Like I have been saying, in the short term with Tesla I am bullish, in the longer term, then we
need to see some more results to get a better idea of how this company can ramp up their EVs.
Currently we have absolutely no idea, other than Elon telling us they will increase 50%
year over year, but there is no signs of that, nor have we been given any indication
as to when 4680s will ramp as of recent. And no one ever bothers asking for specifics,
which is kind of frustrating. It's as if the company's main value is based on FSD,
yet when we saw the FSD v12 demo, it had zero impact on the stock price.
Which makes you wonder, why is Wall Street placing a p/e ratio of 72 on this company,
if a brand new state of the art AI based FSD has no impact on the stock price?
Therefore perhaps more of the value is placed on the EVs side of the business, and EVs being
the future and replacing gas cars, then sure Tesla is so much further ahead than anyone else.
But that is totally irrelevant if they cant ramp fast enough. With targets of
20 million units a year by the end of the decade, perhaps that is extreme. However,
if you do the math, Tesla hitting just 5 million a year, should be great for the financials anyway.
Basically there are very few signs of Tesla ramping their EVs. Oh well actually that's where
I am wrong, you might think, as Texas and Berlin have about 600,000 a year more capacity. Yes, you
are right, but an EV is useless without a battery, and thats what we want to see, more batteries.
Well I am wrong again then, because CATL have completed a new factory with 80 to 100 GWh a
year capacity, which is enough for well over a million more EVs. Yup, except it appears that
these are all ear marked to replace the current LFP batteries, and then those old LFP cells,
don't have any other vehicles to go in, so they will likely end up in Megapacks.
In fact these new CATL cells make it so much more difficult for any other manufacturer
to compete using conventional LFP cells, it is another competitive advantage for Tesla.
10% more energy density and structural battery pack, that is a massive jump.
But there is a new Mexico factory, and Tesla are saying they can construct that
in as quick as 7 months or so. Yes, but they haven't broken ground on it yet,
possibly due to some political issues in Mexico. I think most investors hoped, or expected that
Tesla would have broken ground on Mexico by now, from when it was initially announced.
The thing is though, Tesla is a company full of surprises,
we never really know whats going on. Its easy to infer this negatively, if thats the light
you want to prove it. But then it is probably better to take a more common sense approach.
CATL have their new cells, the M3P cells, which seem to be a break-through, enough to get costs
down that little bit more, and range up that much further, which would thus make all the
difference at this stage in the game, well at least to Tesla as they are already in profit.
Now its probably smart for CATL to run their new factory first,
and test the cells and batteries, before building their next one. Which has been
rumored to be partnered with Tesla in Texas, and/or possibly also Mexico.
We are being given the number of 100 GWh a year capacity for this new factory. Which is likely
enough cells for close to 2 million compacts a year, which could be about the run rate we are
hoping from Giga Mexico. And although the cell and battery factory may take longer to build,
its as important as the actual run rates. Once the cell and battery factory is built, we would expect
the ramping to be fairly quick, at least when compared to Tesla having to ramp up a totally
new production process, i.e. gen 3 production with the unboxed parallel production line.
Therefore I think Tesla want to get the giga Mexico factory sorted first,
and start building that, then lock in the cell and battery factory. Tesla
could likely stock pile ample cells to cover the early stages of production for Mexico.
I just like to see the breadcrumbs of how Tesla can get to where it says. I want to
see the evidence. And there is so much that Tesla dont tell us, and every chance anyone
gets to ask a question, no one ever asks, and asks the most useless questions, always,
I dont understand it. I don't know, perhaps I need to have more faith in this, and am too
skeptical. Or had my hopes for 4680s destroyed in the past, it is now affecting my judgement.
But either way, it is still all going to take time to happen. Look how long the Cybertruck has taken.
However, all it will take is a new headline out of the blue that says "CATL and Tesla lock in a
new partnership to build 100 GWh factory in Texas" or something like that. And these things happen.
I mean Tesla need to make more vehicles. The market for Y and 3 is somewhat saturated, without
having to drop prices that would kill profits, at least in this market with rates where they are.
