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Goldman's Patrick Archambault isn't buying Northland Capital's $230 Tesla (TSLA -4.1%) price...

Goldman's Patrick Archambault isn't buying Northland Capital's $230 Tesla (TSLA -4.1%) price target. Archambault's bull case assumes a 3.5% global market share in the entry- and mid- luxury categories, equating to 200K units sold. Applying a 15.2% operating margin implies $113/ share. The bear case (which assumes total sales of 105K units, operating margins of 14.6%, and a 20x p/e multiple) values the stock at just $58. Goldman's target price is $84, only 34% below Monday's close.
Comments (59)
  • Esekla
    , contributor
    Comments (2456) | Send Message
     
    Although the stock is coming full circle off the short squeeze and declining rapidly, the short interest should eventually cushion some of the blow: http://seekingalpha.co...
    16 Jul 2013, 09:54 AM Reply Like
  • Cassina Tarsia
    , contributor
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    Take your pick - $230 or $84 ... or anywhere in-between. Sounds like a winner to me. The only question I have with Tesla is, what do you do with all the billions of used batteries in another ten years? It could be a nightmare waiting to happen ... and not so green, either. But, who knows, it could be a bonanza for anyone who figures out how to recycle all that trash! In the meantime, I am enjoying a car like no other, that makes you feel like you have just found nirvana.
    16 Jul 2013, 09:55 AM Reply Like
  • AlexiaEP
    , contributor
    Comments (1076) | Send Message
     
    Ms. Tarsia; the chemicals in the Model S batteries are non-toxic for starters. After use in the cars, the batteries can be/will be used for energy storage. After that, which will be many more years down the road, they will be recycled. And for those who cry, recycling will be expensive and therefore not economical...maybe, maybe not. Recycling technology will advance, economy of scales etc...
    16 Jul 2013, 10:13 AM Reply Like
  • Gumby
    , contributor
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    We recycle tons of lead acid batteries! Whatis the difference? More to the point .... will we mine enough lithium to manufacture batteries for EVs? Lithium is currently in limited quantities .Unlike lead ..
    16 Jul 2013, 11:04 AM Reply Like
  • Surf Dog
    , contributor
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    Huge lithium reserves have just been found in Wyoming.
    16 Jul 2013, 11:16 AM Reply Like
  • Cassina Tarsia
    , contributor
    Comments (641) | Send Message
     
    AlexiaEP ... thanks. I was just in my head, wondering about years down the line. You are probably right. By the way ... what is happening with Tesla today ... has this new assessment knocked the socks off of the rally, or what? It's already down to 112, and still falling!
    16 Jul 2013, 01:16 PM Reply Like
  • Esekla
    , contributor
    Comments (2456) | Send Message
     
    Ok, I wasn't going to comment because, well, you know...

     

    But I've said here a few times that Tesla owners have the luxury of only seeing the clean end of their supply chain. The problem with Lithium is in the mining of it, so once you've made the batteries, the damage is already done, and at mass automotive scales, that's a lot of damage. To quote this article, "It isn't a green solution - it's not a solution at all."
    http://dailym.ai/1aMjT5s

     

    That said, it's probably still better than legacy gasoline, but not better than a host of newer, more promising technologies. The real worrying factor is that it calls into question the drop in battery prices that many have been assuming.
    16 Jul 2013, 01:39 PM Reply Like
  • estewart44
    , contributor
    Comments (22) | Send Message
     
    I you can bet if one has thought about a question concerning the technology with this vehicle, the engineers of it have thought about it too.
    16 Jul 2013, 01:48 PM Reply Like
  • Randy Carlson
    , contributor
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    Cassina, the $84 Goldman number may be high in as much as Goldman still seems to assume Tesla is not going to see significant competition in these segments once batteries improve to the point a company can actually make money making electric cars. With major players from BMW to GM, Ford and VW suiting up (with battery packaging automation, battery chemistry research, high volume carbon fiber car bodies) Tesla is very likely to see seasoned, big-gorilla competitors in their market space. Goldman's analysis doesn't seem to consider this...
    16 Jul 2013, 01:50 PM Reply Like
  • estewart44
    , contributor
    Comments (22) | Send Message
     
    Read about the technology before you assume. I know most of the time when I've asked the question, you can bet the engineers have asked it too.
    16 Jul 2013, 04:15 PM Reply Like
  • joenjensen
    , contributor
    Comments (661) | Send Message
     
    Using batteries is a temporary solution, in several years they will figure out how to send power to your car via wireless.
    I understand they are sending power to recharging batteries right now on certain applications wireless, but when they figure out how to use the electric car without any batteries, then you won't need any batteries, power will flow right to the electric motors, and used as you drive.
    People have to realize that technology will only get better not worse, and Tesla will be in the forefront.
    16 Jul 2013, 05:08 PM Reply Like
  • joenjensen
    , contributor
    Comments (661) | Send Message
     
    Watch for the bounce, every time a sock goes down this far this fast it usually bounces. The bounce will come, but no one knows where it will happen. You missed the move up before, do you want to miss the move up again?
    Better buy some tonight before it goes up in the morning, watch out for the toothless sharks though, they could gum these shorts to death.
    16 Jul 2013, 05:12 PM Reply Like
  • valmach
    , contributor
    Comment (1) | Send Message
     
    The question i have for you.. Is what do you do with all the pollution caused by oil. and for the matter nuclear waste.. stupid question
    16 Jul 2013, 08:43 PM Reply Like
  • AlexiaEP
    , contributor
    Comments (1076) | Send Message
     
    Oh, please, Mr. Esekla. Mining for all the other minerals that go into, 'oh, say, an ICE' does the same damage. That's got nothing to do with Tesla, but with the people behind the mining of minerals. It's up to them to find a better way. Or it's up to ALL of us to stop using anything and everything that requires us to mine for the materials. Even that bicycle is made out of material that was originally mined.

