gigafactory they will have 20% of the factory considering investment of $1B and less than 3% of Tesla in shares which they currently own . The problem for them seems to be that this factory will be in competition with their current facilities. They know that capacity and efficiency will be much higher in the new factory and they will have to redirect all of their partners, suppliers and technology into the Gigafactory. Is this a good deal for them, or do they have other options?
    Their situation is really complicated because if they decide not to participate in this factory will be disaster for them. Just look their other businesses:

    Cameras: constant declining sales- smartphones are eating the market. According to Credit Swiss:
    Mid-tier camera companies Panasonic, Fujifilm, and Olympus may not stick around, leaving only Canon, Nikon, and Sony competing in the top-tier and smartphones taking over the

    TV�    s their they are 4[SUP]th[/SUP] biggest producer but this business is not profitable at all- strong competition, small margins, constant R&D expenses where they can�t afford to cut because each year the technology shifting from HD to 4K, from LCD to LED to OLED. Panasonic is best known for their Plasma TV�s (outdated technology). They just can not catch up and for 2012 they posted more than $1B in losses from their TV division (same amount as their investment with Tesla)

    Mobile phones    - Panasonic Mobile Communications division 5.4 billion yen operating loss for 2013.
    Panasonic Automotive Systems ; looks like one of the perspective directions for Panasonic

    The have a lot of other businesses like: Eco Solutions, Appliances, Industrial Devices, Systems and Communications, Healthcare, and Manufacturing Solutions but most of them are losing money. Panasonic annual report 2013: http://panasonic.net/ir/annual/2013/pdf/panasonic_ar2013_e.pdf

    Note that for 2013 they lost $13 billions, they are facing difficult and expensive restructuring, cutting jobs and many unprofitable productions.
    From performance summary they noticed they have increasing sales of Car AV systems, automotive batteries and other car related products.
    Panasonic is not in good condition and it is not profitable company from a long time. After their restructuring they will have to cut majority of their businesses and I believe Tesla is in much stronger position as high growing company a lot of cash available for investments and bright future. Panasonic needs to ensure their survival and I do not think they can afford to lose Tesla as customer and partner. Totally both companies are interdependent but in the end of the day Tesla can do it without Panasonic only with short term implications, as there are other manufacturers who are producing just the same batteries. Panasonic Battery division in other hand will not survive without Tesla.

    Interesting statement from their report is that sales of batteries decreased in 2013 by 4% because of stagnant demand for laptops but profits increased from -20 billion yens in 2012 to + 8 billion yens in 2013. Note that Tesla bought a lot of batteries in 2013 so without them this division would be just the next losing money segment which needs to be cut.

    We know that Samsung ( with $49 Billions of cash) approached Tesla last year for offer, but they were rejected. Now LG and Samsung are planning to build factories for automotive batteries as they see how big the opportunity is. I am sure that both companies will not hesitate at all to join Gigafactory project. (Further more without Tesla there is no future for EVs and respectively demand for automotive batteries). But I do not think they will have this opportunity. Each manufacturer will want to be partner with company which is vividly shifting the industry frontiers. Panasonic s not an exception they are just in really complicated situation with their restructuring.
    tesla_panasonic_main_a.jpg
    The Japanese companies have different corporate culture. Their core value is to respect their key partners and Tesla is critical for Panasonic. Tesla has the same in their DNA (that is why I think Samsung was rejected as supplier even if they offered better prices)
    I do disagree with the argument that Tesla needs to convince Panasonic that there is a demand for batteries. Nobody here doubt this neither Panasonic do, the negotiations are about return of the investment.
    For me is just a matter of time for agreement to be reached. Tesla just need to make it profitable for Panasonic so they can reduce their losses.

