Giga Berlin, Megapack, Short Interest, Musk NYT Interview, BMW EV Plans (07.27.20)

Automatic TRANSCRIPT

Everybody Rob our here and today. We were talking about some news on Tesla's Gigabyte. Lynn Tesla Energy updated short interest on Tesla stock, a new Elon Musk interview with the new. York Times and some news on BMW's production status does stock on the day to day bounce back from the end of last week getting some macro help with the Nasdaq up one point, seven percent tussle stock on the day today up eight point seven percent to one thousand, five hundred thirty nine dollars sixty cents. We'll start today with some reporting out of Germany on. On gigafactory, Berlin they relates to tussles cell production plans at the gigafactory as we can recall from the earnings call last week. Elon Musk was asked by analyst about their battery plans for Berlin and he said quote okay well. We can't say too much about this. Except that there will be local cell production, and that will serve the needs of the Berlin factory and quote well over the last couple of days we have had some reporting by German media on some comments made by Brandenburg. States Minister of Economic Affairs Labor and Energy your. Your Steinbach that may shed a little bit more light on tussles battery plans in Germany bear in mind that for both articles here I am working from Google translated versions, but the first article from Deir Tagespiegel quotes Your Steinbach as saying quote Tesla has started planning for the production of battery cells and Grenada. The company told us that and quote then on the same topic, another article from our BB. Twenty four wrote a quote. Completely new technology and quote is behind the electricity, storage said Minister of Economics. York Steinbach on Monday Antenna Brandenburg. Brandenburg the new batteries are smaller and thanks to their higher energy density allow for greater range. The Minister set so in that translation I assume antenna means from broadcast from Vandenberg or something similar, but setting aside some of that translation weirdness, our focus is on him, saying that it's a completely new technology with smaller and more energy, dense battery salts now obviously smaller could mean a lot of things it could mean a physically smaller battery cell, or it could just be a way of clarifying the concept of higher energy density, more energy and. And a smaller space for volume metric density or more energy and less wait for governor metric energy density, so we'll probably have to leave it up to. You are German listeners to provide a little bit more context on maybe how that would more directly translate, but no matter the translation nice to see these comments and I think they would align very well with our expectations. The other information shared in these articles is that any battery production would to be part of a second phase of the factory and thus would require a separate approval. Approval process from the one that Tesla is currently undergoing, but clearly tussle has been in discussions because of the ministers knowledge on the situation. This does give tussle the benefit of not yet having to publicly disclose the detailed plans for that portion of the factory, which is potentially helpful, keeping the mystery alive as we head towards battery debt, according to the RB twenty four article, the Minister Steinbach did not know when battery production could start from Berlin. The other little tidbit that we got from the dare Tagespiegel article is that Tesla is still. Still searching for a location for design and engineering facility near Gigabyte Berlian, apparently they had been and prospecting. A site called the Europe campus, which is a sort of sustainable and technological pilot project district in Berlin, but apparently that has been now ruled out and the location search continues in general, though we continue to see really rapid progress at Gigabyte Berlian, there are a number of different youtube channels doing drone flyovers almost daily on the site, and the construction is progressing rapidly late yesterday you on replied to a tweet from Queen discussing this. This topic and said quote. Gigabyte Lynn will come together at an impossible seeming speed. The prefabricated construction method in Germany is extremely impressive and quote. I think in general because of how quickly tussle was able to get to production in Shanghai. There's a sense that does can't replicate that anywhere else. And it was only made possible because it was done in China and that train of thought is not without reason certainly, but Tesla Germany is doing everything they can to prove that logic wrong and so far comparing the milestones date by date which. To Lynn at toby. Lind has done a great job of tracking. It looks like at least at this point in the process tussles actually a few months ahead of the line from gigafactory Shanghai so probably worth remembering what you onset on the earnings call last week. Better factories for less money in less time. That's what Tesla is aspiring to do. Next up. Today is news on Tesla Energy. This is a ground-breaking announcement on a significant energy storage project for TUSLA. So I'm not sure if the project itself had been announced beforehand, but late last week, technology infrastructure company switch announce the groundbreaking of three energy projects in Nevada which will comprise five hundred and fifty five megawatts of solar and eight hundred megawatt hours of energy storage. The solar side of the project is not Tesla. That'll be provided by first solar, but for the storage side Tusla will be delivering megaplex for what it sounds like the. The entirety of the project, considering tussle delivered four hundred and nineteen megawatt hours of energy storage in Q. Two, clearly, the eight hundred megawatt hours that this project will scale up to. You is pretty significant next