Hey, I’m Steven and this is Solving The Money Problem.
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Today I’m doing something a little different.
Speculating.
In a few weeks, on four-twenty, my favourite day of the year, Tesla plans to hold its battery
and powertrain investor day which will be streamed online.
Tesla has given us a few clues on what to expect and if you’re an investor, fanboy
or curious observer, it’s worth paying attention.
The key to Tesla’s continued dominance lays unquestionably in just two places:
Autonomy
and battery technology.
History suggests there's a high chance the market simply “won’t get it”.
We need only look back to the stock’s reaction after Autonomy Day, Model Y reveal and Cybertruck
reveal -- all sent the stock tumbling on the back of what was extremely positive news.
Go figure.
So I have no idea what the stock will do.
But mark my words.
Tesla is only holding this event because they have news worth sharing.
This matters.
So why bother speculating when the event is only a couple of weeks away?
To help you think.
Sometimes it’s worth considering possibilities BEFORE they are realities.
“What if Tesla announces this?”
“What if they do that?”
“How might it impact the stock price?
“How long will it take the market to understand?”
Let’s look at what I think we’re in for.
Tesla’s Plan To Scale Battery Production To Multiple Terawatt Hours This Decade
This is the crux of the event, all but a given.
We’ve heard from Elon and others at Tesla many times that they’re aiming to reach
annual battery production at the terawatt-hour level.
Today production is just a few percent of this colossal target.
I expect Tesla will lay out their plans to increase battery production to these stupendous
levels.
How they will do this is an open question and one I’ll dive into in a moment, but
before that, here are a few key announcements I expect we’ll hear at the event.
Cost Per kilowatt-hour
Prior to now, Tesla has been coy on their battery cost per kilowatt-hour.
There’s only three reasons I can imagine for this:
One.
The cost is SUPER high and they’re embarrassed to share.
I give this the same odds as a gamma ray burst destroying all life on earth during the livestream
event.
Two.
They’ve been waiting for a specific milestone (e.g. under 100 kilowatt-hours) and/or this
event to announce it.
Or three.
They’re SO insanely far ahead of everyone else that they’re concerned that sharing
their cost per kilowatt-hour would discourage competition from even trying and slow the
transition to EVs
My money is on the latter two.
However, I think Tesla will present a solution to avoid discouraging other automakers who
are years -- literally YEARS -- behind.
More on this shortly.
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A Million Mile Battery
Robotaxis are the holy grail and Tesla appears to have an unassailable lead with orders of
magnitude more data than anyone else.
It’s only a matter of time.
Owning a vehicle that, when not in use, can be out picking up fares and earning you money
is going to be a game changer.
But a vehicle that spends most of its time in use will wear down much quicker than one
that spends 95 percent of its time parked.
We already know that electric vehicles have FAR fewer moving parts, require FAR less maintenance
than internal combustion engine vehicles and are FAR cheaper to run.
Over just a 5 year period, the total cost of ownership of a Model 3 is comparable to
a new Camry or Civic.
Over 10 years, it’s not even close.
In fact, apart from replacing wipers and tires, there’s not a lot of maintenance to do.
Many legacy auto companies make nothing selling cars.
Instead, their profits come from parts and service.
Electric vehicles are already a MAJOR threat to these business models.
Enter the million mile battery and powertrain.
The average american drives almost 14,000 miles a year.
A million mile battery and powertrain would last over 70 years with this type of use.
In other words, TOTAL OVERKILL.
But Robotaxis could easily do 50,000 miles or more per year, meaning a million mile battery
and powertrain would last 20 years.
If Tesla didn’t think they could solve full self-driving, there would be zero point in
developing a million mile battery and powertrain.
It’s just TOO MUCH.
But here’s the thing.
Robotaxis will happen.
Tesla has a huge lead.
And the forcing-function of NEEDING an extremely long lasting battery and powertrain is pushing
Tesla’s technology lead so far forward, I don’t see anyone catching them.
If Tesla announces they HAVE -- or WILL have -- a million mile battery and powertrain soon,
it will rattle the industry who are already years behind.
The Acquisitions Of Maxwell Technologies & Hibar Systems
Tesla doesn't acquire companies for fun.
It does so to move closer to its goals.
Those willing to do some homework and connect a few dots can deduce quite a bit.
In the interest of brevity, I’m going to dramatically simplify what these acquisitions
mean.
Maxwell Technologies was acquired primarily for its battery chemistry.
An extraordinary amount of factory space, capital expenditure, time and therefore MONEY
can be saved by implementing Maxwell's dry electrode technology.
This is HUGE and will have a major impact on Tesla’s bottom line.
