CHINA Carry on, Elon is
asked about China, and potential geopolitical risks that may affect Tesla. Elon is always
very diplomatic with China. It is imperative for Tesla to maintain peace with China, as
Tesla's China operations current account for a really large portion of profits. Not only
that, they have the LFP cells, and all the refinement. I believe as a result he may give
China more praise than they deserve at times. I mean its just good business, why would you
want to make enemies of the CCP, when they have so much power over your business.
Elon also used to literally laugh at how bad BYDs vehicles were and what they looked like,
which is fair enough, if you've seen them. But today, well BYD certainly stepped up their
game. Likely surprising Elon, as it was a massive jump in improvement. BYD has been
able to grow the most as it is self-funded by it's highly profitable cell phone handset
business.
All others are cash furnaces, and on trajectories to run out of cash, unless something saves
them. I'll do a video soon going over some of their latest financials, to see if anything
has changed. They all seem to have very high OPEX for some reason, relative to Tesla at
the same production rate. And these companies aren't going all in on investing in R & D
for FSD. Tesla does an exceptional job at keeping costs down. But perhaps it's to do
with the adversity that they have faced during uncertain times. Compared to the others that
had no trouble raising massive amounts of capital when their stock prices were inflated.
But it will catch up with them, if they don't better streamline their operations.
I believe a lot of them are waiting for a new battery technology, their savior that
will suddenly give them the range they want, at the cost that leaves a profit. The longer
they can hang in there, the higher their chances. And they may very well be right, what with
the manganese cathodes coming into fruition. So they do have a chance. And as they haven't
invested hundreds of billions into cell plants with nickel cathodes, they have the ability
to swap over their battery technology a lot faster than legacy autos, as the majority
are not vertically integrating their battery production.
Yea, in case you couldn't tell I am super excited to start talking to about this new
battery tech. I even have about half a dozen manganese cathode scripts I've written about
in the past, that I haven't had time to finish. There is too much to cover right now. Bear
with me, some of it may be a little belated, but I don't want to miss any of it.
The world needs a lot of electric cars, but these businesses do need to remain solvent
in order to produce them. There will be a tipping point when production costs do come
down, and likely electric vehicle prices rise, as consumers see more benefit in electric,
and likely ICE supply will dwindle on top of that. I think between now and then these
companies just need to stay afloat to make that transition, build as much market share
as they can, without over-stretching. I am talking about the Chinese EVs, not Lucid or
Rivian. Whereas Tesla is in this unique prime position,
where they can stretch as far as they can cater to, as they are so very profitable,
and can just eat so much of the market share.
Legacy may also be able to self fund themselves, and where they can't they will use their political
connections to the full extent in hope for survival. I just hope that this time when
GM goes under, they stay under. Ford is showing more promise, Stellantis doesn't look like
it has much of a chance, Volkswagen probably does, but Toyota is in big trouble, unless
this hybrid tax credit is their way of survival. Mercedes has a chance too, due to premium
branding, and the cost of a electric motor and battery costing about the same whether
it's for Mercedes of Ford. Hyundai is potentially promising, but they do not get great range
from their batteries, and thats with nickel based cells, in other words they will not
benefit from the manganese cells. I seem to have digressed there with a succinct
recap on the overall industry.
But I guess the main concern investors have in regards to China right now, is the potential
them invading Taiwan. Now this is not really a Tesla specific concern, it would very much
affect the entire globe and just about every business. Personally I think it unlikely that
China would invade right now, particularly seeing what happened to Russia. China would
not be close to as self-sufficient as Russia. I suppose the point is, that if this did occur,
there would be more things to worry about than your Tesla shares crashing.
4680 We are asked for a 4680 update, which in my
opinion is where the majority of the growth is going to come in the near future. He says
they are making a decent number every week. And Elon thinks that they will be in high
volume production by the end of this year. He says high volume production, which is a
term he has used before talking about the 4680s, as well as also referring to it reaching
volume production too. Now I don't know what the difference would be whether the cells
are in volume production or high volume production. Or perhaps its call high volume, because there
are about 828 times as many cells made as cars, so the volume will be significantly
higher.
My assumption was though, that volume production of the 4680 cells would equate to enough cells
for volume production of the Model Ys, 5,000 units a week, or just over 4m cells a week.
