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Tesla 2025: Batteries Not Included

Jul. 05, 2017 1:53 PM ETTesla, Inc. (TSLA)F, GM, TM, LIT, USO136 Comments


  • Tesla's valuation implies tremendous growth.
  • Growth in EVs will be constrained by many factors including adoption and subsidies.
  • We examine a model of unrestrained growth, i.e. growth restrained only by raw material availability.
  • Even in this Valhalla world, Tesla appears extremely expensive.

Tesla's (NASDAQ:TSLA) valuation appears stretched even under extremely optimistic scenarios. The bulls have to pray for multiple miracles.

Tesla currently trades at 8X 2016 revenues. I am using revenues here as profitability is a long elusive goal for the car maker. Yet with the Model 3 on track for production in July and a rapid ramp up expected in to year-end, the bulls are hoping that this is the start of the profit cycle.

The Gigafactory:

Underpinning the first stage of the Tesla expansion is the Gigafactory in Nevada. Currently operating at 14% of capacity, this factory will supply batteries for Tesla cars. The Gigafactory is so huge that it single handedly exceeded all the of the world's lithium-ion battery capacity in 2013.

It will produce 35 GWH of batteries internally (solar and EV) annually at peak capacity. That translates into approximately 5.833 metric tons (MT) of lithium annually, or about 31.04 MT of lithium carbonate (LCE).

Global Lithium Production:

There are plenty of good estimates out there. I have looked at them and complied my own set which I consider slightly more optimistic than the average. Below is the actual and forecast global production of lithium carbonate till 2023.

Source: USGS and Author's estimates

This forecast, if realized, will be a 11.2% compounded annual growth rate from 2015-2023. That is a very impressive number. Beyond 2023 all forecasts show a tapering of growth due to the fact that the easy deposits have been hit, the law of large numbers and the fact that it is hard to get further growth without investing massive amounts in the dictatorial regime of Bolivia, home to 70% of global lithium reserves. Here are couple of such forecasts. First from Global Lithium LLC.

And second from Sanford Bernstein and US Global Investors.

In both

This article was written by

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Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I/We are long  1X TSLA Jan 19, 2018 - 240 Strike Puts I/We are short 2X TSLA Jan 19, 2018 - 200 Strike Puts

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