     

    Putting the entire blame for mining on Tesla is about as weak an argument as you can pull out of the duffle bag.
    29 Jul 2013, 01:17 PM Reply Like
  • ursf
    , contributor
    Comments (126) | Send Message
     
    Given the stellar performance of the share during the past weeks/month, I would not be surprised about a "healthy" downward correction of 20% during the next days. But then there will be the 7/22 2Q earnings call.... which I think will contain the necessary charge (US sales numbers, European start of sales, Hong Kong start) to bring it back up to $130 and above. All of this may not be based on current rationales or traditional valuation rules. But just don't rule out emotional aspects when analyzing Wall Street. The past months should prove the case that not everything can always be properly justified in NPV calculations.
    16 Jul 2013, 10:08 AM Reply Like
  • ajmcgold
    , contributor
    Comments (95) | Send Message
     
    If the Gen 3 is anything remotely like the S, it will sell 300-400k at full production (not 200K, no dates). It is non-linear growth with Tesla, awareness grows exponentially. Analysts rarely assume this (too soft for them).

     

    But let's hope it drops a little, have some cash from selling a kidney.
    16 Jul 2013, 10:16 AM Reply Like
  • JackB125
    , contributor
    Comments (254) | Send Message
     
    Darn. It's already starting to come back up. I was hoping to buy some more under $100. Tesla isn't a company just grabbing some market share; rather, it's leading the biggest change in the auto industry since WWII. Economists will be studying this for decades. Anyone selling now will be deeply regretting it later. IMHO.
    16 Jul 2013, 10:20 AM Reply Like
  • financeminister
    , contributor
    Comments (665) | Send Message
     
    pump! pump! pump! if you don't buy, you will "deeply" regret later!
    16 Jul 2013, 01:40 PM Reply Like
  • Joe Dirnfeld
    , contributor
    Comments (1128) | Send Message
     
    Most of these estimates are not more than guesses. If the stock ends up higher on the day, it too will have been negated.
    16 Jul 2013, 10:21 AM Reply Like
  • Gumby
    , contributor
    Comments (2313) | Send Message
     
    Just because GoldenSap says it is unreasonable for TSLA to hit $230 as suggested by another analyst... Boom! TSLA sank $11 Traders on margin accounts are spooked and got out before short sellers have any chances to borrow the former's shares for selling. Brokers roll up eyes!!
    16 Jul 2013, 11:07 AM Reply Like
  • Agnes59
    , contributor
    Comments (361) | Send Message
     
    Or this could be preparing for Elon's announcement next week, opportunity for shorts buying stocks.
    16 Jul 2013, 12:36 PM Reply Like
  • Glenn Abrett
    , contributor
    Comments (1458) | Send Message
     
    At least this goldman guy gets the notion of multiple scenarios. His article looks around three years down the road. If you look further, you see that there are scenarios in which tesla sells millions of vehicles in say 2020 -- it is those scenarios which make up the bulk of the stock's value.
    16 Jul 2013, 02:25 PM Reply Like
  • Randy Carlson
    , contributor
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    Glenn, I think the scenarios that make Tesla golden down the road do not so much involve selling lots and lots of cars but rather profiting through things like technology licensing, JV vehicle development, their SuperCharger business with other manufacturers participating, etc.

     

    The problem for current investors is that the window for these kinds of deals in forms highly advantageous to Tesla investors is relatively short. If Tesla doesn't 'hook' some major manufacturer (and neither Daimler or Toyota are 'hooked' by any means at this point) by the time next gen Li-ion batteries are available in volume and major carmakers can start making money on their electric cars, Tesla's opportunity for these kinds of deals will be past. My guess is the window is open for the next year to maybe 18 months. After that, Tesla's future will be limited to niche car company...
    16 Jul 2013, 02:37 PM Reply Like
  • portatopia
    , contributor
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    Do you seriously believe some one can predict in 2020 that if Tesla will be around?
    16 Jul 2013, 04:07 PM Reply Like
  • portatopia
    , contributor
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    Tesla buy batteries from Panasonic. They have battery/power management technology but that's not something other companies can't replicate. They don't however process the battery chemical, and manufacturing process technology which is highly capital intensive to develop. The major manufacturers who has developed their own EV all have their own battery power management technologies.
    16 Jul 2013, 04:13 PM Reply Like
  • Daniel Weidelich
    , contributor
    Comments (83) | Send Message
     
    Give it a probability and calculate an expected outcome. Then value the company based on all possible scenarios. Be as conservative as you like.

     

    If there's a 5% chance of Tesla selling a million vehicles in 2020 -- share price is likely justified...depending on what odds you're willing to assign to more likely scenarios, as well as company failure.
    16 Jul 2013, 08:25 PM Reply Like
  • Glenn Abrett
    , contributor
    Comments (1458) | Send Message
     
    Daniel -- yes, yes, yes -- the only possible way to evaluate a company like tsla -- or lnkdin or amzn or yelp or Angi or nflx or any of a hundred others. It is all in the odds. It is always all in the odds. But given EM and the current almost miraculous success, the possibility of battery costs dropping significantly and the tech advantage of Tesla which is likely to do nothing but grow, there has to be some reasonable chance of them grabbing a big share of the auto market down the road. And, as you say, even if that chance is 5%, share price is justified -- and if there is a 20% additional chance of them selling 500,000 vehicles and a 1% chance of them selling three million vehicles than the stock is undervalued -- simple, simple math.
    17 Jul 2013, 11:48 AM Reply Like
  • Daniel Weidelich
    , contributor
    Comments (83) | Send Message
     
    ha, Glenn, you follow all the same stocks I do! Interested to see your scenarios/probabilities for all those companies. Love reading your comments here on SA,

     

    I'm bullish LNKD and TSLA (though, it's hard to believe nothing much has changed fundamentally since $35) -- bearish on the rest, except no opinion on YELP on its own. One thing I will note though, most perfect pair trade going is long Yelp, short Groupon, but I think it's preferable just to short GRPN actually. If there's money in coupons long-term, Yelp has a huge advantage.
    23 Jul 2013, 08:24 PM Reply Like
  • orthophonist
    , contributor
    Comments (126) | Send Message
     
    I remember, in Apple's run up, there were substantial drops, all of which were recouped and more. This happened repeatedly over the years. Those of us who stayed the course were more than amply rewarded. Such is the nature of things when the cult of personality is involved in the pricing equation.
    16 Jul 2013, 08:57 PM Reply Like
  • joenjensen
    , contributor
    Comments (661) | Send Message
     
    That is exactly right, and we need to stay the course!
    16 Jul 2013, 09:41 PM Reply Like
  • Randy Carlson
    , contributor
    Comments (1325) | Send Message
     
    Based on fundamentals, including realistic growth prospects, Tesla is a $40 - 50 stock. The difference between a fundamentals based price and where Tesla shares currently trade represents market expectations that are based on 'things not seen', that is to say faith or hope, or hype.