Which would be enough cells to carry on from the volume production rate we intend to hit
by the end of the year using the 2170 cells. Elon re-iterates he is confident that they
can get to a high production rate by the end of this year.
It's just that it's new technology, once it's sorted they can just ramp it. Therefore it
is an S curve, but they are not entirely sure at what stage they are on the S curve. It
may hit high production before the end of the year, we are not quite sure. Look as investors,
it sounds like we all seem to be patient enough to give this company 5 years at least before
we start taking profits. The 4680 is so important, and makes such a big difference, even if it
doesn't happen at the end of this year, it's not the end of the world, or the company.
The new factories run rates will drop probably quite significantly, in the worse case scenario,
and we might face something reminiscent of the infamous Q2, however this time around
Shanghai should be firing on 8 cylinders and carry the company.
The point I am trying to make is even if the 4680s don't high volume production until sometime
next year, or even at the end of next year, that's not the big deal. The big deal is that
they hit it, and it was possible. Even if it's about 3 years later than they said on
Battery Day. The 4680 is a literal money printing machine, and I do mean literally mean literally.
As these batteries have an intrinsic value of saving more money than they cost to make,
with just about bottomless demand, and that can be done with energy storage alone. Not
that they will be used for that.
I have bet, or invested, on these 4680 cells hitting some serious high volume production
within 2 years time with my LEAPS, I felt that that was a safe and conservative enough
time frame to cover any potential downsides. Because I believe in this product that much,
and I want to own and be a part of it as much of this company as I can. To be clear my overall
LEAPS strategy isn't to trade them. It's to lock in today's low low prices so that perhaps
in 2 years time I can afford to exercise them. Of course I have only been building my LEAPS
positions on the extreme dips just to be extra careful. And I only put 10 to 20% of my portfolio
into LEAPS, as they are not without risk. My main strategy is holding.
100 GWh A number that Tesla have thrown around several
times before is 100 GWh run rate of the 4680 cells, so perhaps there is a possibility that
this is what they call high volume production, perhaps. I know its such a big number it sounds
unlikely, but don't forget the planned on hitting that amount of production this year,
when they initially introduced the 4680 on Battery Day. Then last year we were even told
we could hit a run rate of 100 GWh by the end this year.
On the other hand do the numbers. 1/2 a million Model Ys with 80 kWh batteries is 40 GWh already.
Then another 1/2 a million Cybertrucks with 100 kWh batteries, then we are practically
at 100 GWh already. That is the necessary run rate for those two lines to hit their
targets.
OUTPUT Elon goes on to reassure investors that although
the 4680s are taking longer than we expected, that they still have enough output for 1.5m
cars this year. In other words, Elon is saying even without 4680 volume production, Tesla
are still on track to hit 1.5 million cars for the year. That means Q3 and Q4 need to
collectively produce 935,000 vehicles. This would be an average of 467,000 per quarter.
Elon thinks that Tesla can average over 467,000 deliveries for the next two quarters. Bear
in mind in addition to that, we lost Shanghai for half of July too, due to line upgrades.
Implying Q4 is going to be carrying it the most. Lets say we lost 16 days in July, when
it was at the previous run rate of 2500 a day. That is instantly a 40,000 discount from
Q3, that must must be made up for in Q4. Well just going by the averages alone, we are already
at over a 500,000 for Q4.
We also have Berlin estimated to go from a run rate of around 1,000 a week, to 3,000
a week, but not until an upgrade in October. October is also part of Q4. On top of that
we would also expect Austin to have ramped up more too, a lot more in Q4 than Q3. In
fact we are still being told both Austin and Berlin will hit volume production by the end
of the year. And this is with 2170 cells.
Ok, I am not sure if you are following the math here, but this does not match Elon's
call on hitting a 2m a year run rate by the end of the year. Oh and like I said this is
with 2170 cells, what if Tesla also hit volume production on 4680 cells too. Judging by these
numbers Q4 could be closer to 550,000, or a run rate of 2.2 million. But we will do
a lot of math later to try and estimate what it could potentially come to.
SUMMARY Alright, I think we will go on to working
out what the potential run rate might be by the end of the year, judging by this information.
Which does sound more accurate to base it on compared to a rounded down 2 million a
year run rate.