Tesla's future rides on a massive battery plant

CNN Money ^ | 22 Feb 2014 | Chris Isidore

[mandaladon]

So far the story of Tesla Motors has been about exciting electric luxury cars and an even higher performing stock. Next week it will reveal plans for a much less sexy innovation that is more important to the company's future than either of those things: A huge new lithium battery factory dubbed the "Gigafactory" by Tesla founder Elon Musk. The plant is the key Tesla needs in order to produce an "affordable" long-range electric car in substantial enough numbers to join the ranks of the major automakers. "It's the future of the company," said Craig Irwin, analyst with Wedbush Securities. "They need to cut the cost of the battery in half in order to make a half-million cars. This is how they are going to do it." The size of the plant will be massive. Musk predicted in November that it would have a capacity equal to all factories making lithium ion batteries around the globe. That includes lithium batteries going into Teslas as well as laptops, tablets and smart phones. Panasonic (PCRFF), currently Tesla's primary battery supplier, is likely to be a partner in the plant. Tesla (TSLA) has repeatedly said that it would already be selling more cars, and growing even faster, if it wasn't constrained by the limited supply of batteries. Tesla's goal has always been to sell a mass-market car priced in the $30,000 to $40,000 range that can travel long distances on only an electric charge. The Model S, Tesla's current car, can go more than 200 miles between charges but has a starting price of $69,000. Musk said the new plant will allow the company to meet its goal of releasing the mass-market car within three years.

[ProtectOurFreedom]

Wait’ll every new car comes with a blackbox and THEY know everything about your whereabouts. That day isn’t far away.

Just like in the TV show “Jericho,” cars from the 60s will become VERY valuable.

[dhs12345]

Exactly.

But these sources are transient and unpredictable. And you need a lot more power than you will get from a windmill or solar panels on your car. A car is a rather heavy thing. Especially if you want it to be safe.

You need a way to store the energy which might mean some form of hydroelectric facility. But that would be a fight from the EPA.

[depressed in 06]

They should be looking at manufacturing long extension cords.

[3Fingas]

When that happens, I will start using a dirt bike or moped.

[3Fingas]

When that happens, I will start using a dirt bike or moped.

[cripplecreek]

Nice try but anybody can search for themselves.

[dangus]

Yes... and find a Seeking Alpha article which apparently thinks that Obama flew backwards in time six years to create Tesla. That’s how god-d@mned ignorant the authors of Seeking Alpha are.

If you look up A123 anywhere else, you’ll find that A123 was business partners with Th!nk, Fisker (two electric-car companies), General Electric, and through the United States Advanced Battery Consortium, Ford, GM and Crystler, as well as Shanghai Automotive Investment Corp. In other words, about every other electric car designer in America EXCEPT Tesla.

[cripplecreek]

Do you pimp the E-cat scam too? LOL

[dangus]

Last I checked, there weren’t 35,000 E-Cats sold.

[cripplecreek]

And the E-cat doesn’t suck taxpayer money like the leeches of Tesla

[cripplecreek]

Tesla Is No Success Story Tesla is only profitable thanks to politics and tax subsidies.

The company began with a loan funded through the Advanced Technology Vehicle Manufacturing program, which was signed into law by President Bush; the loan was later awarded after President Obama took office. In Tesla's press release announcing that it had paid back this low-interest loan, the company was careful to thank all of those who made it possible, including "the Department of Energy and the members of Congress and their staffs that worked hard to create the ATVM program."

Along with the federal loan, Tesla also relies on support from politicians through a complex series of federal and state subsidies. For each purchase of a new Tesla acquired for personal use, the federal government offers a $7,500 federal tax credit. In addition, various states offer additional income-tax credits, including $6,000 in Colorado and $7,500 in West Virginia.