     

    Quite a few stocks have maintained high market value based on hype for substantial periods of time. Amazon and Apple come immediately to mind... The question right now for Tesla investors is whether or not the hot air entering the balloon exceeds the rate at which it is leaving.
    16 Jul 2013, 11:10 PM Reply Like
  • portatopia
    , contributor
    Comments (542) | Send Message
     
    Randy, I am not sure Apple's value is based on hype. Even at $700 it's still a low PE ratio at around 20. If Amazon's valuation metric (if you can find one) APPL should be trading at $30000 a share.
    17 Jul 2013, 12:08 AM Reply Like
  • Randy Carlson
    , contributor
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    I think one can reasonably argue that when Apple shares stood at $700, a good $300 of that price was associated with market sentiment that has since evaporated... Oh, and having a modest position in AAPL, I do look forward to the time the market will come to realize - for what ever reason - the wisdom of that $30,000 a share valuation. I might even wonder if the astronomical market cap such a $30,000 share price implies would be sufficient to bring Steve Jobs back from the dead...
    17 Jul 2013, 02:58 AM Reply Like
  • Glenn Abrett
    , contributor
    Comments (1458) | Send Message
     
    No Randy -- when apple was at 700 the price was justified. No one could foresee that Cook would sit on his laurels, do nothing, allow samsung to grab huge chunks of its business without using apple's huge cash reserve to fight. Now apple is overvalued at 420 -- why, because they have bad management.

     

    In exactly the same way Tesla is way undervalued at 120. They have the best management there is. Great management is around 75%. Superior tech. Weak competition. The potential of battery costs dropping. Which, coupled with the deep cost advantage of EV's due to their simplicity, will probably spell the end to ICE's. You and I have been back and forth about this. You once thought battery costs were going to decline while the batteries themselves got much lighter.

     

    Do you no longer think so? I think that is the absolute essential element. Without $200-250/kwh batteries that are 1/2 the weight of current batteries Tesla is, at best, a $50 stock. With those batteries they might, as you once said, become much bigger than apple ever was.
    17 Jul 2013, 11:54 AM Reply Like
  • Randy Carlson
    , contributor
    Comments (1325) | Send Message
     
    Glenn,
    What you describe in valuing Apple - the importance of great management - is precisely the kind of thing that comprises market sentiment. In the case of Apple and Tim Cook, I think it is as much Tim Cook's demeanor as it is his actual performance. I think it is a case of him been pretty good and running Apple and not very good at sounding like Steve Jobs while he is doing it...

     

    I still believe that Tesla can become a very large, very successful company. But they are not likely to get there IMHO by growing their current business model for a couple of reasons. First, Tesla is really small compared to the world wide car business that makes ~100 million units a year and even with high cagr it will take Tesla too long to get there to be interesting. Secondly, if Tesla is going to gain a dominant (not necessarily majority) market share, they will have to significantly displace major players in the auto industry that in many cases are 'wards of Governments' and it is not clear to me that displacing such companies would be a profitable pursuit...

     

    What Tesla needs to do if they are going to turn their technology and their smarts into shareholder value is to figure out how to dominate this business without displacing incumbent players. I can imagine three approaches. 1) Find a technology customer to buy Tesla technology and make a lot of Tesla technology cars - call this the 'Tesla Inside' strategy. 2) Get one or more carmakers to buy-in to the Tesla SuperCharger network, grow SuperChargers to be the dominant distance charging solution for the industry. 3) Buy an existing car company and transform them into a much bigger Tesla. Every one of these strategies would require Tesla to bring outsiders over to their vision of the car business, and that is what worries me about Tesla at this point.

     

    I am concerned about Tesla management specifically because Elon Musk, while very very talented and very very hard working, has not shown great talent in the 'plays well with others' category. Steve Jobs, for all his tantrums and single-mindedness was great at getting others onboard with his vision and his enterprise. I am thinking of three examples in particular, getting Microsoft to support the Mac after Steve's return to Apple, getting the music industry to accept iTunes, and getting phone companies to embrace (and subsidize) iPhone. These three instances where Steve Jobs managed to 'play well with others' probably produced at least as much shareholder value as all the great design, innovation and showmanship / salesmanship Jobs contributed to the company...
    17 Jul 2013, 04:11 PM Reply Like
  • AlexiaEP
    , contributor
    Comments (1076) | Send Message
     
    "I am concerned about Tesla management specifically because Elon Musk, while very very talented and very very hard working, has not shown great talent in the 'plays well with others' category."

     

    Not sure how you can say that given he got Toyota and Daimler on board when Tesla needed the help and is collaborating with NASA et al... He doesn't suffer fools or people will ulterior selfish motives. And that, unfortunately, eliminates a large portion of the population.
    29 Jul 2013, 01:25 PM Reply Like
  • Randy Carlson
    , contributor
    Comments (1325) | Send Message
     
    It is certainly true Elon got Daimler and Toyota onboard. I'm not so sure he is going to be able to keep them onboard, however. Daimler switched the Smart EV away from the original Tesla driveline. The B-Class EV is going with a Tesla driveline, but the high performance SLS AMG is not. Does this imply Daimler thinks they can do a high performance EV better than Tesla can do the Roadster or Model S?

