Analyst Takes Deep Dive Into Tesla (TSLA) Factory

August 24, 2014 7:45 PM EDT
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Global Equities Research analyst Trip Chowdhry had some interesting observations after taking a recent tour of Tesla Motors' (NASDAQ: TSLA) factory.

First, Chowdhry noted activity in Tesla's factory lobby was extremely high. Comparing Tesla's lobby activity levels to that of Google's or Facebook's lobby, he said Tesla's was even higher. He highlighted:

  • Tesla factory lobby was busy with both European suppliers and Asian suppliers
  • Suppliers are eager to work with Tesla to manufacture custom modules for Tesla
  • About a year back, there was hardly any activity in the Tesla factory lobby, and today that has all changed.
  • Today, there is a constant stream of the suppliers; which indicates a reversal in supplier equation:
    • Before: TSLA was searching for Suppliers and had zero leverage with Suppliers
    • Today: Suppliers are eager to work with TSLA and are willing to agree to TSLA's stringent quality and customization requirements
    • Result: TSLA has better Supplier economics and engineered quality

Chowdhry also noted a motivated, passionate, enthusiastic and very skillful workforce. He highlighted as least two war Veterans working in the battery assembly line. He also saw three cafeterias in the Tesla factory, which he thinks are free as he didn't see any payment register.

The analyst highlighted stationary batteries and in-motion batteries:

  • Tesla has 3 categories of of Stationary Batteries:
    • Residential: 10kWh
    • Commercial:400 kWh
    • Utility/Grid: > 400 Kwh
  • Tesla has 2 categories of In-Motion Batteries
    • 85kWh for Model S
    • 60 kwh for Model S
  • On the 2nd floor of the Tesla Factory, cells are assembled into Battery modules, which are then assembled into a Battery Pack
  • A complete area has been set aside on the 2nd floor of the Tesla factory to assemble Stationary Batteries
  • On the 2nd Floor of the Tesla factory, in addition to batteries, Tesla also manufactures drivetrains, which includes electric motor, gearbox and inverter. Tesla also manufactures various electrical components on the 2nd floor

He also noted the new production line is is fully operational and capacity is getting ramped up:

  • We observed that the new production line is fully operational
  • Within the next week or so, the production capacity will probably reach 800 cars per week
  • And probably after 4 to 6 weeks, the production capacity will probably reach 1,000 cars per week
  • This new production line has a potential production capacity of 3,000 cars per week
  • The factory has an empty area, where Model III Production line could be installed

The analyst also believes driver assist could be coming to Tesla Model S in the not too distant future, based on his observations:

  • On the factory floor, we observed an area set aside and labeled "Driver Assist"
  • We at GER speculate, it is more than just parking sensors and probably it could very well be the much rumored feature of "Driver Assist" that could be using MobileEye technology

On the gigafactory, the analyst speculated:

  • Probably no more construction may be done on the Nevada Reno Superpad, at least not for now
  • Probably both California and Texas are the front runners for winning the GigaFactory
  • Probably both California and Texas may each give Tesla more than $200 million in incentives
  • The motivation for California and Texas seems to be the following "What Chevron is for ICE (Internal Combustion Engine), GigaFactory is for EV (Electric Vehicle)" and both these states want to own the new industry that Tesla is creating

The firm has an Overweight rating and a 12 - 18 months price target of $385 on TSLA stock.

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