    Recent split was definitely sign for progress and in my opinion is related with Gigafactory as the purpose cited in the document is so �Panasonic will shift to a business focusing on Automotive power sources�
    �
  • Apr 6, 2014
    adiggs
    Interesting background Cankoo1. I found myself wondering whether it would make sense on Tesla's side for Tesla to acquire the battery division of Panasonic. That would really be going it alone. Then I wonder whether an arrangement like that would make any sense to Panasonic (I suspect much less so).
    �
  • Apr 6, 2014
    Jackl1956
    Panasonic to transfer general power supply business

    Panasonic to transfer general power supply business to subsidiary of Nippon Manufacturing Service

    Panasonic Corp and Nippon Manufacturing Service Corp:Say Panasonic will conduct a absorption-type company split to transfer business relating to development, manufacture and sale of power supply and power supply components except for automotive-use, to Rich Corporation, a subsidiary of Nippon Manufacturing Service.Effective date Oct. 1.

    While I'm still digesting the complexities of an "    absorption-type company split", I am left wondering will it be possible to invest (buy stock) in Rich Corporation. Would Rich Corporation become the pure Gigafactory investment?

    The name Rich Corporation just seems to flow right off the tip of my tongue.
    �
  • Apr 6, 2014
    Familial Rhino
    From your quote, Rich Corp receives everything BUT the automotive-use side. That part stays with Panasonic.
    �
  • Apr 6, 2014
    Norbert
    "Power supply" seems to refer to transformers and such. Why are we concerned with this?

    - - - Updated - - -

    That argument originates from quotes like these (from this previously mentioned Bloomberg article: Panasonic Hesitant to Commit to Musk's Tesla Battery Gigafactory - Bloomberg)

    Plus, Panasonic seemed to have a hard time catching up with Teslas demand for cells in recent months. One can assume that Panasonic didn't anticipate the rising demand.

    While we mostly agree that the Model E will sell in large numbers (assuming sufficiently reduced battery cell cost), there are different opinions about how long it might take to reach 100k, 200k, 300k, 400k and 500k volumes. Among other things, it will also depend on battery cell cost.
    �
  • Apr 6, 2014
    kenliles
    Great discussion and excellent comments/analysis from Cankooo1. I'll come down on generally this side of the discussion. I think Elon has so many options at his disposal (including financing the entire factory on his own) that this will leverage into a make-break decision for Panasonic (ie, we'll agree to a financially-make-sense scenario, but you're either in this or we're moving forward without you). Most (if not all) the leverage rides with Tesla here. That said, it's a cultural reach for Panasonic. I'll come in early saying I think they will go in, but I won't be surprised to be wrong and see another path emerge.
    �
  • Apr 6, 2014
    AlMc
    Ken. I still think Apple will be a partner (or 'the' partner).
    �
  • Apr 6, 2014
    DaveT
    It's hard for me to imagine a convincing scenario where Apple becomes a partner in the Gigafactory. They don't need 18650 batteries and they're very picky in what they do with their money.
    �
  • Apr 6, 2014
    Auzie
    My expectation is for some original creative deal that exceeds my imagination. That deal with NHTSA was quite creative, in my view.
    �
  • Apr 6, 2014
    AlMc
    I would never bet against DaveT and I have no evidence to back up my 'gut' on this. I know that APPLE does not use this type of battery. This is a total 'gut/hunch' (or maybe just my hope):wink:
    �
  • Apr 6, 2014
    kenliles
    Could very well be. Great deal of synergy. I'd be willing to bet they are absolutely on the short list and in play. Apple has so much power financially ($5B wouldn't make a dent in anything) that the Tesla leverage may be challenging, but even that said, I agree hey are high on the short list for partners and Ina pinch could be THE partner. If Jobs were there I'd feel stronger. With Cook, that's reduced somewhat in vision, but countered in brilliant production source logistics. Bottom line, I agree they are in full play. Regardless this is going to be so interesting and I think right up Elon's alley of finance/technology skill set. Gotta love it!

    - - - Updated - - -

    That's mirrors some of my thinking Auzie. And why this feels like such an exciting time for Tesla/EV. To have someone clearly so up to the challenge. Frankly Apple would be a match for that type of solution, but so would many others, including even a new company from Elon that registers as a holding company and several funding/license partners from Panasonic, to Apple, to Page(minus Google I think), to SpaceX. In short, I agree with you this May well be one of those seminal Musk-moments that once again returns to fundamental principles (even if financial) and surprises us. Good observation. Thank you
    �
  • Apr 6, 2014
    DaveT
    Ken (or anyone else), can you explain your reasoning for Apple possibly being a GF partner?

