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Tesla’s long-term play on batteries gets praise from German auto executive

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When Elon Musk proposed his idea of building a Gigafactory to manufacture batteries for Tesla’s electric cars, many were skeptical. The company’s skeptics were quick to jump on the opportunity to criticize the daring venture, and even the MIT Technology Review noted in an April 2014 article that the project might “mostly be a clever negotiating tactic,” since Tesla could not guarantee enough demand for its vehicles to justify the construction of the massive facility (Tesla was only selling around 23,000 cars per year then).

Fast forward to the present, and Tesla’s long-term play on Gigafactory 1 is starting to pay off. The Model 3, an incredibly successful electric sedan that sold over 145,000 units in the SUV and pickup truck-dominated North American market in 2018, is being prepared for an international ramp. Tesla also stands as the most notable electric car maker that produces its own battery cells. Behind these advantages and milestones are Gigafactory 1’s battery production capabilities, which achieved an annualized run rate of 20 GWh last year.

For BMW Deputy Chairman of the Supervisory Board Manfred Schoch, Tesla’s long-term play on electric car batteries was a strategic decision. In a recent interview with German publication Manager Magazin, the BMW executive remarked that Tesla’s high investments for Gigafactory 1 are well-spent. Schoch also praised Elon Musk’s decision to closely collaborate with Panasonic early on to produce batteries at a large scale.

“Tesla controls the entire value chain; they understood electromobility,” the BMW executive said.

Schoch, who also serves as the Chairman of the Munich Works Council and the European Works Council, has decades of experience in the auto industry. Joining BMW in 1980 as a trainee, he later became the automaker’s works council chairman in 1987, where he gained a reputation as a working time expert. During his tenure with BMW, he introduced a wide variety of working time models, even introducing initiatives to make working hours more flexible for the company’s workforce. As such, Schoch is quite familiar with large-scale projects that enhance efficiency in the long-term.

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In his recent interview, Schoch ultimately called on BMW’s executives to explore the idea of producing the company’s own battery cells for its upcoming electric cars. Candidly addressing his concerns, Schoch stated that BMW’s board members would probably benefit from working with Elon Musk, especially since the auto industry has developed a tendency to declare some otherwise important ideas as impossible.

“Our board members should finally deal more intensively with this gentleman, who should have been bankrupt by now. In the (auto) industry, too much is complained, and too much is declared impossible,” the BMW executive said.

Schoch’s statements on Tesla comes amidst Germany’s best year for electric vehicle sales yet. During 2018, figures from the German Federal Motor Transport Authority indicated an increase of 43.9% in EV sales. That’s more than 1% of the country’s total new passenger car sales. This increase comes amidst a steep dive in the sale of diesel-powered vehicles in Germany, which saw a decline from 38.8% to 32.3%.

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Tesla, for its part, is preparing Europe for the arrival of the Model 3. Local reports suggest that Tesla is looking to ship 3,000 Model 3 to the European region starting February. Members of the Tesla community have shared images featuring trucks loaded with the electric sedan heading towards San Francisco’s Pier 80 as well.

Tesla has also begun rolling out dual-charge CCS Superchargers for the European region. When the company announced that the Model 3 would be getting a CCS port, Tesla noted that it would be “retrofitting our existing Superchargers with dual charge cables to enable Model 3, which will come with a CCS Combo 2 charge port, to use the Tesla Supercharger network.” The installation of the new “Model 3 Priority” CCS Superchargers, as well as the retrofitting of the existing network, is expected to continue in the months ahead.

Simon is an experienced automotive reporter with a passion for electric cars and clean energy. Fascinated by the world envisioned by Elon Musk, he hopes to make it to Mars (at least as a tourist) someday. For stories or tips--or even to just say a simple hello--send a message to his email, simon@teslarati.com or his handle on X, @ResidentSponge.

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Investor's Corner

Goldman Sachs reduces Tesla price target to $285

Despite Goldman Sach’s NASDAQ: TSLA price cut to $285, Tesla boasts $95.7B in revenue & nearly $1T market cap.

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tesla-model-y-giga-berlin-delivery
(Credit: Tesla)

Goldman Sachs analysts cut Tesla’s price target to $285 from $295, maintaining a Neutral rating.

The adjustment reflects weaker sales performance across key markets, with Tesla shares trading at $284.70, down nearly 18% in the past week. The analysts pointed to declining sales data in the United States, Europe, and China as the primary driver for the revised outlook. In the U.S., Tesla’s quarter-to-date deliveries through May fell mid-teens year-over-year, according to Wards and Motor Intelligence.

In Europe, April registrations plummeted 50% year-over-year, with May showing a mid-20% decline, per industry data. Meanwhile, the China Passenger Car Association (CPCA) reported a 20% year-over-year drop in May, despite a 5.5% sequential increase from April. Consumer surveys from HundredX and Morning Consult also shaped Goldman Sachs’ lowered delivery and EPS forecasts.

Goldman Sachs now projects Tesla’s second-quarter deliveries to range between 335,000 and 395,000 vehicles, with a base case of 365,000, down from a prior estimate of 410,000 and below the Visible Alpha Consensus of 417,000. Despite these headwinds, Tesla’s financials remain strong, with $95.7 billion in trailing twelve-month revenue and a $917 billion market capitalization.

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Regionally, Tesla’s challenges are stark. In Germany, the German road traffic agency KBA reported Tesla’s May sales dropped 36.2% year-over-year, despite a 44.9% surge in overall electric vehicle registrations. Tesla’s sales fell 29% last month in Spain, according to the ANFAC industry group. These declines highlight shifting consumer preferences amid growing competition.

