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Tesla Obligations To Panasonic And Batteries

|Includes: Tesla, Inc. (TSLA)
Summary

$17.25 bn Purchase Obligations.

If Panasonic is the provider of the batteries and not Tesla, who has the edge.

Exposure to Yen currency risk.

In the latest 10k contractual Obligations amounted to $5.620 Billion in 2018 and a total of 31.424 billion. $17.525 bn are purchase obligations. As stated on page 58,

'These amounts represent (I) purchase orders of $1.18 billion issued under binding and enforceable agreements with all vendors as of December 31, 2017 and (ii) $16.34 billion in other estimable purchase obligations pursuant to such agreements, primarily relating to the purchase of lithium-ion cells to be produced by Panasonic at Gigafactory 1, including any additional amounts we may have to pay vendors if we do not meet certain minimum purchase obligations. In cases where no purchase orders were outstanding under binding and enforceable agreements as of December 31, 2017, we have included estimated amounts based on our best estimates and assumptions or discussions with the relevant vendors as of such date or, where applicable, on amounts or assumptions included in such agreements for purposes of discussion or reference. In certain cases, such estimated amounts were subject to contingent events. Furthermore, these amounts do not include future payments for purchase obligations that were recorded in accounts payable or accrued liabilities as of December 31, 2017.'

Given batteries are the source of power for Electric vehicles, isn't Panasonic the more attractive company ? Why does Tesla receive so much attention when the source of power for their cars are Panasonic battery technology. Given the contractual obligations both parties are reliant on each other (Panasonic may indeed be the biggest payable of Tesla), however Tesla has committed to significant purchase obligations.

I also noted that Tesla is exposed to currency risk as Panasonic prices its products in Yen. It seems from the 10k that they do not hedge cost risk from the value of yen appreciating. Also there sales are not significantly in Japan (yen) to offset some of their currency exposure. I am assuming battery costs are a large cost. Of course, if the yen would depreciate then Tesla would benefit.  This year Usdjpy has depreciated from 112.60 to 106.70 (5.23%).

I am interested to hear what others think of the above.

Disclosure: I am/we are short TSLA.