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.

[dangus]

Interesting. Apparently, many people — reasonably so — define both companies as ultimately becoming largely investors in lithium batteries. The problem is that I’m not sure if Tesla sees lithium as its long-range future, and that Telsa’s stock price already anticipates Tesla kicking GM’s ass by next decade.

[nascarnation]

Tesla looks like a slam dunk short to me...expect it’s never safe to bet against the regime.

[dangus]

Only the fabulously wealthy should ever short. And even if you’re dead-on correct, it can be a horrible idea: if a stock sells for double what its worth, even if it falls to what it’s worth, you can still make absolutely nothing if ten years’ inflation have passed. Tesla has a great product, but its valuation presumes an unbelievable 800,000 cars per year, some say. Overvalued? Quite possibly. Short it? You’d have to be very rich or very foolish.

[Vaduz]

Tesla kicking GM’s ass by next decade.
That will never happen Tesla has low sales due to cost of their car they only have one product they may fade to black by the big three and Japan cars.

[dangus]

Right. That one car makes about a $20,000 per car. Rather than report huge profits, however, they are reinvesting the money into developing an entire line of mid-line vehicles.

[Vaduz]

They will sell out Apple first the cost id to high for them to do so.

[dangus]

IF Apple does buy them, Apple’s reason in doing so would be because Apple decided its future was as a manufacturer of Lithium batteries, and that Teslas were the future primary consumer of Lithium batteries. There’s no appeal to Apple unless Apple is confident that there will be hundreds of thousands of Teslas manufactured every year.

At a market cap of 25 billion, the notion that the cost is too high for Tesla to build its needed factories is just plain silly.

[Vaduz]

The cost of the car will prevent thousands of Teslas manufactured every year battery tech will never reach a goal of being useful for long term use.

[dangus]

And if you looked at 40” Plasma TV screens a decade ago, you’d say “the average family can’t afford a 40” TV.” After all, they cost thousands of dollars. Now they cost a couple hundred.