Investor's Corner
Tesla GigaFactory Economics: Why its critical to $TSLA
Forbes says that success of the GigaFactory is critical to any future increase in Tesla share price. It says production savings will boost profit margins.
Early construction of the Tesla Gigafactory in Reno, NV from Feb, 2015. [Source: Reno Sparks Tahoe Homes]
At present, the lithium to make lithium ion batteries comes mostly from South America. From there it gets shipped to North America for refining and processing. Then it goes to Japan or South Korea for further refining and processing. Finally, it comes back to North America as part of batteries that will be installed in an electric car. That car will then be sold in America, Europe or China. A first year business administration student can tell you there are huge inefficiencies built into that system.
According to Forbes, the genius of the Tesla plan is to consolidate as many of those steps as possible under the roof of its GigaFactory in Nevada. Forbes calculates that even if consolidation only shaves a few percentage points off the cost of each step in the process, the cumulative effect will be significant savings. It estimates savings of 10% are possible in both supply chain costs and labor costs. Then, if the volume of Tesla automobile sales increases, economies of scale should account for a further 10% reduction, for total savings of 30%.
MUST SEE >>> Massive Tesla Gigafactory in HD captured by drone flyover
Based on the prices quoted by Tesla at the roll out of its PowerWall residential battery system in April, analysts believe its cost of manufacture is already at roughly $250 per kilowatt hour. Shaving 30% off that number would drive the cost below $200 per kilowatt hour, and that’s that point where many observers believe electric cars can be price competitive with cars powered by conventional internal combustion engines.
Tesla says it plans to sell 500,000 electric cars a year by 2020. Forbes predicts the product mix to make that number possible will be 20% Model S sedans, 15% Model X SUVs, 5% Roadsters and 60% Model III vehicles. At that sales volume, it estimates the company will realize a 10% gain in its gross profit margins, propelling the company stock 40% higher than its present price target.
Tesla Gigafactory from May, 2015 [Source: Reno Sparks Tahoe Homes]
Large companies like Walmart and Target have already signed deals to use Tesla storage batteries. Amazon will rely on Tesla batteries at its new western service center. And Advanced Microgrid Solutions has just announced an agreement to buy enough Tesla batteries for up to 500 megawatts of electrical storage, according to Bloomberg Business.
AMS CEO Susan Kennedy told Bloomberg, “What I like about the Tesla batteries is that they’re so versatile. But we’re technology agnostic. We can choose any type of technology. We intend to use Tesla batteries on a huge number of our projects going forward.” Meanwhile, Mercedes Benz announced this week that it is jumping into the battery storage business in a big way with its Deutsche ACCUmotive division.
There are billions in profits to be made in stationary battery storage systems over the next 20 years, as the world of electrical power transitions away from fossil fuels to distributed renewables. It may turn out that Tesla’s battery business could generate more profits than its automobile business. In which case, Forbes’ prediction of a 40% increase in Tesla share price may prove to be entirely too conservative.
Source: Forbes
Elon Musk
Tesla needs to come through on this one Robotaxi metric, analyst says
“We think the key focus from here will be how fast Tesla can scale driverless operations (including if Tesla’s approach to software/hardware allows it to scale significantly faster than competitors, as the company has argued), and on profitability.”
Tesla needs to come through on this one Robotaxi metric, Mark Delaney of Goldman Sachs says.
Tesla is in the process of rolling out its Robotaxi platform to areas outside of Austin and the California Bay Area. It has plans to launch in five additional cities, including Houston, Dallas, Miami, Las Vegas, and Phoenix.
However, the company’s expansion is not what the focus needs to be, according to Delaney. It’s the speed of deployment.
The analyst said:
“We think the key focus from here will be how fast Tesla can scale driverless operations (including if Tesla’s approach to software/hardware allows it to scale significantly faster than competitors, as the company has argued), and on profitability.”
Profitability will come as the Robotaxi fleet expands. Making that money will be dependent on when Tesla can initiate rides in more areas, giving more customers access to the program.
There are some additional things that the company needs to make happen ahead of the major Robotaxi expansion, one of those things is launching driverless rides in Austin, the first city in which it launched the program.
This week, Tesla started testing driverless Robotaxi rides in Austin, as two different Model Y units were spotted with no occupants, a huge step in the company’s plans for the ride-sharing platform.
Tesla Robotaxi goes driverless as Musk confirms Safety Monitor removal testing
CEO Elon Musk has been hoping to remove Safety Monitors from Robotaxis in Austin for several months, first mentioning the plan to have them out by the end of 2025 in September. He confirmed on Sunday that Tesla had officially removed vehicle occupants and started testing truly unsupervised rides.
Although Safety Monitors in Austin have been sitting in the passenger’s seat, they have still had the ability to override things in case of an emergency. After all, the ultimate goal was safety and avoiding any accidents or injuries.
