Whence Tesla?

Since sitting through the whole four hours of "Tesla Investor Day" ...and since y'all being intelligent humans with better things to do, you night benefit from -not- having to sit through that.  ;-)

The first takeaway, (that some folks will like ;-) is that Elon talked less than 20% of the time.

It was pretty obvious that there were people with mostly full control of the various sections of the company. Especially Drew Baglino and Tom Zhu.

The team seems to be less that 50% white males, although female participation, while up, is still not impressive.

There was much less of Elon being Elon, that happens more on Twitter.

Second is the absolutely massive scale of the vision. They're thinking hard about the many PetaWatts of total energy use in the world and how to drive ALL of that to sustainable/usable/reusable.

One key thought is that an efficient electrically driven future requires only half as much total energy due to fossil fuels being SO inefficient. This crew is all about generation, transport and efficient use of energy. Home heating, transportation, manufacturing - etc. They expect total earth resource extraction to actually go down during all this.

Here's an overview, the first 15:min are the the real guts of the whole 'big picture'

https://www.youtube.com/watch?v=eIQ20RvhUhg

This was exciting stuff, at least for me. There's almost no part of the global

energy use and supply chain that this doesn't touch, and 'touch' really hard. ;-)
Good overview here too.  Full 'MasterPlan' PDF HERE  Environmental Impact Report HERE 

Third was on the Car/Transportation front. They're using the data they gather from literally billions of miles driven in Teslas to improve the driving experience -and- redesign the cars so they're protecting you from what actually happens during thousands of actual crashes to produce better outcomes than just paying attention to what the various government agencys might require. This should cause the 'safest cars on the road' to become even safer. And since they update the software in the cars on a monthly basis, you don't have to get a new car to benefit.

There was a sub-topic on car-self-driving and how having that available will help aging populations remain mobile and also how then your car can be off transporting other people when you're not using it. And of course how big a deal that could be, reducing the overall cost of your car, -and- requiring fewer cars on the road.

Another major topic was materials sciences and supply chains.

There are major issues with the world wide supply and (dirty) mining of Nickel and Cobalt.

100% of Teslas batteries used both of those in 2020. It's at around 50% now, it's expected that only about 10-20% of their total battery production will use ANY cobalt or nickel in another three years. A similar thing is going on with the Rare Earth minerals that go into electric motors/magnets. They have redesigned the motors to require NO rare-earths going forward. Similar things came up again and again, they have an issue, they design around it, they get it going as fast as possible, and almost always at lower cost. Computer chips, sensors, actuators, wiring - etc.

They are turning those thought processes toward Lithium and Graphite refining, expecting new facilities to be up and running in ten months from ground-breaking. Similar thought processes are being applied to actually designing and building factories. They are seeing the recent stuff go from bare ground to initial production in ten months. Well, except in California and Germany.

The latest/newest will be in Monterey Mexico,

      Edit Apr.'23: There's an addedum ** at the bottom about car production scaling and costs as this impacts the 'once and future $25K Tesla (built there in Mexico).

There was a big section about the whole electrical grid and (basically) redesigning how the whole thing operates. Yep, thinking big.

We edited the graph a bit, it wasn't exponential enough given (now, Apr.'23)
projected MegaPack factories in China and Europe

As a BTW in this there were mentions of how they expect the Tesla Energy business to be considerably bigger than the car business and a mention of how the automation business (robots) would also be bigger than the car biz. If their car business is expacted to deliver 20 Million cars/year by the end of the decade, then those other businesses must become truely gigantic. 

Another thing that came up repeatedly is how pretty much all of these things have advanced in the last ten years and how almost all of it has been on (and will continue) an exponential growth curve.

They did NOT announce the next generation of car platform(s), which many people had expected,  just the roadmap in that direction. As a result the stock took a hit, an awesome example of short term thinking. The next-gen car is expected to be what the Monterey Mexico plant churns out first.

One thing that we might add that didn't get touched on much is the expertise they've generated (via SpaceX) to create Methane from electricity, CO2 and Water.

This could completely turn the airline industry to carbon-neutral in a decade. Batteries power short haul flights, Methane powers the long haul. [Methane generates CO2 when burned, but it's exactly the same amount as you removed from the environment during it's creation.] ...just a cool little (not part of the presentation) thing along the way...

