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Batteries are at the core of Tesla's businesses. There were no truly viable EVs until the energy density of batteries could match fossil fuels. As far as I know the Tesla Roadster was the first EV to use lithium ion batteries. Once the production volume of batteries soared, price dropped and energy density increased creating a virtuous cycle. From EVs the batteries jumped to household storage (PowerWalls) and later to grid level storage (GigaPacks). Elon Musk has said that storage will be as big as EVs. SeekingAlpha has a great article on the growth of energy storage linked below.

I commented on the article as follows:

The primary attraction of solar roofs or solar panels and PowerWalls is the continuous energy supply in case of grid failure. A curious thing happens when enough homes have them. Before "Storage" the grid is in broadcast mode like TV, you can turn it on or off but those are your only options. With "Storage" the grid becomes more like the Internet, distributed and more resilient. Complex systems, which the grid certainly is, have "Emergent Properties." Two of them are grid stabilization and more efficient use of the energy. Both lower the cost of electricity which creates a virtuous cycle. If every home also has an EV the transformation is even faster. A Ford F-150 Lightning can power a home for two or three days.

The whole revolution rests on the batteries, on the ability to store electric energy. With batteries you can store electricity like you can store gas with gas tanks, grain with silos, and fish with refrigeration or salt -- for delayed gratification.

My only doubt are the solar roofs. I didn't like Solar City and Tesla is losing money with the acquisition.


The article is super bullish and the only negative comments I take seriously is whether storage is a low profit commodity market or not. I would love to hear your comments on this. Since so much depends on the software I don't think it is.

One last comment before letting you get to the article. On Friday TSLA broke through the last major point of resistance at 762 which now becomes support. Next stop, TSLA's all time high in late January!

Renewed Focus On Tesla's Energy Storage Growth Amidst New Macro Developments

Summary


• Energy storage on a commercial and residential scale growing rapidly for Tesla as its dedicated battery manufacturing developments start to emerge.

• Natural gas and oil price rises and the climate emergency emphasise the move to a focus on renewables and thus storage.

• Tesla's vertical integration and software development should strengthen the company's position as a leading player in this sector as it announces new battery investments.

• New developments in Texas and the U.K. show the way Tesla wants to go as an electricity generator and distributed utility.

• Tesla increasingly investing in coordinated auto, energy, and battery developments using sophisticated software.

• Surveys show that American consumers are most attracted by lower energy bills and by averting the grid collapsing on them as increased extreme weather events. That trend can only continue.


https://seekingalpha.com/article/4456915-renewed-focus-on-te...

Denny Schlesinger
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In 8 or 9 days we will have production numbers. China will be very good.
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In 8 or 9 days we will have production numbers. China will be very good.

While August improved over July, it was still pretty poor. I guess Sept will highlight if there was a strategic reason to lower sales in July or August and not a demand problem in China for them.
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Production in China in July was 37,000 vehicles. 41,700 in august.. 45,000 in Sept

Total Q3 production. 124,000. up 231% year over year. up 26% from Q2

Pretty good to me.
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Production in China in July was 37,000 vehicles. 41,700 in august.. 45,000 in Sept

Total Q3 production. 124,000. up 231% year over year. up 26% from Q2

Pretty good to me.


Not comment on production in China as much as car sales in China has plummeted at the same time sales of some of the china car makers has been increasing. Most of the China production is being exported
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So if most of the production is being exported why are you inferring a demand problem? There is none.
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So if most of the production is being exported why are you inferring a demand problem? There is none.


I was only referring to China demand as that was what the post was about. It seems to be the more important long tern market
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No it's not.
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No it's not.

China is not an important long term market?

maybe I misunderstood your original post: “ In 8 or 9 days we will have production numbers. China will be very good.” To be about China sales.

So yes, the China production numbers will be good, I agree. Will China Sales be good, I am not sure, I inferred your post to be more about china sales and not just production. I agree the production numbers will be good
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If you are short you better cover.
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To bring the conversation back to energy storage, batteries, Distributed Energy (DE), energy exchange software, solar roofs, mega packs, etc.


Up to this point, energy has been controlled by Centralized Businesses (the Oil companies, the Electrical companies, etc) with the associated political/economic power (and wealth) going to those Centralized entities.
Texas is dependent on the oil industry, and much electrical power is currently generated via petroleum products.

Texas government is dependent on keeping the Permian basin, Eagle Shale, and all the other 'oil fields' happy.
Texas government is also dependent on the Houston oil-based energy infrastructure.

There is a LOT of 'political power' to be satisfied.

