Seeking Alpha

Goldman Sachs weighs in on Tesla Motors

  • Goldman Sachs maintains a Neutral rating on Tesla Motors (TSLA) after meeting with management.
  • The investment firm heard from Tesla execs that the Model S build out will step up in H2 and the Model X should be out before the end of the year.
  • Of note, Tesla management indicated the company's commercial relationship with Panasonic hasn't changed. The statement could be taken as a denial that Panasonic has pulled out in any way from the Gigafactory project.
  • TSLA +0.2% premarket
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Comments (25)
  • John Petersen
    , contributor
    Comments (30626) | Send Message
     
    Panasonic is currently the sole source supplier for the battery cells used in Tesla's cars. Tesla hopes Panasonic will become a partner in the gigafactory, but that apparently hasn't happened. It will be fascinating to see whether the relationship changes in the future.
    10 Apr 2014, 08:06 AM Reply Like
  • Tiderip
    , contributor
    Comments (136) | Send Message
     
    How do you know that??????????
    10 Apr 2014, 08:51 AM Reply Like
  • JRP3
    , contributor
    Comments (8857) | Send Message
     
    He doesn't.
    10 Apr 2014, 09:22 AM Reply Like
  • MarketLost
    , contributor
    Comments (2916) | Send Message
     
    Correct, he doesn't know, but neither does anyone else. This is just another way to say that Tesla neither confirms, nor denies anything.
    10 Apr 2014, 09:40 AM Reply Like
  • John Petersen
    , contributor
    Comments (30626) | Send Message
     
    If Tesla had an agreement with Panasonic that went beyond the previously disclosed cell supply agreement, it would be required to file a Form 8-K with the SEC disclosing the execution of a material contract and promptly release the news to the public.

     

    No Form 8-K filing = no contract.
    10 Apr 2014, 09:52 AM Reply Like
  • MarketLost
    , contributor
    Comments (2916) | Send Message
     
    Hi John, I agree with your contention that they would have to file an 8-K. I'm just a bit too conservative to think that negotiations have completely broken down. However, the fact they announced without the partnership, and the fact its over a month since the factory was announced, means that negotiations are quite a bit tougher than Tesla made it seem.
    10 Apr 2014, 09:56 AM Reply Like
  • David at Imperial Beach
    , contributor
    Comments (4359) | Send Message
     
    What J P said isn't controversial in any way. Panasonic is the sole source for Model S and Model X battery cells. Tesla has no contract in place with any other battery cell supplier. Not only does Tesla hope Panasonic will become a partner in the gigafactory, they have explicitly encouraged investors to assume that they will, so they will have egg on their face if Panasonic decides not to. It apparently hasn't happened because an announcement would be expected if and when it does happen, and so far there has been no such announcement.
    10 Apr 2014, 10:23 AM Reply Like
  • Technology Equity Strategies
    , contributor
    Comments (2603) | Send Message
     
    I think the statement simply confirms that Panasonic has neither committed to join the joint venture, nor definitively stated that it will not.

     

    This state of limbo is likely to continue for months. Any professional who has worked on a large cross border joint venture can attest that putting such transactions are unbelievably complicated. Its actually far more complicated than a major acquisition. Every element of the business, the products, the IP, the people, the supply chain, the financing and the risk allocation must be sliced and defined.

     

    Given how much Tesla has gotten its tit stuck in the wringer here, I am sure they are on their knees performing all the various party favors necessary to hold Panasonic at the table. In its heart, Panasonic can not want to do this. It slices up its own business and creates conflicts of interest and operational headaches that will go on forever, until the JV is ultimately wound up (either in an acquisition, or in a law suit over the contract that is now being discussed).

     

    But Panasonic probably does not want to crisply walk away either, since that can disrupt its customer relationship.Thus the two companies will be locked indefinitely in a quagmire. BTW, this uncertainty and state of half pregnancy will exist, even if basic terms are agreed in principle, while the devil in the details are worked out. It will exist even if the deal is inked, as the real life problems of such a complex deal are implemented.