Hibar Systems was acquired primarily for its battery production and manufacturing processes.
They’ve developed ways and means of very rapidly producing battery cells at scale.
Tesla doesn’t actually make batteries today.
They assemble battery MODULES into battery PACKS, using battery CELLS made by other manufacturers
like Panasonic.
Why would Tesla acquire a company with superior battery chemistry and a company whose innovations
revolve around manufacturing battery cells?
WAIT.
I think I get it!
Tesla will make their own battery cells.
YES.
That’s it!
Tesla will announce plans to produce their OWN battery cells at the battery and powertrain
investor day.
What a revelation!
Just kidding.
This was obvious as ****.
But it matters.
There aren’t many high quality battery manufacturers on earth and demand for batteries is skyrocketing.
Tesla knows it must control every aspect of its destiny, and at battery and powertrain
investor day I believe Tesla will show us version 1.0 of its battery production line.
Before most other automakers even realise they’re headed for major supply constraints,
Tesla is taking things into its own hands, once again showing just how many years ahead
of everyone else they are in both thought and action.
Mining & Materials
Let’s watch this clip:
We’re matching the uh the product rollout according to the scaling of battery production.
That’s really the main limiting factor.
And then as we, as we scale battery production to very high levels, we actually have to look
further down the supply chain.
Um, and um, we, we might get into the mining business.
I dunno.
Maybe.
You know.
A little bit at least.
Um, so.
We’ll do whatever we have to to ensure that we can scale at the fastest rate possible.
We need a large scale solution to cell production.
Yes.
And get the cost per kilowatt-hour lower.
And energy density higher.
Yeah.
And we’re not sitting.
Yeah, we’re not sitting idly by.
We’re taking all the moves required to be masters of our own destiny here.
Technologically and otherwise and I think, you know, through, through, all of the, experience
we’ve developed with partners and otherwise, we, we, we have solutions in place.
Tesla has effectively stated:
“We will do whatever we need to to ensure we can continue to scale production”.
We’ll hear more about how far down the supply chain Tesla is going at the event and no doubt
we’ll hear more on battery chemistry too.
Recent rumors circulated that Tesla was in talks with CATL to obtain cobalt-free batteries
in China.
Don’t be surprised if we hear a bit more about what materials will go (or not go) into
the batteries, and how they’ll be obtained.
If and when Tesla does enter the mining business, you can be SURE The Boring Company will be
involved.
Recycling
When we talk about a “million mile battery”, we’re not describing a battery that spontaneously
combusts after one million miles.
No, we’re talking about a battery that, after one million miles, shows a meaningful
amount of degradation.
Perhaps it loses ten or twenty percent of its capacity.
Your 500 mile range vehicle may now be 450 or 400.
Not the end of the world, but probably worth replacing.
When this happens, where does the battery go?
Great question.
Where DOES the battery go?
It’s recycled.
Because we’re so early into the electric vehicle revolution, the market has not yet
been flooded with used batteries.
But they’ll come.
And when they do, far from becoming landfill, these batteries will find new homes in stationary
storage applications and many more.
The name Redwood Materials may come up at the event.
JB Straubel, one of the founding team at Tesla, recently left his position to start this battery
recycling company.
Guess where they’re headquartered?
Nevada.
Sound familiar?
Oh yeah, Tesla has a Gigafactory in Nevada.
What a coincidence.
We’ll hear more about this soon.
And now, here comes the big one.
My audacious prediction.
One part wishful thinking.
One part informed speculation.
One part deductive reasoning.
And possibly one too many parts THC.
Tesla Can’t Do This Alone
Accelerating the world’s transition to sustainable energy is no small task.
Tesla could not have picked a more challenging goal but it’s one they’re up for.
Tesla has been the sole disruptive force in moving the automotive industry towards electrification.
At this point, every automotive manufacturer on earth either KNOWS electric is the future,
or they don’t have one.
Tesla has changed the rules and now they’re here to offer a helping hand.
Since the entire automotive industry did approximately ****-all for the last decade-and-a-half while
Tesla was at full-speed ahead, Tesla is now so ridiculously far ahead on battery, powertrain
and software that slow automakers face three choices:
One.
Try to catch up.
This is a fool’s errand.
What are you gonna do?
Hire every single one of Tesla’s engineers, then hope Tesla spends the next decade doing
NOTHING?
Good luck.
Two.
Give up.
This appears to be the plan of most legacy automakers right now.
Besides VW who ironically are pushing heavily into EVs, most of the big boys -- or girls,
or whatever they identify as -- seem to be more interested in maintaining the status
quo and ensuring their annual bonuses, than surviving the decade.
Three.
Get help.
