Tesla Earnings for 3q 2023

Investment Analysis Clubs Macro Economic Trends and Risks
41

Perhaps. The biggest argument against that is BYD, which is very good at mass-producing BEV’s but still has a sizable cost difference between the PHEV and BEV versions of the exact same cars. If we were at price parity, or anything close to it, you wouldn’t expect to see that. But getting a battery pack big enough to run a BEV is expensive.

Yes.

Look, BEV’s are expensive to make. There’s a reason that most of the BEV’s have hewed to the luxury end of the market. Again, batteries are expensive. You need the mark-ups that you can get by bundling higher-end appointments and features into the car to make the numbers work.

I don’t think that’s likely to change much. Yes, technology and manufacturing techniques improve. But rising quantities means rising prices - you end up paying more to get raw materials, talented specialized labor, etc. Supply curves slope upwards. The more you make, the more some costs rise. And we’ve seen that for the last decade or so, as BEV costs really haven’t fallen, despite the massive economies of scale and changes in battery development that have been deployed. And we’ve only just started to see the competition for battery resources from other sectors of the economy that need to electrify, like large scale power storage.

Sometimes you can’t make things as cheap as you’d like. Sometimes you just can’t make a $100 laptop or a 1 lakh car.

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42

That’s what happens when one modifies what is primarily a gas car to be all electric. Not surprising that the all-electric version is a less efficient compromise.

A better strategy is to design the car to be all-electric from the beginning, the software-designed vehicle. Then the vehicle has reduced manufacturing costs and will outperform ICEs at the same price range. That’s how Tesla grabbed market share from the likes of BMW in the luxury car market. The Teslas are better cars than BMW ICEs in the same price range. That’s price parity.

I don’t have first hand info but I’ve heard that the BYD BEVs built on their new electric platform designed solely for all-electrics (e.g., with structural batteries like Tesla) are approaching price parity with equivalent ICEs/hybrids.

The issue now is to achieve price parity at the $20K-$30K bracket.

They are now, but we are speculating about the future. Batteries are also declining in price and improving in efficiency. New battery technologies are introduced frequently with competition increasing. Even conservative Toyota is announcing mass production of solid-state batteries by 2027.

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43

Except they’re not really that close yet. The ICE models on that list are around $39K, but the BYD BEV that has equivalent range to those cars is more than $44K. That’s not price parity yet - that’s a $5K electrification premium.

Are batteries declining in price by a material amount any more? From the below article, it looks like the period of significant price declines is pretty much over, as mass adoption and economies of scale have (for the most part) been played through already. There might be modest price reductions going forward, but increased production demands and rising competition for batteries from other sectors of the economy should mitigate that. We’re probably now past the initial adopter phase of EV batteries, and into the longer-term equilibrium - just eyeballing the chart shows that we’re past the hyberbolic reductions and approaching the asymptotic long-term equilibrium.

Might there be some radical new discovery in battery technology that upends the economics of EV’s? Of course it’s possible - but the more likely outcome is that you just see gradual improvements as shifts from one technique to another slightly better/cheaper/more efficient one happen.

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44

“Equivalent” is not so easy to define. It means different things to different people. For some people, it might mean equivalent range, but for the vast majority of people who drive short distances 361 days a year, and longer distances 4 days a year, a lower range is almost always sufficient. It might mean equivalent performance to some other people, so in that case, you may be comparing a $40k Tesla model 3 to a $75k BMW M3. And to still another group of people, equivalent might include the ongoing costs as well. For example, uberlyft drivers in CA flock to hybrids and EVs because their ongoing costs are substantially lower (mainly gasoline). But people who do a lot of local driving otherwise are also increasingly opting for EVs. I’ve seen a few Ford e-Transit vans around here, and saw one charging a few weeks ago and the owner/driver happened to be there, so I briefly discussed it with him, and he said he got it because it saves him about $1000 a month in gasoline. I suppose he was exaggerating because $1000 in gasoline here is 225 gallons, and even at 16 mi/gal, that’s well over 3000 miles a month! Though they (the Ford e-transit) don’t seem to be selling well at all, maybe there’s some other deficiency or perhaps a lack of awareness among owners of such vans? And sometimes, there is no “equivalent” at all. I have a family member that switched to EV recently, not for climate reasons, not for cost reasons, not for any reason other than hating going to gas stations. They bought it because they wanted to be able to “fill up” at home in their garage. There is no “equivalent” ICE for that person.

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45

That’s only true if range is the only buying factor. BEVs have substantial advantages in other areas, like reduced maintenance and fuel costs. The Atto3 Standard is about the same price as the Rav4 with less range but no need for oil changes or belt replacements.

