Seeking Alpha

Randy Carlson

View as an RSS Feed
View Randy Carlson's Comments BY TICKER:
Latest  |  Highest rated
  • End Of Tesla, Or End Of Oil? [View article]

    My use of "conservative" $200/hour was intended to poke fun at Tesla buyers who want an $80K+ car, and look for things to rationalize the purchase... After all, at the Price point, the talk about fuel savings and saved time are really just rationalizations for taking out the checkbook...

    This isn't all that bad a thing. Think of all the guys (and girls?) who rationalize their need for a pickup with the winch, the 8" lift kit, the great big knobby tires, the roll bar and lights with those yellow covers with the happy faces - all on the basis that they really NEED to have one to drive to their macho lesson.

    Or the person who buys that S63 AMG that he will drive exactly 11 blocks each way between the house and the country club - on the basis that he needs it to impress the "natives".
    Dec 19, 2014. 10:31 PM | 1 Like Like |Link to Comment
  • The One Variable That Will Determine Tesla's Future [View article]

    Not only will utilities supply Tesla SuperChargers with the grid connections and energy required, they will be paying Tesla for grid stabilization services from the large amount of grid-connected storage at those stations.

    I would expect Tesla's earnings from grid services, together with credits and incentives, to carry effectively ALL of the SuperCharger station capital cost. Tesla's SuperCharger business will probably, on the basis of grid stabilization services, break even, even if they never recharge a single car... Think about that.
    Dec 19, 2014. 02:51 PM | 1 Like Like |Link to Comment
  • End Of Tesla, Or End Of Oil? [View article]

    Tesla is still a very small car company, expanding their channel and support infrastructure very rapidly to achieve sales growth that is, percentage wise, greater than established manufacturers.

    In this regard, Tesla has significant 'start up' expense associated with the build-out. Sales and service facilities that are up and manned in anticipation of increasing utilization cost money. While the CAPEX is capitalized and isn't a drain on profits, the forward loaded O&M does not appear to be capitalized.

    Tesla is aiming not only to be a far bigger carmaker than they now are, they are also aiming for a degree of integration beyond that of any other carmaker. Not only is Tesla vertically integrated as a car maker (making their own circuit boards, manufacturing their own electric motors, battery packs, and soon cells, etc, Tesla is building the very fueling network for their cars, including generating the energy... Tesla's goal, which they are rapidly and successfully pursuing, is to grow from zero, into a combination of GM + Exxon + Bosch.

    With this strategy, we should not expect company wide operating profits (though gross margin on cars manufactured is worth watching), and we should expect this enterprise to continue drawing in additional, new capital as it expands.

    The sentiment that Tesla is failing because it isn't making GAAP profits, and is using up cash, comes, in my view, from a misunderstanding of what the company is (it's still very much a start-up, just beginning to scale), and what the expected performance of the company at this point should reasonably be expected to be.
    Dec 19, 2014. 01:38 PM | 7 Likes Like |Link to Comment
  • Dissecting Tesla Motors' Competitive Advantages [View article]

    Yes, big difference between PM and "technical lead".
    Dec 19, 2014. 01:09 PM | 1 Like Like |Link to Comment
  • End Of Tesla, Or End Of Oil? [View article]

    #1: Performance, even extreme performance, is important and (some) buyers are very willing to pay steep premiums for it. Just look at the Mercedes AMG, BMW M, and Audi S products, or even you favorite dodge Hellcat. Of course, these extreme performance variants do not comprise the bulk of sales, but they do significantly enhance brand image, attracting buyers to lower performance variants.

    In the case of Tesla, it is worth noting that the 'performance' goes beyond the raw numbers. All Teslas offer the exceptionally smooth, immediate, shiftless, smoking-tire-free acceleration 'feel' that ICE cars cannot achieve.