     

    Toyota is using Tesla hardware for their RAV-4 EV, but that is clearly a compliance vehicle, and in the meantime, Toyota is working independently with Panasonic and has an in-house Mg-ion battery program.

     

    I am reminded of the difference between 'interested' and 'committed' as explained to me by a VC many years ago, "It's like a bacon and eggs breakfast. The chicken is interested. The pig is committed." To me, it looks like Elon has got Toyota and Daimler are interested, but not committed.

     

    The SpaceX / NASA case is also instructive. Elon and his team have clearly cut away a lot of the legacy 'dead wood' from rocket designs and are using the best, current technology to deliver clean, efficient, cost effective solutions. But NASA continues to give the SLS more than ten times the funding going to SpaceX. If Elon could co-opt some of the SLS contractors / sub-contractors to join his team, he probably could get NASA / Congress to fund Falcon X / Falcon XX and his large methane engine program rather than 'play around' with antique technology left over from the Shuttle. The limitation here may be precisely as you describe - Elon doesn't suffer fools... On the other hand, anyone as smart as Elon has the choice of doing everything himself or getting people less smart and less hardworking to help with the job. This necessarily represents a compromise, but when the job is a big one, even someone like Elon can't do it all by themselves. And failure to make the necessary compromise can limit success. That is the problem I had in mind...
    29 Jul 2013, 03:05 PM Reply Like
  • AlexiaEP
    , contributor
    Comments (1076) | Send Message
     
    Valid points, Mr. Carlson, and I essentially agree that the old guard is not yet committed. But they're running out of time to make that final leap and I think they know it. Even GM is starting to realize something is up.

     

    I'm betting based on Musk's ability to learn and change quickly, and even more importantly on his ability to ceaselessly move forward toward the end game. It's already on the table, they (fill in company of choice) can either join or be left behind. I've no doubt where it's all leading, just as I've no doubt the sun has risen this morning.
    30 Jul 2013, 11:12 AM Reply Like
  • Randy Carlson
    , contributor
    Comments (1325) | Send Message
     
    There is an important distinction to make between joining the electric car revolution and partnering with Tesla in a way that creates value for Tesla's shareholders. GM, Nissan and BMW have each committed to EVs with investments that individually exceed that total investment made by Tesla so far. BMW's investment in the i3, including what has gone into their carbon fiber supply chain is something like $2.2B as I understand it. And, BMW has introduced a radical concept beyond their advanced carbon fiber body and innovative (hideous, in my opinion) design - BMW proposes to charge more for their i3 cars than it costs BMW to make them... GM already produces EVs from the mildest of hybrids through the range extended Volt PHEV to the fully PEV Spark, and they sell these vehicles in more markets and in greater numbers than Tesla.

     

    If Tesla cannot, very soon, get one or more major car makers committed to Tesla - their EV technology, their SuperChargers, or their sales channel - Tesla will either be left as a niche car company or be crushed altogether by the much larger car makers as they move to electric cars. This is quickly coming down not to how great Tesla's technology is, but to how well Elon is able to play with others.
    30 Jul 2013, 02:20 PM Reply Like
  • SA FAN
    , contributor
    Comments (76) | Send Message
     
    Randy, Take a look at user's comments in the Time sales pitch. Not a single wow..

     

    http://ti.me/11t0TTn

     

    This is the competition Tesla shareholders need to worry about?

     

    Lets say someone does build compelling EVs, doesn't mean Tesla would have to die (or "get crushed" in your words). Auto market is too big for that. If anything it's the ICE makers that need to worry about the EV competition.. Btw, Elon actually "invites" competition.. It actually highlights how much better/far off Tesla is..

     

    Strongly recommend getting a copy of Deutsche Bank's recent report. Has some serious detail in explaining the competing market space..
    30 Jul 2013, 05:31 PM Reply Like
  • Randy Carlson
    , contributor
    Comments (1325) | Send Message
     
    SAF,
    I totally agree with the sentiment that the i3 is UGLY - of course it may be more compelling seen in person... ( I do not agree with one of the posters who claimed the i3 was as ugly as the LEAF. The LEAF is worse, the i3 at least shows some attitude.)

     

    But I don't think the i3's appearance matters nearly so much as the small battery, light weight and carbon fiber technology that BMW has brought to the market. The i3 will probably sell fine, especially in Europe where distances are shorter and BMW has a bigger presence.

     

    Don't confuse the kind of car BMW chose to build with their capability. BMW claims they will be making money on the i3 from day one. BMW already knows how to build and sell $70-100k sport sedans, and they even know how to make money doing that - something that Tesla has yet to learn.

     

    The dilemma facing Tesla and their shareholders is how to earn a return in the long term that is commensurate with the industry disruption Tesla is bringing about. Right now, Tesla is making money selling ZEV credits. This isn't a sustainable strategy, as even Tesla admits. I don't see any realistic path by which Tesla gains a dominant, or even a significant market share by displacing incumbent automakers.

     

    When the next turn in Li-ion batteries become available, it will be possible for Tesla and everyone else to build lower battery mass fraction, long range electric cars - and probably make some money doing it. Tesla has brought two cars, the Roadster and the Model S, to market that have very high battery mass fraction and commensurately long range. The other manufacturers have uniformly chosen to build lower battery mass fraction cars with shorter range.

     

    This competition is going to be won or lost with the next generation of EVs - Tesla's Gen III car and whatever other manufacturers bring to that mainstream market. BMW just showed the world they have carbon fiber body technology that is ready for the mainstream market, and this is a very major lever for building competitive EVs. Interestingly, VW is also working of carbon fiber for production car applications. It appears that VW is being more aggressive that BMW in applying carbon fiber, using it for the chassis as well as the passenger compartment. It may be noteworthy that Audi has abandoned their near term EV efforts that were based on the same kind of aluminum intensive construction Tesla uses...