up today. I just wanted to provide a quick FYI that the New York Times did an interview with Elon Musk that they published over the weekend. In this case I think the new. York Times did a much better job covering Ilan and providing context than they did back in I. Think Twenty eighteen when they had their last interview with. Longtime listeners will remember my thoughts on that at the time. This did seem quite a bit better. We're not gonNA. Go super into detail here because it is more a personal peace, a lot of the tussle, stuff or business related stuff is a lot of stuff that we've talked about or heard specifically Tesla. He mentions how difficult it was from two thousand seventeen to mid. Mid Twenty, nineteen, and there's some discussion on short-selling and how personally Yulon has taken that, but once it here did stick out to me as being somewhat knew. This is from writer Maureen, Dowd. Who wrote quote Peter? Thiel who helps build a company that became pay pal with Mr Musk told me quote. He's on top of the world. All of the people who have. have been shorting stock who constitute a kind of hate? Factory against the company have been totally crushed, and that makes him very happy and quote. They also spent a significant amount of time in the article discussing Musk's relationship with grimes, which seems to be going very well, so it looks like you want is in a really good spot right now, which is always nice to? To. See All right next up today. I want to go through tussle short interest. We got an update on this on Friday. This is for the settlement date of July, fifteenth, and as of July. Fifteenth Tesla had twelve point. Seven million shares sold short down nine percent from June thirtieth level of about fourteen million shares. This one is particularly interesting because over that period. Period of time Tesla reported cue to deliver and production numbers, and also released short shorts, and the stock over that same period went from one thousand and eighty dollars per share an all time high by the way at the time, at least to one, thousand, five hundred and forty six dollars on July fifteenth that means the valuation of shares sold short went from fifteen point. Point, one billion dollars on June thirtieth all the way up to nineteen point seven billion dollars on July, fifteenth an increase of about thirty percent, despite the fact that the share count actually went down so for shares sold short, we continued to hit the lowest levels since two thousand eleven while the valuation of those shares sold short continues hit new all time highs so. So far year to date short interest is down about thirteen and a half, million shares, or just over fifty two percent from V roughly twenty six million shares that we had sold short coming into the year. The next short interest update will be aftermarket close on Tuesday August eleventh, and that will be for the Friday July thirty first settlement date, which will be our first. First visibility into short interest after q two earnings all right next up today I WANNA talk about a couple of pieces of news from BMW, the first is that the company has announced New Sustainability Targets for twenty thirty, which they described by saying quote. The aim is to significantly reduce co two emissions per vehicle by at least one third across the entire spectrum and To achieve that BMW wants to reduce per vehicle emissions by eighty percent and the production process, twenty percent and supply chain and forty percent in the use face as a part of this emissions reduction plan, BMW said quote in ten years. The goal is to have a total of more than seven million electrified BMW group vehicles on the roads around two-thirds of them with a fully electric drive train and quo remember. BMW, often uses electrified to include a plug in hybrids so far through the end of the. The year in two twenty nineteen BMW had to with more than half a million of these electrified vehicles like the I three or the I eight meaning the target is for about six and a half million more over the next decade, six, hundred and fifty thousand per year, two thirds of that being fully electric would be around four, hundred, fifty, thousand per year BMW had previously said that they intend to double the amount of electrified vehicles in their fleet by the end of twenty twenty one so if If, we assume that's a couple hundred thousand vehicles per year for the next couple of years than two to six and a half million cumulatively by twenty thirty or through twenty thirty, rather BMW would have to grow electrified vehicles sales at about twenty percent per year compound. If that were the case, BMW would be doing about half a million and twenty, twenty five, and approaching a million per year around twenty nine, and beyond, and that would be just electrified vehicles, so cut that two-thirds and that gives you. You your full e. v. sort of numbers, Tusla, as we've talked about as targeting more than four million per year and twenty, twenty, five, and more than twenty million per year, rough numbers here by twenty thirty, so clearly BMW doesn't have ambitions of that scale they never have. That's not their market. Obviously just highlighting the differences for those that like to compare the company's, but regardless of those ambitions. It would be nice to see BMW. Be a little bit more aggressive with their targets for electric vehicles. Vehicles within their own segment BMW continues to emphasize the importance of flexibility to their design and manufacturing process. In this release. They noted that the BMW seven series will eventually come with a full electric option emphasizing that it be then available in four powertrains, standard gasoline diesel plug in hybrid and electric. BMW then continues on to announce the same for their BMW X.. One and BMW five series, saying quote further examples of the quote, unquote power of choice