     

    Delay and frustration of a nature the Tesla management team never intended or imagined, and enough to make them long for the next startup in a simpler industry.
    10 Apr 2014, 10:32 AM Reply Like
  • bubba1979
    , contributor
    Comments (176) | Send Message
     
    I think its the opposite. If Panasonic wanted to give the business to Samsung or lg or jci, it wouldn't be looking for partners to come up with more cash for the gigafactory. Sure Panasonic hasn't located the cash, so they haven't signed the agreement, but if they were about to back out we would be hearing from battery competitors. IMHO Panasonic stock will take a hit if they don't take the agreement. Tesla can still find another battery partner though.
    10 Apr 2014, 11:03 PM Reply Like
  • Technology Equity Strategies
    , contributor
    Comments (2603) | Send Message
     
    Bubba,

     

    You aren't hearing from other battery partners because none of them would have any interest in biting into this turd sandwich. They are hoping and expecting that Tesla remains Panasonic's cross to bear.

     

    This is a bad deal for any battery supplier. A vertical joint venture with a volatile company whose CEO can not be relied on to make rational business decisions based on calm risk analysis and dollars and cents.

     

    Panasonic should do exactly what they are doing. Move very slowly and say no as politely and as late as possible.

     

    Panasonic will quietly back out at a distant time in the future when both Tesla and Panasonic hope people aren't paying such close attention.

     

    BTW, if I were one of the people who bought that terrible bond based on the whispers that Panasonic was going to come in, I would be asking for my money back. They certainly have a right to ask for that, and some chance there is enough legal exposure for them to get some kind of kiss.
    11 Apr 2014, 12:02 PM Reply Like
  • Frank Greenhalgh
    , contributor
    Comments (2689) | Send Message
     
    "Tesla management indicated the company's commercial relationship remains the same." This only means that Panasonic will continue to sell and build about a million batteries for Tesla over the next years. Still no Gigafactory commitment.
    10 Apr 2014, 08:09 AM Reply Like
  • stockahead
    , contributor
    Comments (44) | Send Message
     
    What? GS stays neutral even "after meeting with management" ? Folks, these are good news.
    10 Apr 2014, 08:28 AM Reply Like
  • Tales From The Future
    , contributor
    Comments (6064) | Send Message
     
    GS was one of the major underwriters for the big TSLA convertible bond deal.
    10 Apr 2014, 09:09 AM Reply Like
  • Dr.KennethReid
    , contributor
    Comments (21) | Send Message
     
    There are vast cultural differences (both corporate and East/West) between Panasonic and Tesla that make it unlikely Panasonic will take a significant role in the gigafactory. Basically, Panasonic operates within a culture of risk-aversion and conformity, whereas Tesla, more than any company I can think of, exemplifies a culture of risk-seeking and innovation.
    10 Apr 2014, 09:43 AM Reply Like
  • David at Imperial Beach
    , contributor
    Comments (4359) | Send Message
     
    However, Japanese companies are also loathe to terminate an ongoing partnership with another company like American companies are. They work hard to maintain relationships and meet expectations. Tesla has clearly laid out its expectations in this matter. If those expectations are at all realistic Panasonic would likely lose face if they terminate the relationship.

     

    Panasonic is actually getting a pretty good deal with the proposed partnership. Tesla could have laid the entire burden of building 3.5B cells per year for the Gen III car entirely on Panasonic.
    10 Apr 2014, 10:29 AM Reply Like
  • MarketLost
    , contributor
    Comments (2916) | Send Message
     
    @Dave, I would agree with you on the Japanese companies don't like to give up partnerships, but they certainly will do it. GM had partnerships in the NUMI plant with Toyota, and the CAMI plant with Suzuki. Both of which have been terminated.