     

    For Tesla and their investors to profit in proportion to the huge disruption Tesla looks to bring to the auto industry, they need a strategy other than market share. I haven't seen them successfully engage such a strategy yet.
    30 Jul 2013, 08:13 PM Reply Like
  • Locked Down Investments
    , contributor
    Comments (1330) | Send Message
     
    Musk knows an incredible amount about carbon fiber technology from SpaceX and when manufacturing the Roadster. If it is truly the best option then I am sure they will build the Gen III out of it. BMW doesn't have anything close to a monopoly on how to use carbon fiber.
    My guess is that SpaceX and Tesla will figure out an even better way to use all materials at their disposal.
    31 Jul 2013, 09:26 AM Reply Like
  • Locked Down Investments
    , contributor
    Comments (1330) | Send Message
     
    It's all about the Supercharging network Randy.
    Read some of my other posts here. Can't be bothered to repost it all.
    Bottom line is that the SC network is like cell phone coverage. Tesla will have it and it looks like the other's won't.
    Would you rather buy an econo box EV that only gets you around town (100 mile range) or a real sedan with real performance that you can go cross country in? Methinks the latter.
    Would you rather buy the cell phone that only gives you inner city coverage or the cell phone that gives you nationwide coverage? Methinks the latter, even if it is at a higher price.

     

    JB Straubel said he thinks they can get SC times down to 5-10 minutes in 3-4 years. Hello Gen III.
    He also said to do this the technology on the car needs to merge PERFECTLY with the technology in the supercharger.
    ie. No other vehicle but a Tesla will be able to use the Tesla network...so unless big auto leases Tesla tech for their own vehicles or rapidly starts developing its own SC technology and network then they won't have a very compelling EV to sell to customers.
    I think they will be too slow to act and will be forced to pay to access the Tesla network which will cover 98% of North America, Japan, and Western Europe by the time Gen III comes out (of course for a price and a promise to expand the SC network at their own expense).

     

    How much money will Tesla then earn in your spreadsheet models? By licencing SC technology for the millions of EV's that big auto will be forced to make once Tesla shows the world a better way to travel.

     

    Think about it...how else will big auto compete with an affordable Gen III (which will essentially be a $20-$25k car when factoring in gas/maintenance savings) capable of high performance, long distance travel, with the most storage space, and highest safety ratings in its class?
    Well they can try to skip the supercharging requirement by offering an EV with a 500 mile range I suppose. Only problem there is that if they don't have some revolutionary battery tech that is exclusive to them (and really how long would that battery advantage actually last in this day and age of industrial espionage) then Tesla will also have access to the same battery technology as everyone else. Only thing is that with a SC network already in place Tesla WON'T have to build a 500 mile range EV....they can stick to a more practical (for everyday driving) 250 mile range vehicle which will be much less expensive, much lighter, much faster, much more spacious, and much safer than the 500 mile offering from big auto.

     

    Putting a 500 mile range battery in an EV is just as ridiculous as putting in a 1000 mile capable gas tank in a ICE vehicle. It is silly because nobody requires the ability to travel this far in ONE sitting. Especially when you have a widespread refueling network at your disposal.
    They don't do it in ICE's because this would make the vehicle heavy, slow, inefficient, and dangerous (carrying around all that stored energy)...and they won't do it in EV's for the same reasons.

     

    Therefore without a SC network you ain't got much when it comes to making an affordable, efficient, and fast EV.

     

    This is what big auto better learn right quick...if not Tesla's network will be so far ahead of the game by the time they start to build their own that the only option for them will be..."if ya can't beat em...join em".

     

    31 Jul 2013, 09:27 AM Reply Like
  • SA FAN
    , contributor
    Comments (76) | Send Message
     
    Randy, You repeatedly claim Tesla is only making money through ZEV credits. That info is at least 4 months old. Lets see what happens in Q2 results. We will have a min of 25% gross margin by Q4 and potentially 40%+ Gross Margin by mid next year (Deutsche 's report explains how that can happen) - Elon agreed to matching Porsche's margins on S platform.

     

    Your fundamental claim is Tesla has no competitive advantage over incumbents. That's really a poor view to have, knowing as much as you know about Tesla. There are SuperChargers, there is impeccable design, step change in electronics, a significant advantage of using small-format cells (which Deutsche bank clearly explains no one is "capable" of replicating - and big format cells will in fact burn as seen in Boeing's case) - Ultimately their battery tech is far superior and competition is at least 5 years behind, while Tesla is moving fast to get even further ahead, while competitors are outsourcing the problem, with a blind hope someone else will solve it for them - see Ford for example.

     

    Model S belongs to "Full Size Luxury Sedan" class. About 210K of these were sold in US last year. At current run rate it captured about 9% market share (btw, this is even before showrooms, service centers and superchargers are fully laid out).. Now, show me one EV which captured 9% market share in their addressable markets - none!

     

    Imagining that incumbents will crush Tesla is delusional. They have "nothing" to compete Tesla with.

     

    Then you bring up the point of scaling up, which our old buddy Julian Cox explained n-number of times, how Tesla's cash flow system allows it to grow geometrically with out dilution. I take his side and it agrees with Musk's claims.

     

    Ultimately your view of caution might be reasonable for someone to stay away from Tesla. But outright shorting is beyond me. We are talking about a fundamental shit in multi-trillion dollar industry being led by Tesla. Double that if you combine auto + oil industries.. You want to short at $15B market cap.
    31 Jul 2013, 12:41 PM Reply Like
  • Randy Carlson
    , contributor
    Comments (1325) | Send Message
     
    SAF,
    I have said for a long time that small format cells have advantages over larger format cells. I even wrote an article about that:

     

    http://seekingalpha.co...

     

    The other side of the argument however is that large format Li-ion cells are being used successfully in many systems from communications satellites to submarines. All of the major car makers I know of are going with large format cells, though I think VW gave some consideration to using 18650's (but then they hired some former Tesla folks...) It is not as though these companies are ignorant with respect to the kinds of cells available. The original Honda Insight used smallish, cylindrical cells, for instance.