    #2: From the few reviews and videos I have seen, it appears the Hellcat has difficulty achieving the promised 3.2 second 0-60 acceleration, even under track conditions with 'factory' professional drivers. On the other hand, Motor Trend tested the P85D and found that Tesla's claimed 3.2 second 0-60 time is wrong, the P85D does it 3.1 seconds. And, video from the Motor Trend P85D acceleration test was notably free from tire smoke...

    About the 155 MPH top speed, German cars (Audi, BMW, Mercedes) all seem to be limited to 155 MPH (electronically). I suspect this is regulatory.

    Dec 19, 2014. 01:02 PM | 2 Likes Like |Link to Comment
  • End Of Tesla, Or End Of Oil? [View article]
    Jaques S,

    The Morgan Stanley analysis predicts reduced sales for Model 3, several years from now. Their prediction is based on three implied assumptions: 1) oil will remain cheap, 2) Model 3 buyers will buy these cars primarily to save gasoline, and 3) Model 3 will inherently cost more to make than the ICE cars against which it will compete and therefor Tesla will not be able to build these cars profitably unless they sell for a premium.

    With respect to #1, Tesla can not achieve their stated long range objective of displacing the ICE from cars unless they can sell against cheap oil / gasoline because when the ICE begins to be displaced, that will necessarily result in a glut of gasoline, driving down fuel costs. This is a 'straw man' in the context of Tesla's strategy.

    With respect to #2, Tesla is most likely to enter segment with Model 3 positioned to compete, within segment, on the basis of performance, just as Model S is doing within the segment in which it competes. We should be asking our selves, how many buyers choose a BMW 3 Series over a Camry because the BMW gets better mileage? Not many. People buy BMWs for the performance, and Tesla's Model 3 will be sold against BMWs and Audis, not against Toyotas and Hondas.

    With respect to #3, the cost to make Model 3 will depend strongly on BOTH the cost and the performance of batteries coming from the Tesla/Panasonic partnership and the GigaFactory. Tesla has said they expect cost improvement from economies of scale and centralized, streamlined production at their Nevada factory. They have also intimated that improved battery chemistry will be used and that specific energy of the new cells will be higher. In as much as ICE manufacturers and battery companies have suggested that cells with higher specific energy are coming in the same timeframe as cells from the GigaFactory, some improvement in specific energy should reasonably be expected for Tesla's cells, too. The question is, how much?

    With significant, but still very reasonable improvements in cell specific energy, Tesla's Model 3 should achieve curb weight and cost significantly lower than comparable BMW 3 Series cars. This would leave Tesla in a strong competitive / business position with Model 3. For reasons I have argued in my earlier article, ICE carmakers are constrained to offer lower end, lower performance, 'character differentiated' electric cars so Tesla will be competing with the high-end, performance ICE cars in segment.

    Oil price will not have significant impact on Tesla sales because their strategy is based on delivering competitively better performance against high-end (within segment) ICE cars, not on commanding a premium because electric cars do not use gasoline.

    Oil prices are having a big effect on Tesla investors however, because the market has not yet understood / digested what Tesla's long term business strategy is vs. ICE cars. I think we are looking at buying opportunity at this point, before the rest of the market catches on.
    Dec 19, 2014. 12:46 PM | 5 Likes Like |Link to Comment
  • Dissecting Tesla Motors' Competitive Advantages [View article]

    When you start talking about the 'leader' of a large engineering project (not some 'suit' CEO) the notion of what engineering is gets a little blurry. None the less, I believe the leader of a technical, engineering effort is most certainly an engineer, even if they don't write code or 'lay lead' (sorry, I date myself...)

    At Lockheed, where Kelley Johnson lead the Skunk works, he is credited as the 'designer' of the U2 and SR71 (and the A11, YF12, P38...)

    Bill Lear is credited with the Lear Jet design - and the 8-track stereo, the car radio, the aircraft autopilot, the automatic direction finder and a lot of other stuff. Did he design all of these? Yes, and no. What he did was, in many cases, lead and inspire a team of people that got the job done. Input into design decisions? You bet! I worked for him, and he gave lots of input into the design...