    Here's how I'm looking at it. Apple likes to use their cash for the following:
    1. Securing supplier relationships that are key to their production goals (and/or new product launches)
    2. Being ready for a large acquisition, if the opportunity presents itself
    3. Stock buyback (this is more of a recent trend)

    For #1 - Typically, Apple has ponied up billions of dollars to secure supply of key components needed to support their production goals (ie., memory, screens, etc.).

    Otherwise, Apple takes a very conservative approach to investing their cash hoard and does not take on any high-risk investments. Since Apple doesn't use 18650 cells and doesn't face any battery shortage for their products, Apple would logically have no interest in investing cash into the Gigafactory as a play to secure a supplier relationship. In terms of a pure investment play, Apple shows no history of making large, high-risk investments outside of their core business.

    For #2 - there was a possibility last year that Apple was looking into Tesla to acquire them. Apple has signaled over the years that one of the main purposes of hoarding cash was to be in a position to make a very large acquisition, if the opportunity arose. Tesla could have been that acquisition, but talks broke down (probably early on) and the possibility of Apple acquiring Tesla this late in the game (i.e., with TSLA close to $30b market cap) is very, very small and is not a realistic possibility.

    In summary, in I don't see how investing in the Gigafactory could be appealing to Apple in any way. It doesn't help their core business (iPhone/iPad/Mac).
    �
  • Apr 6, 2014
    JRP3
    You're making the mistake of assuming that the gigafactory will make 18650 format cells, or only 18650 format cells. It's a gigafactory after all. Plus, formats can be changed.
    �
  • Apr 6, 2014
    Norbert
    Once it comes to Panasonic bailing out, I wonder if Tesla would be ready to put that much trust in a different battery manufacturing company. A question there is what it would take to acquire the know how, the team, and everything else. (The team being necessary in any case).

    I suppose another option for Tesla is to start a bit smaller, as they now do have significant capital of their own. As long as the economies of scale already work with that smaller (but still huge) size, that is. Once Tesla has a factory working, and is producing and selling Model E with success, it will be easy to get additional capital to increase the factory size. (For which the DOE's Advanced Technology Vehicle Manufacturing program might be at least a Plan B, given that's how Nissan financed its Tennessee battery plant.)
    �
  • Apr 6, 2014
    republic
    Larry Page should put his money where his mouth is and give Elon whatever funding he needs to build whatever he wants. That guy has over $30 billion in his name. ;)
    �
  • Apr 6, 2014
    DaveT
    I'm aware the format of the cells can change, but the key point is the need for batteries in consumer electronics pales in comparison to massively growing markets of EVs and grid storage. There really is no need for a gigafactory for consumer electronics, as there's plenty of supply. The big need for gigafactories are with EVs, then followed by grid storage. Unless Apple wants to get into the battery supply business as a supplier (which I see close to a 0% possibility of that happening), then I don't see a reason why Apple would have any interest in the gigafactory.
    �
  • Apr 6, 2014
    kenliles
    I think both you and JRP are hitting the right notes here from my perspective. Apple will ONLY be interested if they can benefit from the unique form factors they require. And he GF will only benefit if those add significant scale to the plant. Now those 2 points are exactly the key and the risk. If the GF is indeed (as virtually described) a materials to pack factory, then Apple's unique form factors would be a possible export (even a possible refinement of the Panasonic form factor for use in a Tesla packs). DaveT to your point, no other markets address the total size of potential that Auto and Grid provide (and frankly that's he point that give me most pause as to Apples potential partnership)- However, Apple possesses perhaps the single most corporately concentrated combination of benefit with configurable batteries from chemistry of all iOS products, Data Center power, and cheap capital applied to competitive lock-out sourcing (alba Cook) of any single company- leading to thoughts of partial partnership. The problem though is the allocation of output to Apple's form factor when Elon has said, even SCTY will be a challenge belong Tesla requirements. I think Apple will be in the final running but as a second tier leverage bubbling up if Panasonic proves too reticent. (Really love this speculative discussion - thanks guys!)
    �
  • Apr 6, 2014
    DaveT
    Here's a few more thoughts:

    1. Battery cost doesn't mean that much to Apple.
    Sure, Apple cares about the cost of every component in their phones/etc, but the battery is a relatively small percentage to the overall cost of the product.