     

    The only reason I can imagine for the universal choice if large format cells by the auto companies (other than Tesla) has to be perceived cost advantage. It is difficult for me to imagine that everyone of the automakers is profoundly dumb about this...

     

    Tesla for a very long time and on many separate occasions claimed that they would fund development, tooling, expansion, etc from their cash flow and spectacular margins. So far at least, they have not done this, but repeatedly borrowed money or sold more stock to cover the cash demands of growth. This 'growth through internal profits and cash flow' story is beginning to sound like trying the same thing over and over while expecting different results.

     

    Tesla has set out to disrupt the ICE auto industry and based on the current stock price, their investors seemingly anticipate future returns commensurate with disruption and subsequent dominance of this large scale, world-wide industry. Incumbent automakers currently sell more plug-in EVs than Tesla, offer more models of plug-in EVs than Tesla, are developing and introducing new plug-in EV models faster than Tesla. And, if every thing goes right for Tesla this year, their share of the world wide car market might get as high as 0.02%. The likelihood of Tesla growing to the point of dominant market share within the next decade without seriously diluting shareholders seems, to me at least, remote.

     

    Tesla may have alternative paths to earn investors the kinds of returns being anticipated that don't require displacing incumbent automakers. I even analyzed and wrote about one such alternative:

     

    http://seekingalpha.co...

     

    So far however Tesla has not demonstrated they can co-opt other industry players into using SuperChargers or participating in some analogous scheme that would let Tesla investors earn outsize returns.
    31 Jul 2013, 02:18 PM Reply Like
  • AlexiaEP
    , contributor
    Comments (1076) | Send Message
     
    "If Tesla cannot, very soon, get one or more major car makers committed to Tesla - their EV technology, their SuperChargers, or their sales channel - Tesla will either be left as a niche car company or be crushed altogether by the much larger car makers as they move to electric cars. This is quickly coming down not to how great Tesla's technology is, but to how well Elon is able to play with others. "

     

    You have joined the pack who've underestimated and continue to underestimate Mr. Musk and his team, and you've been vamboozled by the propaganda of others; maybe your own even.

     

    "Crushed by the much larger car makers as they move to electric cars," you say? On which planet would that be happening? Because it sure isn't Planet Earth. Only one of those much larger companies has even put together a 'study group'.

     

    Let's take your $2.2Billion figure. And all BMW could come up with was the i3? Seriously? That's all they got? That's the best they could come up with? Might I suggest they go back to the drawing board, double that investment and start over.
    31 Jul 2013, 02:33 PM Reply Like
  • SA FAN
    , contributor
    Comments (76) | Send Message
     
    Randy, You clearly know a lot about batteries.

     

    Per Deutsche Bank and many others on SA and outside, large formats cost twice or more than small format cells for a given KWh. The reason others are not considering small format cells is that it is incredibly complex to manage a system of 1000s of cells, which most consider "impossible". Tesla worked on the cell for 10years, with 60million hours of testing, optimised all 30 components of the cell to work well with their cooling/supercharger systems and essentially produced a new cell. This cell can still be produced on the same equipment which produced the normal laptop cells. This equipment scale is giving them enormous cost advantage.. This battery tech is the true competitive advantage that Tesla has. This is not a static target which others can catch-up to. Tesla is running as fast as they can to further expand on this lead and more importantly close the inconvenience gap with ICEs for long distance travel.

     

    Honestly, I really don't believe they need some alternate path to make money. While continually improving tech, just make cars and sell them. That will make plenty of money.
    31 Jul 2013, 04:38 PM Reply Like
  • SA FAN
    , contributor
    Comments (76) | Send Message
     
    "Tesla for a very long time and on many separate occasions claimed that they would fund development, tooling, expansion, etc from their cash flow and spectacular margins. So far at least, they have not done this, but repeatedly borrowed money or sold more stock to cover the cash demands of growth."

     

    Randy, We are talking about a company with about 2 to 3 quarters of production. What sort of "cash flow for growth" would anyone expect at this point? Give them a few quarters or an year to accomplish the gross margins they are aiming for, then "cash flow for growth" becomes real.
    31 Jul 2013, 04:48 PM Reply Like
  • Randy Carlson
    , contributor
    Comments (1325) | Send Message
     
    SAF.
    I am familiar with assertions large format cells cost more per kWh than smaller cells. This may have to do with the lower initial volumes of large format cells, or it may have to do with the packaging and 'control' issues you mention.

     

    There are however a couple of problems I have with this argument. First, Tesla is not the only outfit making and selling large battery packs based on lots and lots of 18650 cells. Panasonic for one is selling very large, ~1MWh class batteries for grid connected storage that use 18650 cells with the same double-ended individual cell fusing approach used by Tesla. Yet when Ford went to Panasonic for EV battery cells, they walked away with large format, prismatic cells. Panasonic is clearly in the business of selling large capacity, 18650 based Li-ion batteries and the only thing I can imagine driving Ford's choice would be cost.

     

    The other thing that doesn't seem to fit the argument is that Tesla appears ready and willing to sell electric drivelines, including the batteries to other car makers. They have in fact sold such to Toyota and to Daimler. With a purported 2:1 cost advantage one would expect the driveline component of Tesla's business to be booming, but that is not what we see happening. Tesla got dropped from the SmartEV, even though Daimler is a 'partner / investor' in Tesla. Fiat went to Bosch, not Tesla for the 500e driveline. If Tesla does in fact enjoy this purported 2:1 cost advantage, they either are being very greedy, or their marketing proficiency on the driveline side is lacking.