One last bit is that Tesla is blowing the competition out of the water on is fast charging infrastructure: 45,000 stalls currently active, 99.9% uptime. Recent US & State govt. supplied figures show that a Tesla Supercharger fast charging station costs around $40K each to put in. The competition averaged OVER three times that. Some over 4X.
When the EV driver uses the Tesla app to find and schedule and pay for charging, which also figures out in realtime what the demand at various stations is going to be and routes you to an available stall. It may suggest stoping at a different charger location that is along the trip you have already planned if you're going to be facing a wait. Then you'll pay 50-80% as much as the competitors per KWh delivered to your car. And since they're rapidly adding (50% in Europe already) the ability for ALL EVs to use Tesla chargers and the Tesla app, this usage should grow rapidly. Along the way they'll be exposed to the reliability and conveinience of the stations while looking at Tesla advertising on the app.
In locations where electricity is expensive they've started to put in Tesla Megapack (giant grid-tied batteries) to reduce the cost to the driver. The battery and associated 'AutoBidder' software buys energy during the parts of the day where the rates are cheapest and sells that energy back to both the EV drivers. and back to the grid during high demand (and high price) periods.

We'll leave you with photos that go some way to explaining how a team of four plus a crane operator can install 16 Tesla Supercharger stations on a prepared site IN ONE DAY. This by comparison with 4-6 weeks for their competitors.

** Here is a graphic about how costs go down over time as production and materials processes improve. An application of Wright's Law, which shows that for every cumulative doubling of unit production, Tesla's processes have yielded a 15% reduction in manufacturing costs. This doesn't seem like much but remember it's a cumulative (exponential) gain. This example uses known results from Tesla Model 3 production. While those numbers are impressive, each new generation of factory production processes has yielded an additional 20% improvement on top of this 'base-line'. So the question of "Will Tesla be able to make the fabled $25K third generation car in the new factory in Mexico?" comes up 'Yes' using just the extrapolation of current trends, ie: no great technological breakthroughs required.
So will there be a $25K (in 2021 dollars) Tesla introduced in 2025?    Maybe not. 

Remember that the earliest production from a new facility on a new generation of car skews toward the higher price 'optioned' version of the vehicle, until some of the factory costs are amortized and the volume ramp improves efficiencies, which takes a year or so given examples in Austin and Germany. The 20% improvement in processes noted above exactly matches with a $20K per unit Mfg.cost and would yield a price around $28K. Could easily happen, after the ramp is complete, Don't forget that $28K=(a 2021  '$25K' + Inflation at 3%/yr.)
Also see the Post About Battery Costs, as by then battery pack costs for U.S. deliveries could have dropped in half, or better! Seems like that should improve the odds.

And, for the record, GM, Ford, Stellantis, VW, Toyota and Honda are not keeping up and show no signs of closing the gap. The 36% Gross Margin (and about 20% net margin) shown as a consistent expectation below is no where near matched by any of these. In fact you can pretty much assume ZERO net margin for all of these other companies (excepting possibly VW) throughout 2025. 
 

GM = raw Gross Margin, Model3. Note: Mid 2021, early 2023, mid-late 2025

>> Edit: Oops, our bad. The price for a Model3 has already fallen to $37.5K in 2023, so the gross margin above  cannot realistically be assumed to stay at 36%. We're guessing just below 30%, and yes this would push the net margins just below 20%. Still WAY better than anyone else. >>
Hmmm, a couple bits of feedback would tend to indicate that some folks aren't getting the point immediately above. Yes, this graphic is about Model3. It's also about the raw cost of components plus labor, not the cost of development or investment in new factories, thus the 36% above becomes 20% after the accountants get through with it. The point is: having that number stay the same as the selling price of the car marches downward.
No, it's not directly about the 'Model2' or whatever the next-gen Tesla is called.
The next-gen Model2 factory in Mexico should go on line in late 2024 and be ramped-up during 2025.
If they're even close to the new factory being 20% more efficient and the materials going into a slightly smaller vehicle plus manufacturing improvements resulting in 25% or more reduced costs, then a vehicle cost 20% or better lower than the Model3 example above is almost certainly within reach. Add in the battery cost reductions and the end result should meet or exceed the $25K 'low cost Tesla' goal, WHILE MAINTAINING the 30%+ Gross Margin that Tesla has been 'doing' for years. 
Since there is no competition that's maintaining even single digit Gross Margins, the competition will simply have NO ROOM to fight that price war. Heck they are unlikely to be able to make a profit at $35K, to say nothing of $25K. This will almost certainly result in various bits of Government Intervention to 'Level the Playing Field' ...also known as taxing the heck out of Tesla or simply not letting them in. How the U.S. is going to handle Tesla killing large portions of uncompetitive automakers like Ford and GM will be interesting. Our guess is that Tesla will 'magically' become ineligible for the U.S. car rebates and/or $35/KWh battery subsidy at some point.