These subsidies have become so central to Tesla's business model that it advertises them to customers as a way to cover the cost of a down payment. And for states that do not yet offer subsidies for electric cars? Tesla's website provides links to help consumers encourage state and local legislators to subsidize the purchase of such vehicles. The company's site even goes so far as to recommend consulting a tax professional.

[BfloGuy]

But then again, electric cars are favored by American Marxists, so it will probably be allowed.

For the greater good, you know.

[dangus]

Once more, for the willfully ignorant:

Tesla and its business plan existed before Obama

Tesla would be profitable without the e-car subsidies

The e-car subsidies did far more to finance Tesla’s competitors (like Fisker), which actually HURT Tesla’s finances.

A123 had nothing to do with Tesla

No-one has ever demonstrated cold fusion. Lithium batteries have been demonstrated.

You are the most willfully ignorant person I have ever come across.

[cripplecreek]

For the greater good, you know.

Which makes them feel entitled to a major tax break because they're "saving the planet".

In Ann Arbor Mi they did a study of who was using the "free" charging stations and found that they were primarily 6 figure earners who could afford their own charge. (Lots of university professors) Basically it came down to 6 figure welfare leeches who felt entitled to massive tax breaks for them while squeezing out that last few bucks per day with taxpayer and tuition payer funded charging.

[dangus]

To those who sniff that Tesla generates a profit only because of tax subsidies: The tax subsidies come to $7,500 per vehicle. That means that even if the tax subsidies were to end, and Tesla were to have to discount its prices to make up for that (which is highly questionable, since they can’t keep up with demand), Tesla would still generate an incremental profit of more than $12,000 per vehicle.

So what’s this about Tesla being barely profitable? Tesla is resinking all of the per-vehicle profit into developing larger production capabilities and creating still newer technologies.

Could they go bankrupt? Their market capitalization is based on vehicle sales 40 times their sales volume, and 20 times their current assets. In other words, no matter how short of funds they ran, they could easily sell more stock to raise more funds. Even if doubling the amount of outstanding stock meant quartering their stock price, they would still generate five times more cash than their entire current assets.

Bottom line: The government subsidies have meant more profit per vehicle, but also higher costs and higher competition. Because of the GM bailout, for instance, Tesla had to build a new factory from scratch, rather than buy one from GM at pennies on the dollar.

[dangus]

... as far as an investment goes, however, Tesla’s stock is probably inflated... but Tesla would be viable with a stock price a fraction of what it is.

... as far as environmentalism goes, in the short run, no-one should fool themselves. The reason to buy a Tesla is pure consumerism, and consumerism means f*** the environment. At $69,000, there’s no way the added resource exploitation is going to balance the fuel savings. You want to save the environment, buy a used Prius. HOWEVER, in the long run, Tesla is financing an electrical-car infrastructure which will ultimately mean far less fuel consumption. Those idiots who say, “yeah, but you still have to fuel the electrical grid” don’t get it: Teslas get a fuel efficiency equivalent of waaaayyy over 100 MPG.

[Vaduz]

What long-range electric car ? not one can reach 200 miles and Tesla may be a Apple product soon the know the limits of an electric car only the rich can own one due to high maintenance coats.

[Vaduz]

Pipe dream indeed electric cars didn’t pan out in 1905 they pop up as a fad every so often.

[dangus]

>> not one can reach 200 miles and Tesla may be a Apple product soon the know the limits of an electric car only the rich can own one due to high maintenance coats. <<

I’d respond if I you could clean up the wording; I can’t tell what you are trying to say about Apple products.

Plainly, Tesla certainly has an ultra-high-end sales model for its current models, which is highly profitable. The reason they don’t report far, far higher profits is because they are pursuing a much broader, much more modest sales model for their next generation of cars by investing fantastic amounts of money. Will they ever fill the niche of NIssan Versa or Smart Fortwo? No. They may certainly have a car with a lower annual cost of ownership than current top-selling models, however, for a much nicer car.

[Vaduz]

Apple may buy Tesla soon.