Musk's vision is Smart Homes (Tesla has house plans) with DEcentralized power, with solar panels and power walls (and businesses) INDEPENDENT of the centralized energy structure (ie. the centralized energy companies LOSE their guaranteed money source. - yeah, I know, Tx deregulated the electrical grid in Tx.. blah blah blah...)
I just think there is a lot of 'centralized' lobbying, politics, etc.

How is Musk making this decentralized process happen? (IMO, Texas government is corrupt. And can be bought.) I am, so far, NOT seeing or hearing any resistance from TX government.

It's going to be interesting to watch this play out.

These 'individual' (smart) homes are a piece of Tesla's plan? Let's label them #1.



Tesla is compared to Apple in the 'culture/lifestyle' of TeslaFans, and Tesla owners who are rabidly in love with the product. And, Tesla does seem to be promoting a lifestyle of users for whom every aspect of life has some Tesla connection ... except the 'physical community of users all living in the same building/suburb'.

NIO is building NIO Community - a building/s (communities? Apartments of NIO owners? I'm not sure) with NIO planned and supported amenities, creating an environment based around NIO products. At any rate, it seems a step further toward an actual community of NIO users who live together, play together, etc, all based around the common idea of NIO.

I've been watching to see if Tesla is making moves to include its Tesla Culture/Lifestyle at a community scale. I've NOT seen anything official from Tesla.
BUT - there is Alset eHome International (AEI).
https://finance.yahoo.com/quote/AEI/profile?p=AEI

This NOT a plug* for AEI. I bring it up for the ENERGY STORAGE applications, and the Decentralized Energy applications.

Alset EHome International Inc., through its subsidiaries, engages in property development, digital transformation technology, and biohealth activities in the United States, Singapore, Hong Kong, Australia, and South Korea. The company engages in the land development, home building, sales and rental, and property management businesses. It designs applications for enterprise messaging and e-commerce software platforms; and engages in the research of nutritional chemistry to create a natural sugar alternative, products to slow the spread of disease, and natural foods and supplements, as well as to treat neurological and immune-related diseases. The company was formerly known as HF Enterprises Inc. and changed its name to Alset EHome International Inc. in February 2021. Alset EHome International Inc. was incorporated in 2018 and is based in Bethesda, Maryland. Alset EHome International Inc. was formerly a subsidiary of Hancock Fabrics, Inc.

Alset has two current 'suburb communities' under construction - Maryland and Texas. Both suburbs are 'luxury homes' (Smart Homes) that come standard with Tesla Solar, Powerwalls, ... AND each home comes with a FREE Tesla car.
These 'communities' offer Tesla Powerwalls/Battery storage - which provides most of the home's power needs (ie. NO electricity fees), and the potential to SELL electricity to the grid, AND a free Tesla car for battery back up, and when FSD arrives - robotaxi business income. Oh, and at community scale, luxury/resort amenities.

Communities (such as AEI) are another venue for Tesla to extend it's influence, AND, while not directly Tesla designed (yet?) are perhaps #2?

Tesla is building 'megapack' farms in CA, TX, ??US?, AU, UK, Germany? and other locations around the world, to supply electricity to businesses. These are Tesla designed pieces of Tesla's plan. Lets call them #3.
While I'm on megapacks - Samsung is reportedly going to build a chip factory 30 miles from GigaTexas, in Taylor Tx, supposedly due to the 'electric energy security' ... which made some people laugh... My thought is that Samsung will add a Tesla megapack to its chip factory. Absolutely NOTHING has been mentioned... but, it seems reasonable to me, and meets the 'secure electricity' aspect.

Denny says that battery technology was/is a key to making this DE plan happen. I agree and I would add to that the Software that permits moving the energy from one battery to the next, or to an end use, AND also SELLING excess energy to the Grid. Let's call this software, piece #4.

Several things must exist at the DE location: adequate battery tech; solar/wind energy capture; connection to the microgrid and the macrogrid; software to control electricity storage/use.
At the Macro scale - a macrogrid to move electricity; ?more?;


So, I see 4 pieces to the DE (these are NOT in a particular order):
1 - individual homes with solar panels, powerwalls,
2 - communities of homes all with solar panels and powerwalls, (and the Tesla HVAC system).
3 - business parks with megapacks and perhaps solar panels,
4 - and the SOFTWARE to connect the 'hard' pieces.

5? - Starlink for OTA control of the 'pieces'?

8^Q
ralph

*AEI - comes across to me as a 'lets grab onto Tesla and free-ride' some Tesla reputation to promote our brand. My immediate thought on learning the barest amount about AEI was 'scam'. But, I have nothing really on which to base that judgement. Just my opinion.
AEI is merely the FIRST instance that I've run across, of a planned suburb/community based around Tesla products. AFAIK, Tesla has NO connection with Alset.
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To bring the conversation back to energy storage, batteries, Distributed Energy (DE), energy exchange software, solar roofs, mega packs, etc.