Battery costs currently are said to average about $150/kWh, with Tesla battery cost estimated to be about 20% lower. Full price parity is estimated to occur at $100/kWh. Tesla’s 4680 battery once scaled is anticipated to go below the $100/kWh threshold.

The BYD Blade battery is probably close to that threshold.

As for breakthroughs, CATL and BYD are said to be introducing sodium-based batteries that have the potential for substantial cost reduction smaller EVs.

CATL first-generation sodium-ion cells cost about 77 USD per kWh, and the second generation with volume production can drop to 40 USD per kWh. In present times, it appears reasonable to utilize sodium-ion batteries in electric vehicles. Sodium-ion batteries from CATL and BYD to be installed in mass-produced cars by Q4 2023.

True, but I think it is still a useful term. One can group cars based on similar utility and performance, then compare their prices. If you do that with the Tesla models, Tesla turns out to be very competitive.

46

Of course. But you said “equivalent” ICE’s/hybrids. The short-range version of the BYD BEV (less than 200 miles in the real world) is not really equivalent to an ICE vehicle that can get 400+ miles on a tank of gas, which is what the RAV-4 ICE provides.

Indeed. As it has been for years. Tesla has been “estimated” to show significant reductions in price for year after year after year (and I recall seeing estimates of Tesla battery costs being lower than that a couple of years ago). Yet the price of their cars remains relatively unchanged, despite the fact that the reductions in discussed /kWh price should result in reduced production costs of several thousands of dollars. Industry-wide, for example, you’ve seen (allegedly) battery costs fall significantly over time as well - falling, say, by more than 30% from 2018 to 2022:

…but that hasn’t really been reflected in BEV prices, even though that’s many thousands of dollars in costs.

So I’m a little skeptical that future changes in battery composition or estimated prices are going to end up materially affecting BEV prices too much.

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47

Similarly, the ICE version isn’t equivalent because installing a 500 gallon tank of fuel with a dispenser next to your garage is quite cumbersome and expensive. And it has to be filled up by a tanker truck every few months.

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48

But no one (well, nearly no one) ever has to do that^^. Ever. Most car drivers come within a close enough distance of a gas station (near house, near destinations, or en route) so that refueling takes barely any time. They don’t need to have home fueling. The car can be refueled with a minimum amount of inconvenience without home fueling. So the difference is relatively inconsequential, and doesn’t really affect the use of the car.

A driving range of less than 200 miles is more consequential. Not for short daily trips, but for the occasional longer trips.

Again, the rhetorical question asked above (or in another thread), is “why would anyone buy an ICE when they can get an equivalent EV for the same price?” The answer is that they never would. The reason ICE cars are still so popular is because people don’t regard a car that goes a very short range (which could be developed at price parity with an ICE) as being equivalent to an ICE. If they did, you could probably sell a BEV with a <100 mile range and get very close to the actual cost of the exact same ICE car. But people regard range as an important enough attribute of a vehicle for that note to work.

^^ Fleet refueling exists, so this is more of a thing for commercial users.

49

I don’t think the numbers show this to be true.

ICE: 52 weeks a year, 50 weeks regular driving near home, fill up once a week. Let’s say it takes an extra 2 1/2 minutes to get to the gas station, 5 minutes to fill, and 2 1/2 minutes to to get back to your normal route (This is being generous as often just the one extra traffic light in each direction could be 90 seconds alone. It’s also very generous because statistics show that people will drive up to 10 minutes out of their way to save 20+ cents a gallon.) And then two weeks a year, they drive longer distances and have to fill up once along the way there and once along the way back, say 10 minutes total each.

50 weeks x 10 minutes = 500 minutes
2 weeks x 2 x 10 minutes = 40 minutes
TOTAL for ICE vehicle is 540 minutes a year

EV: Same 50 weeks usual driving, 2 weeks travel driving. Come home plug in each evening. On long trips, stop at a DCFC charger along the way, say 5 minutes out of the way, 20 minutes charging, 5 minutes back, 3 times each way each week. To be more than fair, I assume 20 minutes of charging even though it often will be less than that per charging stop (mine are typically 8 minutes to 18 minutes per stop for long trips), not to mention that during long trips, stops have to made anyway for bathroom, snacks, leg stretching, rest, etc, so you can arrange your stops to combine two activities (charging + bio breaks) whenever possible.

50 weeks x 15 seconds (to plug in at home) = 1.25 hours
2 weeks x 2 x 3 x 30 minutes = 360 minutes
TOTAL for EV is 361.25 minutes a year

Net net, the numbers show that the EV, across a typical year, is more convenient, at least with regards to time spent fueling, than an ICE vehicle.

