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Tesla is a Battery Company

blog.jeremyrwelch.com

11–20 of 173 posts

Re: Tesla is a Battery Company

#11
If Tesla executes, they are going to be the leading company in a number of industries, of which battery technology and manufacturing is one of them. They are also leaders in direct sales, JIT manufacturing, motor design, any one of which is a disruptive innovation channel they could monetize, all in the service of building electric cars. Tesla is an energy company, a battery company, a car company, etc, just as GE or any other innovator ends up in many segments. What they are is a nascent Multi-business, Multi-national company that the market is betting (based on the stock price) is going to be able to be a global force. A lot of publicly traded companies are single-business companies that derive most of their revenues from a domestic operation. The few companies that manage to become multinationals have this outsized influence because they tend to drive massive revenues, earnings, and markets caps. The correlation between operating in multiple business areas and being a massive multinational is a direct relationship, because disruptive businesses always reach a saturation point. Businesses like Tesla that set out to disrupt industries that represent significant portions of GDP will naturally need to move into multiple markets in order to execute their strategies, because they need to disrupt or create a sequence of disruptive or creative strategies in order to reach that saturation point (natural market size).

I love Elon for the fact that he thinks of his businesses on a planetary basis, and if you consider the point, you'll see he's actually executing Tesla in multiple markets simultaneously, and essentially going directly from startup to Multinational, and skipping the domination of a single category. He knows that if he doesn't, he's going to face stiff competition from entrenched companies and it's likely he'll lose his advantage. But by tight control of the supply line businesses, and a few strategic relationships with existing multinationals, he's able to elevate Tesla into a multi-business, multi-national organization in record time.

Sure, they're a battery company, but what they really are is an organization that's shooting for the moon and actually executing at that scale. Simple incredible to watch.

Re: Tesla is a Battery Company

#12
post #4

I don't think this is a revelation to anyone who has been paying attention? This seems to have been the dominant hypothesis for a long, long time, and is always what justified Tesla's early (very) red activities. They were a battery company using luxury automobiles to fund battery R&D.

> I don't think this is a revelation to anyone who has been paying attention? Maybe so, but for casual observers, this lays out the argument very concisely, in a way that might not have been apparent before. (To the average American, "battery company" means Energizer and Duracell, and doesn't seem like a very future-facing sector, so characterizing Tesla as such seems diminutive and hyperbolic.)

Exactly my goal. Many on Wall street understand it, but many on Main street (and even many in the Bay area) don't quite get the picture yet.

Re: Tesla is a Battery Company

#13

I don't think this is a revelation to anyone who has been paying attention? This seems to have been the dominant hypothesis for a long, long time, and is always what justified Tesla's early (very) red activities. They were a battery company using luxury automobiles to fund battery R&D.

Yes, this has the tone of something revelatory but I agree.

Re: Tesla is a Battery Company

#14
The article assumes that car batteries will feed into the grid. Tesla seems to think that won't be the case, car batteries need to be secured against harsh outdoor conditions and have tougher charge cycle limits.

Re: Tesla is a Battery Company

#16

The article assumes that car batteries will feed into the grid. Tesla seems to think that won't be the case, car batteries need to be secured against harsh outdoor conditions and have tougher charge cycle limits.

Tesla deploys a large battery product at all of their Supercharger locations. These batteries are built to withstand harsher weather conditions, and will likely form the basis for a home battery product.

Re: Tesla is a Battery Company

#17
post #7

Only as much as Apple was a HDD company with the release of the first iPod. Yes, their underlying hardware was necessary for the product to be revolutionary, and it was also something that no one else could produce at the time. But, like Tesla, Apple added a layer of design and marketing that made for a revolutionary UX, as well. So I agree that Tesla is a battery company, but I don't think that that makes them less…

Apple never manufactured their own iPod hard drives. That's where the similarity ends. Advancing the state of the art in batteries is essential for Tesla to remain competitive. For Apple, it was adding content and services.

Re: Tesla is a Battery Company

#18
Musk has previously said in an interview that Li-Ion batteries were at $600 / kwh, but when he looked at the component and manufacturing costs they were at $100 / kwh. Somehow the entire supply chain has piked up a lot of overhead, and he realized it would be possible to reduce that. At those prices, Model-S battery pack costs are between $36k and $51k!

When I realized that, I came to conclusion that Tesla Motors could be viewed as merely a stepping stone on the way to building a Gigafactory.

When demand for batteries is low, a low-volume battery factory has to share its suppliers with other clients, and those suppliers will price their risks and profits into the deal, multiple times along the chain. On the other hand if you have enough volume to justify having the entire manufacturing cycle under one roof, from ore to ready packages, all those markups go out the window. It wouldn't surprise me to see overhead going from the staggering 500% to a more moderate 50%, but only as long as there is enough demand for all of those batteries. Which is why you need cars - they consume a lot of energy.

By now it's pretty much certain that Tesla will be the first to build a Gigafactory. The interesting bit is whether Musk figured out a way to make sure no one has the ability to build a competing Gigafactory and commoditize the business. Right now only Tesla itself can generate enough demand, so they are pretty safe. If Musk can convince the other car manufacturers to buy batteries from Tesla, it will kill the incentive for anyone else to build a competing Gigafactory for a long time. So at the least Musk needs to appear non-threatening to other car manufacturers, and perhaps the best move would be to split battery division away from Tesla Motors completely.

Re: Tesla is a Battery Company

#19
post #7

Only as much as Apple was a HDD company with the release of the first iPod. Yes, their underlying hardware was necessary for the product to be revolutionary, and it was also something that no one else could produce at the time. But, like Tesla, Apple added a layer of design and marketing that made for a revolutionary UX, as well. So I agree that Tesla is a battery company, but I don't think that that makes them less…

As Apple has never made hard drives, calling them a hard drive company makes zero sense.

The hard drive in the iPod was never the most interesting component, or the differentiator from the rest of the market. Tesla's battery is. The hard drive in the iPod is like the wheels on a Tesla. It's useless without them, but they're a completely replaceable commodity and has no bearing on the success of the product

Re: Tesla is a Battery Company

#20

I don't think this is a revelation to anyone who has been paying attention? This seems to have been the dominant hypothesis for a long, long time, and is always what justified Tesla's early (very) red activities. They were a battery company using luxury automobiles to fund battery R&D.

It's a revelation to me.

I thought Telsa was a car company and I followed them since the beginning until their initial IPO.

From there and sorta lost interest in follow any automotive news.

Plus it is very easy to see them as a car company, they started out as a car company and Elon came to Tesla, a car company, and took over.

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