Elongate and July 4, 2017

 

Happy birthday America.  I have not opined much on Tesla but feel compelled to do so today.  Elon and his team have come up with a fantastic car in the Model S, a mediocre SUV in the Model X, and maybe a dud in the Model 3.

Sales of the Model S and X combined have petered out in the US (see the chart above).  The Model 3 cannot be sold for the price stated with any profit to Tesla.  Hence the Model 3 will have to be sold for a lot more than the mid thirty thousand dollars folks are hyping.

 My real analysis based on Thermodynamics and facts shows that the batteries are still costing between $200 and $225 per kilowatt hour for the cells only.  Real data show that the learning rate in the past 7.5 years since I wrote my testimony to the US Senate on lithium ion batteries is only around 5% a year at best and 2% at worst.  Panasonic has a learning rate of approximately 5.2% per year and the manufacturers of lithium ferro phosphate batteries only have enjoyed a learning rate of 2%.  Forget the double digit learning rates the hypers of these battery chemistries have published.

By my estimation Tesla will have to sell the Model 3 at an average price of $58,000 before rebate to stand a chance of being profitable.    They may do this but will they be able to sell a million model 3s in 3 years???  I really doubt this. 

 If Elon and Tesla are stretched too thin we will experience Elongate.  This will make Watergate seem like only a petty crime as according to the majority of people the future of the world depends on Tesla's (EV's) success. 

My bet is that Tesla remains a high priced niche player in the automotive industry and the Model 3 will sell 300,000 vehicles in total in the US in 3 years and the average price of these will be $55,000 or higher.    Tesla stock price will reduce and when the dust all settles Tesla will have a market cap of approximately $20 billion not $200 billion.

Of course I could be completely wrong but like the founding fathers I am willing to declare my thoughts in writing.  Time will tell if I am right or wrong.  We will know the answer by America’s 244^th Birthday in 2020.  Happy July 4 to all and long live Government For, Of, & By The People.