So Tesla need to launch a new model, and one that is for the mass market, that will sell in
the millions a year. This is how Tesla grow. Sure we have the Cybetruck, and there are some people
out there who think Tesla might sell a million of those a year. But I find that super unlikely,
I doubt Texas capacity is close to that, and I don't think Tesla would make another Cybertruck
factory, at the opportunity cost of making a compact factory. Why? Because its not all about
getting more profit per vehicles, its also about getting as many Teslas on the road as possible,
because every Tesla is a potential Robotaxi, or at least an FSD subscription down the road.
The Cybertruck was great at the time, but Tesla have a mission,
its not to deliver the most bad ass product ever created to as many people as possible. It's to
transition the world to sustainable energy. This will be done more through smaller EVs, especially
when a Cybertruck likely consumes about 3 times the number of cells when compared to a compact.
Elon says Tesla should keep growing at 50% a year, or at least get back to that number.
Well that is only going to happen by making more EVs, which means they need to make smaller ones,
that can be made faster, consume less resources, smaller batteries,
be affordable and with gen 3 manufacturing. The Cybetruck doesn't meet that criteria.
If Tesla can find a new sweet spot here, around the $25,000 price point,
plus rebates, and subsidies, etc. Then this car will be such low cost,
especially without fuel and servicing. In fact a great deal of the future of the company, industry,
perhaps climate change, depend on the how well this car will sell and how fast it can ramp.
Again this will come down to CATL's battery factories, and how many they want to build
for Tesla, outside of China. Tesla are not vertically integrated enough to control
their growth yet. They are at the mercy of other battery makers. Panasonic as well,
Tesla need Panasonic's 4680 cells to ramp up Cybertruck, if Tesla haven't made enough
progress with their in-house cells. The Cybertruck will be in low enough quantities, that Tesla can
source enough energy density cells to ramp that vehicle, without having to ramp 4680s too high.
At the same time Tesla is doing everything right, in order to scale up to the level they want,
get cell and battery costs down, to a level it makes EVs more affordable again. It sounds like
its still a matter of solving dry battery electrode processes, and hopefully once its
solved, then all systems are go, and the process and be rinsed and repeated easily. There will
be 100 GWh in Texas, and then another 100 GWh of 4680s in Nevada. Hopefully Tesla can replicate the
4680 manufacturing easily enough and fast enough, to see the kind of ramp we want, as every year
it gets harder and harder to get 50% growth, as there is 50% more than the previous year to grow.
Without 4680s, Teslas cell supply will really depend on CATL, and the involvement that Tesla
have with them. The likes of Panasonic, or LG, they make such small quantities,
Tesla has outgrown what they can offer. For the numbers that Tesla need to see
any significant growth they have to look to CATL for now, whilst waiting to take
control of their own in-house cells. This is why 4680 cells are so important.
The most important element next year is likely FSD progress and looking to see if it becomes
safer than a human, and potentially we will have a training computer to facilitate that soon. And
apparently the 10,000 H100 cluster is about 5 to 10 times faster than the precious A100.
This is pretty much an order of magnitude more performance, and will mean Tesla can
train that much faster, perhaps what took a week now takes a day, this is a big deal.
If Tesla solve FSD, next year, or show a very believable path to it being solved
in the next couple of years, then the market wont care so much about the 4680 run rate,
in fact it barely cares now. The market really doesn't value Tesla
correctly a lot of the time. And this is something I have learned.
Like right now, if you truly believe version 12 FSD is an absolute game changer,
then you should be buying more Tesla shares, as the market didn't care.
Its not so quantifiable for myself. But if I saw that Tesla ramped up 4680 cells to 50 GWh a year,
and was hitting the same energy density as 2170 cells, without using silicon in the
anode already. Then I would buy a ton of LEAPS, as I can quantify the value on that. But I need
to see evidence of it, unfortunately Elon's word on the potential progress,
is not good enough. But who knows perhaps this time FSD really will be solved next year.