     

    About Tesla funding growth and new products internally... The original 'story' was that the Roadster would generate the cash to fund Model S development / tooling / production and that Model S would do the same for Gen III. From what I have seen, it doesn't seem to be happening this way, despite both the Roadster and Model S having been received by enthusiastically by critics, analysts and owners alike. The sad fact is that the automotive business is more capital intensive and offers much lower margins than does the iPhone or iPod business over at Apple. This means that internally funded geometric growth is more problematic for a car company - something that seems to have escaped more than a few Tesla investors...
    31 Jul 2013, 05:28 PM Reply Like
  • Locked Down Investments
    , contributor
    Comments (1330) | Send Message
     
    Yeah $2.2 billion for the dorky i3 with 100 mile range?
    And Tesla gave us the Model S for under a billion (and the X might cost just another $250 mill to bring to market thanks to the common platform sharing)...who is making better use of their resources here?
    Again go back to the supercharging network...this is Tesla's true moat to making an affordable long distance EV.
    If big auto doesn't commit 100% to EV's and start building a similar supercharging network they will be left in the dust.
    Problem is that they don't believe in the EV yet so they won't commit the funds to a real network like Tesla is doing.
    By the time they wake up it will be too late.

     

    Big auto is still messing around with hydrogen, hybrids, nat gas, ICE, etc, etc...I would not be surprised if Tesla is now spending more money on pure EV R&D than most of the big auto companies.
    Let's take Toyota the #1 spender on R&D in the world. Last year they spent about $10 billion on R&D.
    I bet 75% of this is spent on making more efficient ICE's, 15% on its hybrid program, 3-4% on hydrogen (which it is still attempting to bring to market), 3-4% on nat gas vehicles, and maybe 3-4% on pure EV's.

     

    If so Toyota might be putting $350 million a year into pure EV research and development.
    Tesla just spent a billion dollars on bringing the Model S to market. They are now a $15 billion dollar market cap company 100% focused on building better EV's and supercharging networks around the globe. Their focus is 100% clear...big auto will never be able to say this...at least not for another 10 years at least.
    My hope is that Tesla does do another offering to take advantage yet again of the demand for its shares.
    I have made 350% on my holdings so far in Tesla. I would happily take a 20% haircut on this if Tesla wanted to raise $3 billion right now to rapidly accelerate the Gen III program and supercharging network build out.
    It's all working for Tesla right now...they just need to execute.

     

    And execute they will...probably the entire auto industry.
    1 Aug 2013, 12:01 AM Reply Like
  • SA FAN
    , contributor
    Comments (76) | Send Message
     
    teddyg101, I don't think this just a matter of funding. It's a matter of "competence". There is no other charging system that is as fast as a SuperCharger. There is no other EV that can go as far as Model S on a single charge. That speaks of tesla's competence in this very specialized field.. Why would anyone expect any auto maker all of a sudden to become a most competent firm in electrical engineering is beyond me. Thats never been an automakers core competence - building an Internal Combustion Engine is.. Randy somehow conveniently misses this.
    1 Aug 2013, 11:26 AM Reply Like
  • SA FAN
    , contributor
    Comments (76) | Send Message
     
    "Panasonic for one is selling very large, ~1MWh class batteries for grid connected storage that use 18650 cells with the same double-ended individual cell fusing approach used by Tesla. Yet when Ford went to Panasonic for EV battery cells, they walked away with large format, prismatic cells. Panasonic is clearly in the business of selling large capacity, 18650 based Li-ion batteries and the only thing I can imagine driving Ford's choice would be cost."

     

    Randy, why couldn't that be due to the complexity involved in keeping the batteries stable & cool in a car that's running at highway speeds. Or some other lack of know-how.. Just because Panasonic or others figured out how to use for grid-storage doesn't mean they figured out how it would work in a car. Aren't the application and the demands very different?
    1 Aug 2013, 11:33 AM Reply Like
  • SA FAN
    , contributor
    Comments (76) | Send Message
     
    Randy, Finally, Musk promised a 200mile range vehicle which costs about $35K by 2017. Also, it would be "only" 20% smaller than model-s, which is a "full size" vehicle.

     

    You say if Tesla can pull it off, so can competitors.. Has a single exec from any auto company actually promised anything comparable though? Genuine question. Pls share a link if there is one.

     

    If not, isn't your point pure speculation?
    1 Aug 2013, 11:44 AM Reply Like
  • Randy Carlson
    , contributor
    Comments (1325) | Send Message
     
    SFA,

     

    My goodness! How the homework builds up when one is away....

     

    Let's begin by putting to rest the idea that major automakers don't know s*** about building a modern electric car and Elon Musk does.

     

    GM built their first modern electric car (which btw used a 3-phase, inverter driven AC motor) in 1964 - well before Elon was born. GM's electric car development program continued through the EV-1 years and along the way fathered the electric cars Apollo astronauts drove on the moon.

     

    The EV-1 weighed less than 3,000 pounds, of which more than 1,100 lbs was battery. This is a substantially higher battery mass fraction than Model S. The EV-1 also had a lower (0.19) Cd than Model S, an aluminum structure like Model S (including cast aluminum shock towers, btw). The EV-1 achieved 80 mile range using lead-acid batteries with 35 Whr/kg specific energy. If one substituted the same weight of Panasonic NCR18650A Li-ion batteries (245 Whr/kg), the EV-1 range would be 580 miles or roughly DOUBLE that of Model S. The EV-1 came to market in 1996. That is sixteen years before Model S.

     

    http://bit.ly/1eeDebR

     

    The economic viability of Tesla's Gen III car is dependent on availability of higher specific energy (Whr/kg) batteries. I did an analysis of this issue here:

     

    http://bit.ly/XrmOpZ

     

    The underlying 'magic' that comes with higher specific energy batteries is that with such batteries, you can build an EV with lower battery mass fraction for a given range capability. That puts the manufacturer in the position of selling the customer less batteries and more car for a given price, making the proposition of an electric car more attractive.

     

    What all the 'short range' EVs have that Model S does not have is the correct mass fraction for a viable 200 mile range EV built with next generation Li-ion batteries. What this means is that the LEAF, i3, 500e, etc. will be spot-on competitors for Tesla's Gen III car when the better batteries show up. And Tesla is not going to be able to build a Gen III car at the proposed price point until those better batteries become available. Tesla's would be competitors are 'skating to where the puck will be'.