If you’re already more than half a decade behind on a core technology, and the leader
is pulling further ahead, why not get some help?
And this is what I expect will happen.
If you’re not with me on this one, let’s reason our way through using some arbitrary
numbers to illustrate a point.
Say Tesla is 5 years ahead of you TODAY.
And that every year, they pull twenty percent further ahead.
Imagine you realise it’s urgent and IMMEDIATELY begin trying to catch up.
If Tesla literally stopped doing ANYTHING, PERIOD, it would take until 2025 for you to
be where they are today.
But Tesla won’t stand still.
We have a 17 year track record of Tesla innovating faster than anyone else.
Imagine somehow that you COULD innovate ten percent faster than Tesla.
Good luck considering they have -- and continue to attract -- the best engineers, but play
along.
How many years would it take you to catch Tesla if you out-innovate them by ten percent
per year, starting 5 years behind?
MORE THAN TEN YEARS.
One more time.
If today, your battery technology is 5 years behind Tesla and you innovate ten percent
faster than they do, it will take MORE THAN A DECADE JUST TO CATCH UP.
That spells certain doom.
This is where we’ll see a head on collision between pride and reason.
The only way I see MOST legacy automakers surviving the transition to EVs and Tesla
reaching multiple terawatt-hours of annual battery production this decade is by collaboration.
This could come in a few different ways.
Whether or not Tesla announces plans to partner with other automakers at the event is anyone’s
guess.
But at some point, it WILL happen.
If you’re a legacy auto CEO, facing the challenge of transitioning to electric vehicles,
why in the **** would you even TRY to develop your own tech when you don’t have the talent
and don’t have the time?
Seriously.
Expertise in internal combustion engines counts for NOTHING in the EV world.
What matters is your battery technology and software skills.
These companies face so much pain just surviving the transition that they have little choice.
As they saying goes:
“Beggars can’t be choosers”.
So how will it work?
I see three paths.
We Build, You Buy
In this case, Tesla would manufacture its battery and powertrain and sell those to other
automakers who would effectively become window dressers -- putting something pretty on top
of Tesla’s core technology.
Were this to happen, it’s very likely Tesla would take on partners to fund the construction
of more gigafactories.
This would be brilliant for Tesla and more importantly, the planet.
For Tesla to achieve its mission, they’ll need dozens of gigafactories.
This would accelerate things significantly.
You Make, You Pay
Another way this could work is by licencing.
This is a fairly -- but not entirely -- hands-free option for Tesla.
In effect, Tesla would share their battery and powertrain production blueprint with other
companies who could then manufacture the same technology, paying Tesla a licensing fee for
every unit.
The Machine That Makes The Machine
This is the most out-there of all but hey, this entire video is an exercise in speculation
and it’s not AS crazy as it sounds.
Remember Tesla’s mission is to accelerate the world's transition to sustainable energy.
This idea is in harmony with their mission.
What if Tesla sells Gigafactories?
As they’ve said countless times, the Gigafactory is the real product.
The iterative design improvements from factory to factory have been super impressive.
Once the new battery cell production lines are nailed, a Gigafactory is a complete solution
for anyone who wants to make high quality, competitive EVs.
Imagine you’re GM or Ford or VM or whoever and this is an option:
Pay Tesla $1 billion dollars plus three percent of gross production (or some other amount)
and you get the blueprints, plus help to build your own gigafactory which will pump out five
hundred thousand Tesla-powered EVs a year, using Tesla batteries and powertrain.
All you need to do is put a pretty body and interior on top of the Tesla skateboard and
you’re good to go.
I understand this sounds nuts but it’s not so silly.
Why spend tens of BILLIONS of dollars and countless years TRYING in vain to catch up
to Tesla who are about the only company outside China who today can make a profitable EV.
When instead, you can SAVE yourself BILLIONS and instantly begin making profitable, competitive
EVs?
It’s not as crazy as it sounds.
As I said, this is all speculation but I won’t be surprised if this video ends up looking
like a recap of the event.
I expect Tesla will tell us how far ahead they already are, how they plan to scale to
multiple terawatt-hours of annual battery production, how they are integrating Maxwell
and Hibar and they’ll also reveal their battery cell production line and talk about
partnering or licencing to other automakers.
All will be revealed on April 20th.
As a Tesla investor, I’m more excited about this event than any other in Tesla’s history.
Are you?
I’m Steven Mark Ryan, this is Solving The Money Problem and I love you all.
Thanks so much for watching.
Let me know your thoughts in the comments below.
Do you agree or disagree with anything I said?
What do YOU think Tesla will announce at the battery and powertrain investor day?
Any crazy theories?
And of course, if you have any ideas for future videos, let me know.
I read ALL your comments.
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