Sales Targets For 2020 Won’t Be Met Either.
Electric Cars Failing To Excite Buyers.
Tesla Motors Inc said it would build its so-called giga-factory near Reno, Nevada, but one expert said this would result in chronic over-production of batteries, while investors warned that the company’s shares were currently overvalued and ignored some troubling negatives.
Boston-based Lux Research said the giga-factory would lead to more than 50 per cent overcapacity of lithium-ion batteries, and only lead to a cost reduction of $2,800 per vehicle, while Tesla would fail to reach its target of selling 500,000 electric cars by 2020.
Morgan Stanley said in a report that it stood by its belief that Tesla was the most important car company, and that although it might one day be worth $320 a share, it was currently getting ahead of itself. A year ago Tesla shares trade at around $170, moved up to close to $290 when the Nevada decision was taken, before falling back to just under $260 on September 14.
Morgan Stanley said some sobering facts for Tesla shareholders to consider included the fact that electric vehicles were failing globally, demand in China might be limited by an inability to develop dealer and service infrastructure, while the development of batteries wasn’t taking place fast enough.
Tesla and its partner Panasonic of Japan will contribute 45 per cent and 35 per cent of the initial $4 billion required to build the giga-factory which should start production by 2017.
Razor-thin margins
Lux Research said Tesla sales would only reach 240,000 by 2020, leading to razor-thin margins to Panasonic and 57 per cent overcapacity.
“The giga-factory will only reduce the Tesla Model 3’s cost by $2,800, not enough to sway the success of the planned lower-cost EV,” said Cosmin Laslau, Luz Research analyst.
Tesla currently makes the Model S sedan, and will introduce the Model X SUV next. Tesla has a target of reaching volume of 100,000 by the end of 2015. After the Model X, Tesla plans to market a smaller, cheaper and much bigger selling vehicle, the Gen 3.
Lux’s Laslau said battery prices need to fall dramatically if electric cars are to make a sales breakthrough. Tesla currently has the lowest cost for batteries – $274 per kWh, and Laslau said Tesla CEO Elon Musk aims to cut costs by 30 per cent to $196 kWh with the giga-factory.
Lux said the overcapacity wouldn’t be taken up by non-auto uses either.
“This 57 per cent overcapacity is unlikely to be filled either by rival carmakers or Tesla’s own plans to sell some stationary battery packs to developers like SolarCity for its residential photovoltaic integration and other uses,” Laslau said.
Morgan Stanley said some big car manufacturers appear to have put electric car development on ice while pushing hydrogen as the future of emission free transport, while it thought they might well be able to persuade governments to water down some of the more onerous regulations seeking to slash fuel consumption.
Tesla’s business case includes big sales in China, but Morgan Stanley said demand for the Model S and Model X there will outstrip its ability to meet it. The giga-factory was likely to make the Gen 3 product better, rather than cheaper.
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