     

    The notion that Tesla has the highest power EV charging system with their 120 kW SuperChargers is simply wrong. Aerovironment currently has a charger for EV fleet operations with more than DOUBLE the power:

     

    http://bit.ly/1eeDckg

     

    I recall, though I can't locate a reference, that Aerovironment experimented with very very fast recharging of the VRLA batteries in the GM Impact (predecessor to the EV-1) that used a ~500 kW charger to fully recharge the vehicle in 2 minutes (VRLA batteries are tough), just the same as pumping gas...

     

    And finally, heating and cooling batteries? If you imagine Tesla has the most sophistication in this area, take a look at what GM does with the Volt battery:

     

    http://bit.ly/1eeDebT

     

    Don't get me wrong though. Elon Musk and the team at Tesal are very good. They have produced an exceptional car design that gets the most out of current technology. But they are not the only folks ever to do that, and they aren't the only engineers around today that can build first class EVs. It is economics and the facts of their market pisition, not lack of technical competence, that has ICE makers today building smaller, shorter range EVs.
    1 Aug 2013, 05:52 PM Reply Like
  • AlexiaEP
    , contributor
    Comments (1076) | Send Message
     
    "Let's begin by putting to rest the idea that major automakers don't know s*** about building a modern electric car and Elon Musk does."

     

    Nope, not ready to put it to rest considering what they've put out there 'today'. It's irrelevant what they've done in the past. It only matters what's on the road now. If they actually knew what they were doing, BMW wouldn't have bothered with the i3 and if GM was that brilliant, then they'd a) not have destroyed the EV1 in the first place, b) hired all those EV1 people back (or their children), and c) wouldn't now have just decided to put together a 'Tesla study group'.

     

    "It is economics and the facts of their market pisition, not lack of technical competence, that has ICE makers today building smaller, shorter range EVs."

     

    Okay, let's run with that and for argument's sake I'll agree with you and concede 'someone' knows ****, but clearly that 'someone' isn't in control at GM or BMW, or, or, or, and until such time as they do become in control, it's all irrelevant. Arms and legs might be moving, but they aren't going anywhere in a hurry.
    2 Aug 2013, 10:24 AM Reply Like
  • SA FAN
    , contributor
    Comments (76) | Send Message
     
    Randy, Thanks for the detailed response. I respect your knowledge on the subject.

     

    I differ on the conclusions though:

     

    Lets say I agree with all the info you have. In other words, your conclusion is that Tesla made it primarily because of 'business acumen' of Elon Musk. Fitting all the pieces of puzzle together properly.

     

    Now, didn't Bill Gates win big with a similar business acumen? Who knows, there might have been 100s of other better operating systems out there than the very first version of DOS.. Didn't Steve Jobs win big with similar business acumen? There were many mp3 players before ipod, there were many phones that could connect to internet before iphone.

     

    So if business acumen is the key strength of tesla, so be it. They can still win big with just that with a man like Elon Musk at the top.

     

    Finally, all the data you provided (which is valuable) gave me one signal: "keep a close eye on competition". But it doesn't give me the signal of sell the stock or short the stock.

     

    I wish I could say "I'll believe it, when I see it" about competition. But unfortunately in stock market we get paid for foreseeing things. So at a minimum I need a top-level exec at an auto company come out and say "We are going to build a mid-size 200mile car that will cost about $35K by 20XX year" putting his or her credibility on the line. That 20XX better not be too far behind 2017. Even better, together with a convincing solution for long distance travel - rental suv's is not, fast chargers at dealerships is not (god, someone pls talk to Nissan). Then I will start worrying about my long position. Even then you see, the competitors and Tesla "together" can succeed in converting us from ICEs to EVs enabling Tesla to still make a decent chunk of money.
    3 Aug 2013, 03:53 PM Reply Like
  • CKsensik
    , contributor
    Comment (1) | Send Message
     
    Anyone have the actual Goldman report?
    17 Jul 2013, 09:56 AM Reply Like
  • Randy Carlson
    , contributor
    Comments (1325) | Send Message
     
    SAF,

     

    First off, I don't recommend selling or shorting the stock this very instant or even sooner... I do believe thoughtful investors should be aware of where Tesla is in relation to the market (they are really small) and what competition is out there (the big guys are suiting up, and even if they have thus far not chosen to build long range / high performance EV, that doesn't mean they don't know how. It just means that for a big ICE company that doesn't make business / economic sense. Yet.)

     

    Tesla has done some technical things 'right' compared to the other folks, and that is why, among other reasons, they are in the market with a long range EV. The major ICE guys - or at least a few of them - are on-track to try overcoming Tesla's cleverness by 'brute force'. GM bought into Envia and is driving battery improvements. BMW (and VW/Audi) are heavily committed to doing carbon fiber structures in volume production for light weighting... These are not 'me too' strategies, these are 'kick-your-butt' strategies that can work if you have deep pockets. GM, BMW, VW all have deep pockets. So, I don't think Tesla is in for a free ride...

     

    The 'big win' for Tesla is likely to be something that dominates the industry without having to displace incumbent players. Something like getting other carmakers to buy into a Tesla owned/operated SuperCharger network. I think they can make more money that way than they can by selling cars.

     

    And this brings me to what is my big concern about Tesla and Elon Musk. I haven't seen Musk carry off the co-opting of a major player - in any of his ventures - in the same sense the Steve Jobs co-opted the music studios into supporting iPod / iTunes or AT&T into supporting iPhone. That is the kind of 'political' maneuvering it will take to do a SuperCharger deal, or something similar that will bring in really big returns without displacing incumbent car makers. Can Musk and Tesla pull it off?
    3 Aug 2013, 08:28 PM Reply Like
  • AlexiaEP
    , contributor
    Comments (1076) | Send Message
     
    Yes. Just watch them do it. Bets have been placed, we only need to wait it out.
    4 Aug 2013, 12:36 AM Reply Like
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