On a positive note, Tesla is making strategic moves. The Model 3 and Model Y are part of a Chinese government campaign to boost rural sales, potentially mitigating losses. Piper Sandler analysts reiterated an Overweight rating, emphasizing Tesla’s supply chain strategy.

Alexander Potter stated, “Thanks to vertical integration, Tesla is the only car company that is trying to source batteries, at scale, without relying on China.”

As Tesla navigates these delivery challenges, its focus on innovation and supply chain resilience could help it maintain its edge in the electric vehicle market despite short-term hurdles.

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Elon Musk explains Tesla’s domestic battery strategy

Elon Musk responded to a new note from an analyst that highlighted Tesla’s battery strategy.

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Elon Musk giving YouTube tech reviewer Marques Brownlee a tour of the Fremont factory. (Credit: MKBHD/YouTube)

Tesla CEO Elon Musk explained the automaker’s strategy for building batteries from top to bottom in a domestic setting as the company continues to alleviate its reliance on Chinese materials, something other companies are too dependent on.

With the Trump Administration, it is no secret that the prioritization of U.S.-built products, including sourcing most of the materials from American companies, is at the forefront of its strategy.

The goal is to become less dependent on foreign products, which would, in theory, bolster the U.S. economy by creating more jobs and having less reliance on foreign markets, especially China, to manufacture the key parts of things like cars and tech.

In a note from Alexander Potter, an analyst for the firm Piper Sandler, Tesla’s strategy regarding batteries specifically is broken down.

Potter says Tesla is “the only car company that is trying to source batteries, at scale, without relying on China.”

He continues:

“Eventually, Tesla will be making its own cathode active materials, refining its own lithium, building its own anodes, coating its own electrodes, assembling its own cells, and selling its own cars; No other US company can make similar claims.”

Musk, who spent time within the Trump White House through his work with the Department of Government Efficiency (DOGE), said that Tesla is doing the “important” work of localizing supply chains as the risks that come with being too dependent on foreign entities could be detrimental to a company, especially one that utilizes many parts and supplies that are manufactured mostly in China.

Tesla has done a lot of work to source and even manufacture its own batteries within the United States, a project that has been in progress for several years but will pay dividends in the end.

According to a 2023 Nikkei analysis, Tesla’s battery material suppliers were dominated by Chinese companies. At the time, a whopping 39 percent of the company’s cell materials came from Chinese companies.

This number is decreasing as it operates its own in-house cell and material production projects, like its lithium refinery in Texas.

It also wants to utilize battery manufacturers that have plans to build cells in the U.S.

Panasonic, for example, is building a facility in Kansas that will help Tesla utilize domestically-manufactured cells for its cars.

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Tesla stock: Morgan Stanley says eVTOL is calling Elon Musk for new chapter

Could Tesla dive into the eVTOL market? Morgan Stanley takes a look.

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Daniel Oberhaus, CC BY-SA 4.0 , via Wikimedia Commons

Tesla shares are up nearly 20 percent in the past month, but that is not stopping the only trillion-dollar automaker from attracting all types of new potential sectors to disrupt, at least from an investor and analyst perspective.

Morgan Stanley’s Adam Jonas is not one to shy away from some ideas that many investors would consider far-fetched. In a recent note, Jonas brought up some interesting discussion regarding Tesla’s potential in the eVTOL industry, and how he believes CEO Elon Musk’s answer was not convincing enough to put it off altogether.

Tesla’s Elon Musk says electric planes would be ‘fun problem to work on’

Musk said that Tesla was “stretched pretty thin” when a question regarding a plane being developed came up. Jonas said:

“In our opinion, that’s a decidedly different type of answer. Is Tesla an aviation/defense-tech company in auto/consumer clothing?”

Musk has been pretty clear about things that Tesla won’t do. Although he has not unequivocally denied aviation equipment, including planes and drones, as he has with things like motorcycles, it does not seem like something that is on Musk’s mind.

Instead, he has focused the vast majority of his time at Tesla on vehicle autonomy, AI, and robotics, things he sees as the future.

Tesla and China, Robotics, Pricing

Morgan Stanley’s note also discussed Tesla’s prowess in its various areas of expertise, how it will keep up with Chinese competitors, as there are several, and the race for affordable EVs in the country.

Tesla is the U.S.’s key to keeping up with China

“In our view, Tesla’s expertise in manufacturing, data collection, robotics/ physical AI, energy, supply chain, and infrastructure are more critical than ever before to put the US on an even footing with China in embodied AI,” Jonas writes.

It is no secret that Tesla is the leader in revolutionizing things. To generalize, the company has truly dipped its finger in all the various pies, but it is also looked at as a leader in tech, which is where Chinese companies truly have an advantage.

Robotics and the ‘Humanoid Olympics’

Jonas mentioned China’s recent showcasing of robots running half marathons and competing in combat sports as “gamification of robotic innovation.”

Tesla could be at the forefront of the effort to launch something similar, as the analyst predicts the U.S. version could be called “Humanoid Ninja Warrior.”

Pricing

Tesla is set to launch affordable models before the end of Q2, leaving this month for the company to release some details.

While the pricing of those models remains in limbo with the $7,500 tax credit likely disappearing at the end of 2024, companies in China have been able to tap incredibly aggressive pricing models. Jonas, for example, brings up the BYD Seagull, which is priced at just about $8,000.

Tesla can tap into an incredibly broader market if it can manage to bring pricing to even below $30,000, which is where many hope the affordable models end up.

During the Q3 2024 Earnings Call, Musk said that $30,000 is where it would be with the tax credit:

“Yeah. It will be like with incentive. So, 30K, which is kind of a key threshold.”

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