It was not so long ago that the group of brokers who owned the NYSE set the trading rules. Then the Internet pulled the rug out from under them. One year I paid $50,000 in trading commissions while barely breaking even. That's when I decided to put half my portfolio with a "discount" broker. The NYSE brokers called themselves "Full Service Brokers" to try to stay in business. My FSB did provide some very useful services which is why I kept half my portfolio with them but I did most of my trading with the discount broker. I used to call the NYSE brokers "Full Charge Brokers."

I bring this up because batteries and solar panels are going to create similar disruptions in the electricity and fuel industries. I'm not going to try to map the evolution of the disruption but software and the Internet are the enabling technologies.

The incumbents are going to fight back but money talks and BS walks. Already a regulatory agency led by a former UAW lobbyist has said that Tesla should not have released their FSD before the agency gave its blessing. BS WALKS! FSD is going to be here much sooner than I though possible but humans are crappy at making predictions. Proof that I'm human? Maybe! 😇

This is going to be the disruption of the century just 100 years after Ford, Rockefeller, Edison, Tesla, and Westinghouse.

Denny Schlesinger
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There is a pure play energy storage/management company that currently (pun?) had more installed storage capacity than Tesla. I have a tiny position and am studying it. The narrative is AI/ML software to maximize utilization. Seems very simple usage model but there are very complicated monetization channels and diverse user profiles. 75% of revenue is hardware, 25% is services. The RPO is 2/3rd's service and 1/3 hardware. Hardware has about 5% gross margin, I think. Latest quarter non-GAAP GM was 11% overall. So, current financial metrics suck.

But the 1/3 hardware RPO will be realized within one year. The services RPO, 37% is greater than 5 years. They sell the hardware, install in one year and then harvest services for 10 to 20 years.
Because they have a number of different customer types, the picture is a bit obscure. They sell to utilities, to enterprises, to commercial, to developers, .... One of the more complex models would be an enterprise which both generates electricity and consumes it and so its generation period, its usage period and the electricity cost need to be predicted to control the time of consumption and time of selling.

Revenue growth was 339% Y-o-Y.

I am still digging.

Here are some picks and shovels if you are interested:

Investor presentation

https://investors.stem.com/events-and-presentations/default....

Latest quarterly

https://d18rn0p25nwr6d.cloudfront.net/CIK-0001758766/7623d52...

KC
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What is "RPO?"

Thanks.

Denny Schlesinger
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Remaining performance obligation.

"A company's Remaining Performance Obligation (RPO) represents the total future performance obligations arising from contractual relationships. More specifically, RPO is the sum of the invoiced amount and the future amounts not yet invoiced for a contract with a customer."

KC
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75% of revenue is hardware, 25% is services....

Hardware has about 5% gross margin,
I think. Latest quarter non-GAAP GM was 11% overall. So, current financial metrics suck.


A 5% gross margin on 75% of revenue is a crappy business model. :(

Denny Schlesinger
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A 5% gross margin on 75% of revenue is a crappy business model. :(


Depends. Think razor/razor blade.

Now, there is the reality of quarterly reporting and then there is the business model described in the investor presentations.

BUT, the results plus the model show an interesting picture. Quarterly results show that RPO is ten times the current year's revenue. 37% of that 10x is due to be recognized more than 5 years in the future. The investor presentation claims 80% gross margin for software and for "market participation" revenue. It also claims/predicts 10% to 30% gross margin for hardware sales (how many grains of salt would you like to put on that--your taste may vary). So this becomes a cost of acquiring customer issue. They do of course have sales and marketing expenses, but you could categorize the hardware revenue a gross margin producing sales activity.

But give them 5% margin on 10%, and 70% on 90%, I think that would be 68% GM on the life of the current year's revenue stream (discount for present value????) But it is a complicated picture with host customers (minor % of revenue) where Company retains ownership of the storage system, and partnership customers where ownership is transferred to a customer or a customer's customer. ??? And there is FTM revenue (Front of the Meter) and BTM revenue (Behind the Meter). See slide 10 of the presentation. I think the ownership transfer model is for electric utilities or renewable energy producers.

This could go into the too hard pile and there is a lot of "determined" revenue in the RPO (i.e., the Company has determined what this RPO is and it is reviewed at least quarterly).

But the model itself isn't necessarily crappy. Might be brilliant. Devil is in the details and the accuracy of the "determined" and the stickiness of the contracts and the cube root of the adjusted solar/natural gas Schrodinger coefficient.

KC, who has not added to the watch position.
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Live blog from Tesla shareholder meeting here

https://www.siliconinvestor.com/readmsg.aspx?msgid=33521321
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