    For example, how much do you think the battery costs in an iPhone? Now, I don't have specific numbers and won't take the time to research it (feel free for anyone to research and share concrete numbers), but I'd guess that the iPhone battery costs Apple less than $10.

    ... actually I just did some research, and according to Breaking down the $650 price of the iPhone | Digital Trends
    They're estimating the battery for the iPhone to cost $4.50, which turns out to be less than 2% of the manufacturing cost of the iPhone.

    Guys, $4.50 really is not much and Apple's focus/priority is not to drive down the cost of their $4.50 battery to $3.50. Sure, they'd love to do that but it isn't a top priority.

    2. Battery efficiency means a lot to Apple.
    While battery cost doesn't mean much, efficiency does. If a battery can be smaller and more efficient, then this help Apple make smaller products that have longer battery life. However, the Gigafactory really doesn't seem to help Apple much in this regard. Rather, incremental improvements to battery efficiency (ie., 7-8% a year) will prove important regardless if the Gigafactory exists or not.

    Also, computing power is getting more efficient. According to http://www.economicsofinformation.com/2011/09/is-koomeys-law-eclipsing-moores-law.html:
    "The idea is that at a fixed computing load, the amount of battery you need will fall by a factor of two every year and a half," says Jonathan Koomey.

    3. EVs will dwarf the battery needs of consumer electronics.
    Consumer electronics will likely get smaller and smaller (ie., wearable devices) with smaller and smaller battery needs. Contrast this to the EV market, and you see the EV market will need massively huge amounts of batteries.

    Consider a Model S with an average of 6000 cells. Times that by 100k cars a year (ie., # cars Tesla sells in 2015) and you have 600m cells required. Compare that to the iPhone, which let's say sells 200m a year. But the iPhone has probably an equivalent of a 18650 cell inside (rough guesstimate), so that's probably about equivalent to 200m cells. Also, there's no indication that there are any supply constraints with the iPhone battery (or any consumer electronic battery). In other words, Apple probably has access to more than enough supply at very good prices. Why would Apple invest billions into a gigafactory? Doesn't make any sense. Also, it's not like Apple is planning to sell 100x (or even 10x) the number of iPhones they currently do in the next few to several years, so there's no pressing need for them to invest into a massive supply chain expansion like the gigafactory.

    4. Apple likes to invest into supply chain procurement when supply is limited.
    Apple has had a history of paying billions of dollars to secure flash memory, screens, camera modules for their phones, etc. But this is largely because they've forecasted supply limits unable to keep up or match production (ie., of a new product or ramping product). Also, they've done this to secure the top quality components as well (ie., the best camera modules for their iPhones from Sony).

    But regarding batteries, it's not like the Gigafactory promises to deliver a radically better battery to Apple for their iPhones/etc. Further, since the cost of the iPhone battery (ie., $4.50) is already so inexpensive, the economies of scale of the Gigafactory to drive down battery costs for Apple is minimal. In other words, it doesn't mean much to Apple to drive down their iPhone battery cost from $4.50 to $3.50.

    As much as I'd love for Apple to be a partner in the Gigafactory, I really can't find a realistic business case scenario for Apple to do so. In Apple's perspective, if they're going to invest billions of dollars into something it better help their core business (iPhone/iPad/Mac) in a very significant way or somehow create a new core business for them.
    �
  • Apr 7, 2014
    Norbert
    The more I think about it, the more it makes sense. Would be a great use of the money. $30 billion? Such an amount comes with an inherent obligation to do good with it.
    �
  • Apr 7, 2014
    30seconds
    I think batteries mean a great deal to Apple and they should be interested in advancing chemistry via the GF. Even though the CPUs are getting more efficient the displays are upping their power draw - bigger screen, more pixel...

    And its not just about the iPhone being able to charge every few days vs. every day. There are a whole generation of new devices (i.e., Oculus, Glass) that could/ should be mobile but are severely limited by battery currently.