We can also perform a similar exercise regarding fuel cost, but we all know how that one comes out.

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50

And yet people don’t act as though that’s the case. They act as though range anxiety is a thing.

That’s because you can’t really do this kind of exercise, totting up the minutes spent over the course of a year, and get an assessment that meaningfully assesses convenience or inconvenience. It’s why those, “you spend eight months of your life lifting the toilet seat” factoids don’t actually lead people to buy automatic toilet seat lifters so they can get eight months of free time.

Most people aren’t indifferent between having an extra 45 seconds added to each of their weekly fill-ups and having an extra 40 minutes added to a single long trips. They’re not indifferent to having an unexpected 10 minute delay added to a routine errand because they forgot to recharge at home (or couldn’t get the charger at their apartment or office) and having an extra 10 seconds each week waiting for gas.

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51

Anecdote. One datum.

My 2019 RAV4 hybrid gets between 360 and 380 miles per tank.
That’s based on the “estimated miles indicator”.

FWIW
:fuelpump:
ralph

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52

Most people haven’t driven in a decent EV yet. In real life, it’s not at all like this. Even if you forget to plug in at night a couple of times a week, it’s not at all noticeable for normal driving patterns. There’s no such thing as a 10 minute delay due to forgetting to plug in. And I don’t know where you get “40 minutes” from? I’ve owned EVs for more than 2 years and have done 5 or 6 long trips in an EV during that time. Never had a 40 minute stop for charging alone. The only 40 minute stops would be for a meal or something like that! All my supercharger stops have been 8 to 18 minutes, the car calculates what it needs to get to the destination or the next supercharger.

You need to experience it for yourself to understand it. To me, and to everyone in my family, long trips are more enjoyable in the EV than in the minivan. In fact, the kids literally HOPE that only up to 5 family members are going on a trip so we don’t have to take the minivan and can take the Tesla instead.

We once drove 504 miles straight (that trip was the best mileage I ever got out of that vehicle) in our minivan, and it wasn’t a particularly pleasurable trip, though it was quick[er]. Luckily the kids were all small and mostly sleeping the whole time in carseats at the time.

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53

Right. If I have to charge for 20 minutes on the way there (remember, we’re including the time to get to the station) and 20 minutes on the way back, I’ve got 40 minutes added to that trip.

I didn’t mean to hijack the thread into a discussion of range anxiety again. If you think a car that gets fewer than 200 miles of range is “equivalent” to an ICE car, you’re welcome to that opinion. I don’t think many consumers would agree.

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Well, that is disappointing to read. I just ordered a 2024 RAV4 XLE Hybrid and I was expecting to get near 500 miles per tank. My Chrysler Town & Country gets me nearly 450 miles between fillups and I do a lot of long distance driving.

You have made me sad,

JimA

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55

Here’s a beer for your tear!

The 2019’s have a known gas tank volume issue. The documentation says the volume is 14g.
Mine is 11g +/-.
Toyota has not recalled for this, AFAIK. I got a letter telling me to “sit tight, we’re working on it”.

It is NOT a problem for me, so I don’t worry about it. :slightly_smiling_face:

Perhaps (surely?) they’ve fixed it for newer models?

:beers:
ralph

56

I don’t. No serious EV automaker sells anything with less than 250 mile range.

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57

Other than the gas tank volume issue; how do you like the RAV4? Have I made a reasonably good decision or will I regret this?

JimA

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58

Overall it’s a good vehicle. I like its ‘git up n go’.
I like the mpg.
I like the size and interior space.
I got a dealership ceramic coating that is superb.

I don’t like Toyota cause they don’t just upgrade the software and make my vehicle better.

The dealership has been good. The service dept is great.
This is being automated, talk to a bot to schedule maintenance, etc. I LIKE THIS!

The sales people are … Sales people. LOLOLOL. Don’t trust em!
They send emails “we want your car! Come on by, we’ll pay top dollar” etc. Liars. LOLOLOL.

If I were interested in a new hybrid, I definitely look at a new RAV4.
But I think I’d look at Costco car buying service to see about that.

:space_invader:
ralph

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59

It has been an issue forever, across brands. In 1977, I bought a 2-yr old Pontiac Astre (Vega equiv) from a relative. Engine had been replaced at no charge by GM. The manual said 16 gal tank. Ran out of gas when I tested mileage to check MPG with local driving. I estimated approximate total mileage using 16 gal tank because this was first time I drove it. Ran out of gas, so was towed to gas station. 14 gal to full tank. That explains why I ran out of gas.

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60

We might also mention that a Pepsi truck is probably nearly full when it leaves in the morning but almost empty at the end of that 100 mi. Again different from an over the road truck.

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