    I suspect that Elon Musk interacts with his engineers is a somewhat similar way - and in a way that makes the design of things "his design" in a significant, though not exclusive way.
    Dec 19, 2014. 12:30 AM | 3 Likes Like |Link to Comment
  • Dissecting Tesla Motors' Competitive Advantages [View article]
    Is Elon Musk an engineer?

    Well, engineering is is nothing more or less than "applied physics", isn't it?

    Elon Musk has a physics degree, and no question, he is applying it.

    So, I guess maybe he is an engineer after all...
    Dec 18, 2014. 11:06 PM | 2 Likes Like |Link to Comment
  • The One Variable That Will Determine Tesla's Future [View article]

    At a top level, you are right. Utilities will face issues providing additional service connections to SuperCharger stations. Each station, even with grid-connected storage, for a 6 Charger / 12 parking space station, requires a connection at ~1/3 MW. But, this is yet another area where Tesla seems to be thinking ahead of competitors.

    As the grid adds more renewable energy, especially wind and to a lesser degree solar, it becomes necessary to either add huge amounts of 'spinning reserve' or large amounts of grid-connected battery storage in order to keep the grid stable. These kinds of stability support (spinning reserve / grid connected batteries) are the only kinds with fast enough response time to do the job. And this problem is already upon us!

    The PUC in California has already ordered utilities to acquire 1.6GW of battery storage. Notice I said 'acquire', not 'buy'. One of the approaches encouraged by the PUC is for utilities to *acquire* this storage capacity as a turn-key service from private sector suppliers. The utilities of course MUST furnish some way for this grid connected storage to be connected to the grid.

    This is where Tesla's installation of grid-connected battery storage at SuperCharger stations starts to look very clever. It's clever because 1) if Tesla signs up to be a grid connected storage provider, the utility, of course has to provide connection to the grid. 2) because SuperChargers are geographically distributed, the grid connected storage can be, too, enabling use of this storage capacity to smooth demand as well as supply peaks, thus avoiding the need to upgrade local grids. 3) because Tesla already has communication links to their SuperChargers, it is a straight forward step to integrate the system of grid storage systems across SuperCharger stations and aggregate control for the ISO. 4) and, this may be the biggie, as a larger and larger proportion of our grid electricity comes from renewables, we will necessarily 'overbuild' wind and solar so that there is more capacity than there is load, so that the load can be met on the least windy, most cloudy days, and this means there will be 'excess' electricity available that is likely to be priced at or near 'free'. Grid connected battery storage at SuperChargers can capture some of this very low 'opportunity' energy for charging cars.

    The value of grid stabilization services, combined with the low cost of 'opportunity energy', and available tax credits and incentives greatly reduces the cost of building SuperChargers and results in the SuperCharger business being very very profitable, even if so 'over built' that even under the worst case conditions, drivers will be able to just drive up and plug in.

    I can see a situation wherein Tesla gains an early, and possibly dominant position in grid stabilization / grid connected storage as a service by wildly over-building SuperCharger stations primarily as places to site their grid-storage business assets. This could leave the other high power guys in the position of trying to get the utility to give them the connections they need.

    Slick, isn't it...?
    Dec 18, 2014. 10:47 PM | 3 Likes Like |Link to Comment
  • Tesla Underestimates Supercharger Expenses [View article]
    I would not expect appreciable battery life effects either way, so long as SOC is maintained between 20% and 80%.

    There may be some 'operational advantage' to leaving the house with 80% SOC to better cover the case of an unexpected 'errand' during the day, but other than that there wouldn't seem to be much difference.

    As I understand it, the factors that adversely effect battery life are a) charging at low states of charge, and charging / holding the battery at SOC > 80%, especially while the battery is hot. To address this last condition, my understanding is that Tesla cars will run the AC system if necessary to actively cool the battery - even if the car is 'off' - until the temperature is lowered or the SOC drops below ~80%.
    Dec 18, 2014. 05:57 PM | 2 Likes Like |Link to Comment
  • The One Variable That Will Determine Tesla's Future [View article]

    I have, in fact, moved away from mother and dad.

