America’s largest electric vehicle manufacturer, Tesla Inc. (NASDAQ:TSLA), held its much-ballyhooed Battery Day on Tuesday where CEO Elon Musk promised, among other things, cheaper and more powerful EV batteries that could potentially become a game-changer for the company and the industry as a whole.
Unfortunately, the investing universe appears unimpressed by the blizzard of promises, with TSLA shares slipping 10.4% in intraday trading on Wednesday and shaving $50B from the company’s market valuation.
The latest selloff is a surprising development for the high-flying stock which has lately earned itself the unflattering moniker of a ‘cult stock’ due to its uncanny ability to continuously defy gravity (i.e. fundamentals).
To be fair, Tesla’s presentation was not as disappointing as its stock performance would have you believe.
The company announced a new, larger battery format (4680 vs. the previous 2170) that will deliver 5x more energy; 6x more power and improve driving range by 16% compared to its predecessor. Essentially, the new battery will employ the biscuit tin format that, while cylindrical in design and using the usual lithium-ion chemistry, will bear little resemblance with previous cells. As Roadshow's Kyle Hyatt explained, "The most significant change happens inside the larger cell canister and involves removing the tabs that act as the positive and negative connection points between the anode and cathode and the battery casing."
Tesla says the new batteries will also be cheaper to produce--a big plus in the global electrification drive and Tesla’s quest to stay ahead of the price-innovation curve.
Another important new feature: Tesla says the new batteries will be used as structural parts on Tesla cars to feather out the load and create a stiffer structure. Musk says this will become the standard for all EVs in the future.
However, the skeptics will probably squawk at a number of things.
First off, the 4680 is only capable of those specs simply because it will have a volume 5.5x bigger than the 2170, which will probably significantly increase the overall weight of the vehicle.
Second, Tesla plans to continue buying its batteries from battery cell suppliers, though it says it’s planning on 3TWh battery capacity by 2030. Battery part shortages have proven to be a serious supply chain bottleneck for several EV manufacturers, meaning Tesla remains vulnerable in that aspect.
But perhaps the biggest reason for the selloff: Tesla has no prototype of its wonder-battery to show to the world.
Back in 2014, Elon Musk admonished battery innovators laying claim to some breakthrough battery technology to send him actual cell samples and not mere PowerPoint presentations.
Tesla might pride itself in being a leader in EV battery technology with Musk preferring a pragmatic approach. Yet, the most exciting EV company in the world could only manage rolls of PPT presentations and zero physical products to introduce what promises to be one of its biggest breakthroughs to the world.
Talk about underwhelming.
Model S Plaid/Cybertruck/Roadster 2.0 delays
During the presentation, Tesla tied the arrival of two key products to the new battery: Model S Plaid/Cybertruck
The Model S Plaid will represent Tesla’s top-of-range model and come packed with specs such as a range of over 520 mile,0-to-60-mph time of under 2 seconds and a top speed of 200-plus mph while retailing for the princely price tag of $140,000. The Plaid had been slated to hit showrooms in late 2020 but now will not be available until a year later.
Same case goes for the cybertruck. Although Musk confirmed earlier rumours that cybertruck pre-orders had eclipsed the half-a-million mark, investors won’t get to see the effect of all those orders on the balance sheet until 2022 compared to earlier expectations of late 2021.
It’s also not lost on investors that Tesla is yet to start deliveries of the Roadster 2.0 three years after taking up to $250,000 (the full purchase price) in deposits.
Tesla certainly seems to be living up to its reputation of botching up key delivery timelines time and again.
No third quarter teaser
Last but not least, Tesla failed to make any mention of its upcoming Q3 quarterly earnings. Given that the current market consensus for 121,000 deliveries exceeds Q4 2019 deliveries by 9K units and given the still-dire Covid-19 situation, you can surmise that expectations have been ratcheted up a bit too high and there’s a big risk Tesla will fall short.
Sometimes, in the investing world, no news is deemed to be good news. But for a company headed by a Twitter-loving CEO and where leaked emails have become the norm, the sudden bout of silence does not seem to augur well for edgy shareholders.
All in all, Tesla provide a pretty solid long-term outlook including:
- Tesla's vertical integration is expected to lead to a 56% dollar per kWh reduction in costs and unlock a range increase of 54%.
- Tesla says it wants to make 20M vehicles a year in the long term
- The company aims to get to the $25K price point with full autonomy
- Roughly 600k cybertruck pre-orders are on the books
But for a stock that has more than quadrupled in the space of less than 12 months, investors probably expected something much more substantial and less rhetoric from Tesla’s Battery Day.
By Tom Kool for Safehaven.com
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