So you might wonder why I am talking about the new batteries so much lately, or some
of you at least, and have become the battery economist, although it's good to see a lot
of you also understand and care as much as me.
But others are also wondering, who cares what batteries Tesla are using their new vehicles,
as long as they are getting the orders.
Their demand is maxed out for the year, whether they are 2170 batteries or 4680 batteries.
Demand is only half the battle.
You need supply for the other half, oh and at a profit preferably too.
Now perhaps I am too deep in my own little Tesla world, perhaps I expect everyone else
to automatically understand the same as me.
So perhaps it was remiss of me to assume automatically that everyone else will be as excited about
batteries as me.
So why won't I stop talking about batteries?
Why?
Because as far as I can tell this is the biggest time in Tesla since perhaps the Model 3 launch,
or possibly getting Model 3 to volume production.
That was possibly the last milestone of this sort of magnitude.
Of course back then I could have been commenting on Tesla's level of production and talking
what a big deal it was to hit volume production, and people might not have understood back
then either.
I don't even think everyone even realizes today still, just what an achievement volume
production makes, especially for economies of scale.
Elon continually likes to express just what
an achievement volume production is, and how difficult it is to reach, let alone doing
it a profit.
And a lot of people still don't quite understand this.
A lot of people think the Chinese are going to be able to achieve this, and then take
over America with their cheap Chinese EVs.
Except that the price that Tesla sells their vehicles, for less than the Chinese can even
make them for, after they have been shipped to the US.
All Chinese vehicles, fine except the Wuling Death Trap, still make net losses on every
sale, and all of them have a dwindling balance sheet every quarter, their burn rates don't
match their reserves.
BYD however does have a profitable hybrid business to support it, and is more vertically
integrated too.
But they can still only reach half way to volume production yet.
But the Chinese can make so many more vehicles,
because they have all those LFP batteries.
Now I have been advocating, and explaining all last year about how LFP is the savior,
it is the necessary battery, that is required for a feasible transition to renewable energy.
It is low cost, abundant, safe and durable.
But I think people seem to believe that we can just make as many LFP batteries as we
like.
Well we do hear that CATL is really growing
big, in fact 167%, isn't that huge?
Is it?
Well percentages don't tell us very much, they tell us whatever the narrator wants us
to think.
And 69% of people know this.
It all depends on where they started of course.
I mean if you start from 1 GWh in your first year, and you reach 10 GWh in your second
year then that's almost 1000%.
But you still only produce 10 GWh.
Oh but CATL are actually the largest battery manufacturer in the world, so it probably
is a big deal.
Well CATL reach a capacity of about 96 GWh last year.
That is a lot of batteries, but do you see, that Tesla will have a battery capacity of
closer to 500 GWh, perhaps sometime in 2024.
LFP is still using the old battery manufacturing processes, that mean you need a really big
factory, and get relatively small output.
They simply can't scale or ramp up close to Tesla.
It will not take long until 4680 becomes the most produced battery in the world.
Yes, iron is more abundant, but it doesn't mean you can make LFP faster, just cheaper.
The reason LFP has taken over nickel, is because Tesla haven't been working on any new nickel
factories except the 4680 which has taken a long time.
In the meantime Tesla is saying they need as much LFP as CATL can make.
Last quarter Tesla delivered just over 300,000
vehicles, at an estimate that is approximately somewhere over 20 GWh of batteries.
If CATL are at a rate of around 25 GWh, with 33% market share, then at a rough guess that
means Tesla control 26% of the global battery supply.
Oh would that mean that Tesla have 26% market share of EVs then?
Well no, as Tesla vehicles need fewer batteries than other vehicles, to get the same, or more
range.
If Tesla's use about 25% fewer batteries, then that would take the market share to around
33%.
Except we have all these cheap Chinese EVs with just 10 kWh batteries too, which skews
it again.
But if you remove those, then of electric vehicles that could legally be sold in developed
countries, Tesla probably isn't far of 40% market share.