    The requirements for SuperCharger capacity as discussed above are based on two things. 1) that SuperCharger compatible cars (Teslas and compatible cars from other manufacturers) constitute a fixed fraction of the cars traveling the highway past the SuperCharger station (or group of several adjacent stations), and 2) that EVERY passing SuperCharger compatible car stops to recharge. If, for instance, SuperCharger cars constitute 10% of all vehicles on the road (i.e. 10% of all registered vehicles), then, on average, one car stops at the SuperCharger station to recharge for every ten vehicles passing by...

    The only things that might operate to increase SuperCharger traffic beyond what it would be under peak, rush-hour conditions would be a) drivers choose preferentially to use their Tesla on Christmas Eve, leaving their ICE car at home and/or b) there is proportionately less heavy truck and more car traffic owing to the holiday. Neither of these possibilities seem to me likely to change much as neither of these effects is likely to be very large.

    The real issue in the situation you describe is that under 'normal' rush hour conditions, a significant number of the SuperCharger compatible cars will be commuters and therefor not need to visit the SuperChargers at all. This would mean that under 'normal' rush hour conditions, SuperCharger stations would have substantial capacity in excess of demand.
    Dec 18, 2014. 05:49 PM | Likes Like |Link to Comment
  • Dissecting Tesla Motors' Competitive Advantages [View article]
    It's fun to watch folks running around making uncritical, un-nuanced conclusions for lack of effort and failure to keep themselves informed.

    Dec 18, 2014. 03:25 PM | 5 Likes Like |Link to Comment
  • Dissecting Tesla Motors' Competitive Advantages [View article]

    If the media cannot, or choose not to critically parse Mr. Musk's words, then that's their problem. The would of adults (and perhaps even investors) isn't nursery school...
    Dec 18, 2014. 01:02 PM | 3 Likes Like |Link to Comment
  • The One Variable That Will Determine Tesla's Future [View article]

    You are correct. That's what I get for not going all the way back to the real source...

    Data on page 27.

    This would suggest that one would see stations in both Mount Shasta and in Weed.

    The constraint on the grid distribution is the peak power requirement, not total energy delivered. If we double the amounts I calculated earlier, then the peak would be about 13 MW.

    I did a quick search trying to find what the local grid capacity might be and found the following item:

    Know anything about this one?
    Dec 18, 2014. 12:55 PM | Likes Like |Link to Comment
  • The One Variable That Will Determine Tesla's Future [View article]

    The annual average daily traffic (AADT) on I-5 past Mount Shasta (lake Street) is 20,400 vehicles.

    This is an average of 850 vehicles per hour, and using a typical crest factor of 2.5, the peak hourly traffic is ~2,550 vehicles. If 10% of these are BEVs using SuperChargers, then the peak rate is 255 cars per hour. ( making no allowance for large trucks...)

    If each of these cars receives, on average 40 kW (remember, smaller cars like Model III will likely make up most of the fleet at these levels of penetration), then each car will utilize a 120kW charger for 20 minutes and the number of chargers in use would need to be 85, with 170 total charging spaces (1 charger per 2 spaces.) Overbuilding by 1.25 X should give good statistical performance and make it highly unlikely a driver will need to wait for a charging spot on arrival.

    So, with over-build to handle congestion under the most severe conditions, we would need ~212 spaces and 106 chargers. If ~ 1/2 of the peak load is drawn from grid-storage units, then the total peak draw from the grid would be 106 x 120kW / 2 = 6,360kW = 6.4MW This would require ~ 19 service connections rated 480V, 3-phase, 500A.

    It is also practical, and even likely that the required SuperChargers would be divided between Mt. Shasta, and Weed, just north on I-5 as there are also several restaurants near the freeway in Weed.
    Dec 18, 2014. 04:04 AM | Likes Like |Link to Comment