    Plus Apple does like to take control of certain key components that provide a competitive advantage. Rumor is that they are starting glass production themselves
    �
  • Apr 7, 2014
    Cankooo1
    Apple sold 50 million iPhones, 71 million iPads and 16 million Macs in 2013.
    So let�s say with the biggest factory in the world is able to reduce the price of the batteries with just 1$ for iPhones, with $1,5 for IPad and with $3 for MAC batteries and in the same time increase efficiency by 10% . This means $200+ millions per year in reduced costs in worst case, probably much more. Is it enough for Apple to invest 2 billion � may be no. I do consider Apple much more as customer when the factory is up and running then as the investor. At some point of future deal between Apple and Tesla is definitely a possibility. Currently Apple seems to be much more interested in the 17� touchscreen than the batteries as it represents potential market for expanding for Apple.

    Also I do not think Panasonic is desired partners because of their investment in the Gigafactory. There are much more financially healthier sources. For me most likely the reason is their experience and supplier chain.

    I am sure that the investment will be provided one way or another. We saw many different possibilities from weird to logical and rational to wild financial sources. Just few reminding examples: Dimler(current partner and investor in Tesla), Larry Page(Larry said it several times, I bet that he means it), form of loans (After they repaid the government loan I bet that Tesla has a good credit rating), additional listings (they have managed to collect $2B for just a week) and all spectrum of investment instruments and Silicon valley as Elon is really familiar with. Even I do see certain logic even for Oil company to hedge their business, not that Tesla will accept them just interesting thought. Anyway there are plenty of options for Tesla.
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  • Apr 7, 2014
    JRP3
    I tend to agree that Apple is probably not interested in the gigafactory, but not because of the format differences you initially mentioned.
    �
  • Apr 7, 2014
    DaveT
    I'd like to hear your reasons on Apple probably not being interested in the gigafactory.

    To clarify what I said about format differences... Apple not using 18650 (or whatever same cell format Tesla chooses with the gigafactory) significantly lowers any possibility of Apple being interested since it would require the Gigafactory to make a whole separate line of cells with a different cell size/format. That's a lot of retooling and complexity introduced. It only makes sense for Apple to invest in GF if they were severely supply-constrained with their current and/or future battery supply. However, there's no indication of that happening. Rather, it appears the opposite, that Apple has plenty of battery supply to meet their current and future needs. Also, for Tesla it doesn't make sense to split their Gigafactory cell production into different formats and supply Apple since the Gigafactory is mainly for automotive cell use and to supply Gen3. If Apple was already using 18650 format for their main products, then I could see it more of a possibility of Apple investing some in GF since they could secure some of their future supply at a lower cost. Otherwise, I'm not seeing a business case scenario that makes sense for Apple.
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  • Apr 7, 2014
    Familial Rhino
    Your comment was not addressed to me, so forgive me for jumping in, but the point you're making here is exactly why I don't see any GF partner being a consumer of its supply. The entire production of the GF is meant to provide Tesla with enough batteries to cover their growth needs, and it's barely enough. Why would Tesla partner with anyone who would want to divert a significant portion of the output to themselves? (And conversely, why would any consumer of batteries partner with Tesla unless they could get a lot of that output for themselves at cheaper prices than elsewhere?)

    The way I see it, anyone partnering with Tesla won't do it for supplying themselves with batteries, but for selling their inputs into the manufacturing process.
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  • Apr 7, 2014
    techmaven
    Apple almost exclusively uses lithium polymer batteries in very small and thin formats, so none of the existing products are likely to benefit from 18650 batteries. Even if the Gigafactory did not make 18650's, they'd likely build slightly larger format batteries which makes even less sense for Apple.

    The only way I can see Apple involved is in standby battery storage. Apple is very much into reducing their energy footprint. They have extensive solar and biogas implementations at their data centers:

    Apple - Environment - Renewable Energy

    This is the only path I see Apple investing at this point, which is their drive to 100% renewable energy across their entire company.
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  • Apr 7, 2014
    JRP3
    My thoughts are much the same as yours, minus the format issue. Many cell production machines are built to be adjustable to handle different formats, and some of the line production machines are not format dependent at all, for example slurry mixers, so I don't see a lot of retooling and complexity involved in producing different formats.
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