Except these other EV companies, well they are struggling more with manufacturing lines
right now, and trying to ramp up to volume production.
They are not so battery constrained, and they make so few vehicles, they probably aren't
chip constrained either.
So what I mean is Tesla's market share is capped, because there are not enough batteries
in the world, and if Tesla had more, then they could make more cars and sell more cars.
Whereas the other EV companies, well they can't make any more, because they are struggling
to ramp up their production lines, because they didn't listen to Elon Musk, telling everyone
how very difficult this is.
Let's take everyone's favorite, a company
I believe to be over rated.
Over rated on batteries, and over rated on production, BYD.
People have been telling me all year BYD will start making a lot of EVs, and they will be
selling everywhere.
I said, ok, sure, maybe, but they haven't shown any signs of it yet.
They can't ramp up to volume production, and they are losing money on BEVs.
What about their compact, they beat Tesla
to the market, it's probably going to cost under $25,000 too, Tesla can't compete at
those price points.
Sure, and neither can BYD.
People were expecting this BYD Dolphin to be everywhere.
But guess what, they also got stuck, half way to volume production, because it's really
hard.
The same for BYD Han.
These two vehicles production has been fair consistent for the last few months.
I haven't driven a BYD, but they look like they are doing a lot better job than legacy,
but it's all moot, as none of them can make them in volume production.
Anyone can make nice cars at this level, but a company's job isn't to make nice cars, it's
to make nice profits.
BYD are probably doing the best, they are almost at volume production with their hybrid
vehicles, but perhaps fully electric is just that much more difficult.
But I keep watching.
But I did say, that there is no way the Chinese are going to flood America with their cheap
EVs.
Still not going to happen.
All they can do, and the legacy autos, is start new lines for new models, and make it
look like they are doing more than Tesla.
All EV manufacturers are starting to raise
their prices now too, I told you this was inevitable.
Yes partly because of inflation, but if you look at their financials, they had no other
choice either, or they will crash and burn.
Just like Rivian is also discovering.
These Chinese companies are almost all using LFP too, which just because we have seen percentages
increase so high, it doesn't mean it will continue to.
They are no on such an exponential path, it is far more linear, so wont see the jumps
that Tesla are doing with their batteries.
It just looks really good at the start, because the quantity is relatively low.
All the Chinese hyperbole of how successful their EVs will be, is just backed by meaningless
statistics.
But look how many more batteries Tesla will have than all the Chinese put together.
But the Chinese are ok with a 10 kWh battery for their vehicles.
If that works for them, it's better than if they were in an internal combustion.
But it's not going to affect Telsa's profits.
Tesla is about to transition from a car company,
to a battery company.
Well actually shows what you know, Tesla is a Robotics/AI company, not cars.
Well Tesla is a Robotics/AI company, when they start making some robotics/AI profit.
Right now all, and I do mean all profit, comes from selling cars.
Tesla is still very much a car company, until the financials tell us otherwise.
But now the financials are also going to show us that Tesla is becoming a battery company.
They have spent the most research and development in making the most ideal car battery.
We estimate that this will end up saving around as much as $8,000 per vehicle, at least for
a Long Range Model Y.
Last quarter there was an EBIT of around $13,000 per vehicle.
If this new vehicle is saving $8,000 just for the battery, then that is a 60% increase
in EBIT.
Which will pretty much be felt all the way to net profit.
Of course this only applies for the new vehicles from the new factories.
But within time, these vehicles will quickly dwarf all the other sales.
Implying that these new batteries alone may end up increase net profits margins around
50% or so.
Of course all the additional sales of the vehicles from Berlin and Texas too.
But liek we ere talking about CATLs improvement in batteries, well its pale in comparison
to what 4680s can ramp up.
So I wanted to point out just why, right now,
nothing is as important to look into as these batteries.
It's not because I am desperate for content, it's because it's so exciting, I can't stop
talking about it.
And that's what this channel was for, an outlet for me to talk about Tesla, so my wife doesn't
have to hear about it out any more.