Goldman Sachs reiterated its ‘Neutral’ rating and its $400 price target. Delaney said, “Tesla is making progress with its autonomous technology,” and recent developments make it evident that this is true.
Investor's Corner
Tesla gets bold Robotaxi prediction from Wall Street firm
Last week, Andrew Percoco took over Tesla analysis for Morgan Stanley from Adam Jonas, who covered the stock for years. Percoco seems to be less optimistic and bullish on Tesla shares, while still being fair and balanced in his analysis.
Tesla (NASDAQ: TSLA) received a bold Robotaxi prediction from Morgan Stanley, which anticipates a dramatic increase in the size of the company’s autonomous ride-hailing suite in the coming years.
Last week, Andrew Percoco took over Tesla analysis for Morgan Stanley from Adam Jonas, who covered the stock for years. Percoco seems to be less optimistic and bullish on Tesla shares, while still being fair and balanced in his analysis.
Percoco dug into the Robotaxi fleet and its expansion in the coming years in his latest note, released on Tuesday. The firm expects Tesla to increase the Robotaxi fleet size to 1,000 vehicles in 2026. However, that’s small-scale compared to what they expect from Tesla in a decade.
Tesla expands Robotaxi app access once again, this time on a global scale
By 2035, Morgan Stanley believes there will be one million Robotaxis on the road across multiple cities, a major jump and a considerable fleet size. We assume this means the fleet of vehicles Tesla will operate internally, and not including passenger-owned vehicles that could be added through software updates.
He also listed three specific catalysts that investors should pay attention to, as these will represent the company being on track to achieve its Robotaxi dreams:
- Opening Robotaxi to the public without a Safety Monitor. Timing is unclear, but it appears that Tesla is getting closer by the day.
- Improvement in safety metrics without the Safety Monitor. Tesla’s ability to improve its safety metrics as it scales miles driven without the Safety Monitor is imperative as it looks to scale in new states and cities in 2026.
- Cybercab start of production, targeted for April 2026. Tesla’s Cybercab is a purpose-built vehicle (no steering wheel or pedals, only two seats) that is expected to be produced through its state-of-the-art unboxed manufacturing process, offering further cost reductions and thus accelerating adoption over time.
Robotaxi stands to be one of Tesla’s most significant revenue contributors, especially as the company plans to continue expanding its ride-hailing service across the world in the coming years.
Its current deployment strategy is controlled and conservative to avoid any drastic and potentially program-ruining incidents.
So far, the program, which is active in Austin and the California Bay Area, has been widely successful.
Investor's Corner
Tesla analyst realizes one big thing about the stock: deliveries are losing importance
Tesla analyst Dan Levy of Barclays realized one big thing about the stock moving into 2026: vehicle deliveries are losing importance.
As a new era of Tesla seems to be on the horizon, the concern about vehicle deliveries and annual growth seems to be fading, at least according to many investors.
Even CEO Elon Musk has implied at times that the automotive side, as a whole, will only make up a small percentage of Tesla’s total valuation, as Optimus and AI begin to shine with importance.
He said in April:
“The future of the company is fundamentally based on large-scale autonomous cars and large-scale and large volume, vast numbers of autonomous humanoid robots.”
Almost all of Tesla’s value long-term will be from AI & robots, both vehicle & humanoid
— Elon Musk (@elonmusk) September 11, 2023
Levy wrote in a note to investors that Tesla’s Q4 delivery figures “likely won’t matter for the stock.” Barclays said in the note that it expects deliveries to be “soft” for the quarter.
In years past, Tesla analysts, investors, and fans were focused on automotive growth.
Cars were truly the biggest thing the stock had to offer: Tesla was a growing automotive company with a lot of prowess in AI and software, but deliveries held the most impact, along with vehicle pricing. These types of things had huge impacts on the stock years ago.
In fact, several large swings occurred because of Tesla either beating or missing delivery estimates:
- January 3, 2022: +13.53%, record deliveries at the time
- January 3, 2023: -12.24%, missed deliveries
- July 2, 2024: +10.20%, beat delivery expectations
- October 3, 2022: -8.61%, sharp miss due to Shanghai factory shutdown
- July 2, 2020: +7.95%, topped low COVID-era expectations with sizeable beat on deliveries
It has become more apparent over the past few quarters that delivery estimates have significantly less focus from investors, who are instead looking for progress in AI, Optimus, Cybercab, and other projects.
These things are the future of the company, and although Tesla will always sell cars, the stock is more impacted by the software the vehicle is running, and not necessarily the vehicle itself.
Tesla needs to come through on this one Robotaxi metric, analyst says
Tesla gets bold Robotaxi prediction from Wall Street firm