     

    I would have to disagree about the second point. As nobody can produce that amount as of today, Tesla would have to spread out the requirement, which would likely benefit Panasonic more because they only have the risk with respect to not having exclusive rights. This way, they have a lot of risk to not only furture profits, but of losing their investment.
    10 Apr 2014, 11:37 AM Reply Like
  • prop_trader
    , contributor
    Comments (12) | Send Message
     
    The author states that the Model X will be out by the end of the year. The clarification should be the drivable 'prototype' "may" be out by the end of the year. No date on when the final version will roll off the assembly line.. "late 2015 at the earliest"? I am still looking for the articles that said Panasonic was a partner in the Gigafactory. There was only assumptions that they were never an official statement from Panasonic saying they were involved. The only semi official statement from Panasonic was that they thought it was too risky and they were not involved.
    10 Apr 2014, 09:44 AM Reply Like
  • Frank Greenhalgh
    , contributor
    Comments (2689) | Send Message
     
    David: Do you think that Panasonic would be upset if Tesla "laid the entire burden of building 3.5 B cells"? I think they would welcome it. Maybe they know Tesla has no where to go without risking reliability with a different battery manufacturer.
    10 Apr 2014, 10:50 AM Reply Like
  • User 7369811
    , contributor
    Comments (259) | Send Message
     
    It just strikes me as poor form to suggest in any way there will be a partnership before there is one.
    10 Apr 2014, 11:23 AM Reply Like
  • Anton Wahlman
    , contributor
    Comments (3232) | Send Message
     
    I have not read the full Goldman report, but I noted this sentence: "An all-new drivable prototype of the redesigned X should be out in 4Q14." Okay, let's say that's the case. How long does it take from when you first have a drivable prototype until you are delivering the car to consumers?

     

    Every other automaker tells me that it's 2 to 2.5 years. Clearly Tesla has some magic that can speed up this test and verification process, durability testing, etc. But how much less? Why hasn't the rest of the industry come up with a way to reduce the time from a drivable prototype to customer deliveries? What is everyone else in the industry missing?

     

    I don't know the answer, but based on the idea that a drivable prototype isn't on the roads until 4Q14, it would be hard to conceive of the car being delivered to regular paying consumers until late 2015 at the earliest. I mean, don't you need at least a year to test the car for durability in all extreme climates?

     

    My understanding is that Tesla's official guidance is that the X will be delivered some time in the March-June 2015 timeframe. I'm just unable to square this with the first drivable prototype not being on the roads until 4Q14.

     

    Can someone please tell me where I'm wrong?
    10 Apr 2014, 02:24 PM Reply Like
  • bubba1979
    , contributor
    Comments (176) | Send Message
     
    Tesla was saying volume production of the X around April 2015. They have prototypes already. They likely will have a production model in Q4 of this year to shake out. You are reading the right stuff, but the words about prototypes are confusing. The S is already a mule for the batteries and motors ;-)
    10 Apr 2014, 11:08 PM Reply Like
  • Frank Greenhalgh
    , contributor
    Comments (2689) | Send Message
     
    I believe the S and the X share the same basic chassis. This will help, although the addition of front wheel drive has to be tested. When Detroit goes into production they mean ten of thousands of cars. To insure their costs their purchasing and manufacturing people work to reduce cost. Tesla is going to build maybe 200 cars a week to start. They will release them and the customers will be beta testers. Tesla's customer service will correct the defects and everyone will be happy. The alternative to waiting and going broke.
    10 Apr 2014, 03:03 PM Reply Like
  • Doc's Trading
    , contributor
    Comments (1742) | Send Message
     
    Technical analysis...TSLA... Drop stop on short position from $220.10 to $218.10...I still expect double bottom at 203 area to be broken and another severe drop to follow.
    more later....
    10 Apr 2014, 03:14 PM Reply Like
  • Renewable Investor
    , contributor
    Comments (111) | Send Message
     
    Guys Tesla future is tied to politics not profits. Without a understanding of green politics you should not be making a bet on Tesla. For the next 3 years Tesla is the poster child for Obama and his green agenda.
    I am not a fan of Elon Musk but I will him one thing, he knows better than anyone how to play the Obama Green Game and work the liberal do gooders.
    10 Apr 2014, 11:12 PM Reply Like
  • Technology Equity Strategies
    , contributor
    Comments (2603) | Send Message
     
    Renewable,

     

    I totally agree. Its just so hard to know whether the incentives are coming or going. In California and Norway, I think the trend is down. Thats not good.

     

    But will they pop up somewhere else thats important. I doubt they get a tailwind in Germany. But will they catch a break in China?
    11 Apr 2014, 12:09 PM Reply Like
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