will be the high volume BMW X. One and BMW. BMW Five series, which will also be available in the future with all four drivetrain variance, fully electric plug in hybrid, diesel and petrol with 48-fold technology and quote so BMW again fully buying into this flexibility in manufacturing model, which from everything that we have learned from Tesla. Everything that they've said on their quarterly earnings calls for years now combined with a healthy amount of common sense I just cannot see that being a cost effective strategy. Yes, you do leverage a little bit of the scale from the other. Other powertrain lineups, but I just really cannot see that offsetting the downsides that you lose from starting with a Queen Design for an individual type of powertrain or through benefits from focusing on one powertrain setting, even aside the added difficulty of designing manufacturing system that incorporates more flexibility as Tesla talks about all the time. That's the real product that's where the innovation is being made, and BMW is sacrificing their opportunity for innovation in this area for the power train of the future specifically, which at this point is? Is Pretty clearly electric in favor of the so-called power of choice for some period of time that will help BMW feel like they are transitioning when in reality, the plan that they have will never allow them to be fully competitive with ground up electric vehicle, and as those become more and more of the market, share, BMW, or it increasingly difficult to compete whatever reputation they had that allowed them to sell cars in the past will fade in the blink of an eye and in my opinion BMW. BMW will probably be out of business or be sold off I think they would be much better served to follow the strategy of instead of saying we're gonNA electrify everything parts of our entire lineup to just focus on making one good electric vehicle from the ground up, differentiating it from Tesla with interior trim, fancy paint, options and wheels may be exclusive owner benefits taking a page from the credit card model. These luxuries that Tesla just doesn't really care about dominate that niche. Get Your scale up and expand. Expand from there that seems to be portion is trying to do with Ticon, so we get a little bit of visibility into that strategy from Porsche. Though I do think they focused on slightly the wrong things may be trying to be a bit too true to the Brandon terms of track performance over some of the bare essentials for an electric vehicle range and charging network, anyway, getting sorta sidetracked there, but I do want to cover one other release here from BMW, and this is about their Munich factory. Factory which produces about thousand vehicles per day and two thousand engines for vehicles burdette? BMW announced last week that they would be temporarily shutting down this factory to convert it to the more flexible manufacturing that they're targeting. They say quote. We are gearing up our Munich plant for the future. Once remodeling is finished, we will be able to produce vehicles with diesel, petrol and hybrid drive trans as well as the fully electric BMW, I four all on the same line. This will allow us to respond flexibly to. To customer, demand and quote okay, so we talked about that, but case in point here they're shutting down their vehicle factory for forty five days. That's forty five thousand vehicles ninety thousand engines that they are not going to produce now for BMW. That's probably okay. Because of the coronavirus situation, they probably have a lot of excess inventory right now, but a lot of that is circumstantial, so let's assume that BMW didn't actually want to shut its factory down if we assume the average selling price on those. Those forty five thousand vehicles would have been forty five thousand dollars that would be two billion dollars in lost revenue from the shutdown period to convert your factory that is a significant opportunity cost to reconfigure factory for a product that is likely going to be a lower or negative gross margin for you initially. BMW works around a seven percent roughly operating margin, but because economies of scale those very last units that you produce or end up, not producing carry an outsized impact on that operating margin. That's also. Also known as the contribution margin, which on these vehicles out, guess would be more than ten percent so best case this downtime, and that lost revenue is costing BMW, one hundred and fifty million dollars in profit worst-case well over two hundred million, and we didn't even talk about the additional thousand engines per day, which could potentially double the impact if that's stopping vehicle production at another factory, so these are the hidden costs that other automakers have to deal with because they are not starting from scratch. Yes, they. They don't have to build an entirely new factory, but that's not as advantageous as it may seem. At first a couple of hundred million isn't going to get you entirely new electric vehicle factory, but a nice first step, and like we said before the factory is just as much a product, and that also benefits from a clean ground up design, so BMW for that when it comes to the product or for the factories. I don't mean to rebuff BMW. I just don't think the strategy is sound strategy. Strategy the one thing I will say for them. They did tie or said they planned to tie their board. Management compensation to the sustainability targets which I do still feel are not aggressive enough, but at least they are tying them into the compensation plans all right, so that will wrap today as always. Thank you for listening. Don't forget to subscribe in sign up for notifications. Make sure we on twitter at Tussle podcast and I'll see you tomorrow for Tuesday July twenty eighth episode of Tesla Thank you.

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