Ark Invest provided detailed metrics for their bull case analysis for Tesla through 2024.
Besides the self-driving aspect, there are two key factors for Tesla:the efficiency of factory construction andlowering vehicle costs while growing margins.
Tracking Tesla’s factory construction rate and efficiency of factory production is a critical aspect of the bull case.
Tesla confirmed that $1.6 billion in financing was necessary for its Shanghai factory, which has an initial capacity of 150,000 vehicles. There are various reports of expansion of Tesla Shanghai capacity to 250,000 by the end of 2020 and to near 500,000 by the of 2021 or in 2022.
Tesla captured 23% of China’s EV market in June.
The initial capacity seems to have been made by investing $10,700 per unit of capacity.
Investing $11,000 per unit of capacity for Shanghai, US factory and Berlin factory expansions would validate several of the bull case scenarios.
Tesla has been lowering the price of vehicles. If auto revenue gross margins are grown to 30% by the end of 2020 while the prices were lowered, then this would validate the lowering cost aspect of Ark Invest bull scenarios.
If Tesla can get to 7 million cars per year by 2024, they will need to have 14 gigafactories producing 500,000 cars. There could also be fewer factories producing 1 million cars each.
Fremont 500KShanghai 1M (2022 fully scaled to 1M)Berlin 1M (2021 250K, 2022 500K, 2023 1M)Texas 1M (2022 250K, 2023 500K, 2024 1M)Oklahoma 1M (2022 250K, 2023 500K, 2024 1M)Europe 2 500K (2023 250K, 2024 500K)China 2 1M (2022 250K, 2023 500K, 2024 1M)Asia 1 500K (2023 250K, 2024 500K)Asia 2 500K (2023 250K, 2024 500K)
6M more cars per year would need $60B at $10K per unit.
Ark Invest notes that the auto industry expects EV to reach factories with $7K per unit investment.
If Tesla reaches $7K per unit for factories then only $42B of capital investment would be needed for the 6M more cars per year. Tesla has $8B in cash now. If there are no factory shutdowns then Tesla will be producing 200K cars per quarter for $10B per quarter in revenue and $3b per quarter in auto gross margin. This would be about $2B in profit per quarter. $8B in profits per year reinvested in 2021 and higher profits in 2022, 2023 and 2024.
It would be good for Tesla to raise $20-40B over 2020, 2021, 2022 to build the extra factories.
SOURCES- Ark Invest, TeslaWritten By Brian Wang, Nextbigfuture (Brian owns shares of Tesla)
