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Thursday, January 27, 2022

Tesla in 2022

Following Tesla is always exciting. They don't use the standard playbook. They are not chained to history or even their own existing designs. If they've found a better way of doing things, they'll take a 90-degree turn from their current heading.

On January 26th Tesla held their Q4 financial conference call. We heard all about how 2021 fared and we got a glimpse into what might happen in 2022 and beyond.

On the conference call, Tesla's 2022 guidance was more about what they are NOT going to do, than what they will do. The chip shortage will continue to be an issue for Tesla (and the rest of the auto industry) this year. Given this and their planned growth, Tesla will not be introducing any new vehicles in 2022. This means another year of waiting for people with Cybertruck, Roadster, and Semi orders. 

However, even with this limitation, there is a lot to look forward to in 2022. Here are a few of the things that could happen in 2022. Let's start with the highly likely and then get into some fun speculation.

Giga Berlin Body Production Line

  • Opening of the Giga Austin and Giga Berlin
    Both of these Gigafactories have started pilot production and are expected to deliver their first customer vehicles in Q1 of this year. The Model Ys coming out of Austin have structural battery packs and 4680 battery cells (which are also being produced at Giga Austin). 

  • Tesla Insurance Continues to Grow
    This offering recently expanded to Ohio and Arizona, bringing the total to 5 states where your Tesla can be insured by Tesla. Tesla has a goal to make their insurance product available to 80% of current US Tesla owners by the end of the year. How many more states would that take? Well, not 80% of US states. US Tesla owners are not evenly distributed throughout the nation; they're mostly concentrated on the coasts. So you can expect to see Tesla insurance spreading up and down the left and right sides of the country this year. 

  • 1 Million Vehicle Year
    Tesla delivered 936,172 vehicles in 2021. Giga Shanghai has expansion plans and Austin and Berlin will begin their ramp. Estimates for 2022 vehicle deliveries range from 1.2 million to 1.8 million. Even at the low end of these estimates, 2022 will be a record setting milestone and the the first year ever that Tesla (or anyone else)  produced over the 1 million electric passenger vehicles in a calendar year.

  • New Gigafactories Announced
    Once Austin and Berlin are online. Tesla will not slow down. We can expect to hear about at least one new site. Where do you think it/they will be? India, Russia, South Africa, Brazil... we'll see. 

  • Supercharger Upgrades
    With larger pack vehicles like the Roadster and Cybertruck in the works, the Tesla Supercharger network will likely see another speed upgrade this year. 



  • Cybertruck Revisions
    With another year on the drawingboard, there will be tweaks to the Cybertruck. Side mirrors, interior, wheels, through cabin bed access, and more will likely all have improvements, refinements. There's been speculation that we'll see two sizes of Cybertruck. That would add significant manufacturing complexity, so it seems unlikely that Tesla would unveil or announce a second truck before the first one is in production. I'm interested to see if that single giant wiperblade will be in the final production Cybertruck.



  • Redwood Partnership 
    Tesla is looking at supply-chains from mining to chips. They want to secure materials from all the sources they can. As Tesla ramps their own cell production, a partnership with Redwood is a natural fit. Redwood's founder, JB, is also one of the founders of Tesla. He left Tesla on good terms. In the partnership, Redwood would receive all of the production scrap from Tesla's battery factories and add it to their recycling flow. In return, Tesla gets another raw material supply source. 


  • Tesla Semi and Megachargers
    This is the year that we can expect to see the first Tesla Semi-trucks on the road. And the first deployments of the giant Megachargers that will be used to recharge these beasts. These will likely be test vehicles or a limited deployment (rather than volume production). This will allow Tesla to test the vehicles and refine the design further. 

  • 4680 Battery Cells
    Revealed at Battery Day. These are the next evolution in Tesla's battery technology. These cells will initially hit production in the Model Y from Giga Austin. This is an important milestone and will eventually enable the next generation of Tesla vehicles (Semi, Cybertruck, Roadster...). Don't expect to see deliveries of the Cybertruck or Roadster this year, but delivering 4680s in any vehicles will clear a major hurdle to the eventual delivery to these phase 4 vehicles.

  • FSD Beta Wide Release
    By the close of 2021, FSD Beta was in the hands of about 60,000 Tesla owners (select influencers and those US drivers with a score high enough safety score). The software continues to improve and the roll-out will continue to broaden (perhaps to safety scores as low as 90). Version 11 of FSD Beta will have even more improvements. This year, you can expect to see Canadian drivers get their first chance to try out FSD Beta. To be clear, it will still be Beta; Tesla will not be removing the steering wheel anytime soon.

  • FSD in Boring Company Tunnels 
    Speaking of FSD, today, the Boring Company tunnels have human-piloted Tesla vehicles driving in them. This is an environment that Tesla (er, the Boring Company) controls completely. This is the ideal first deployment environment for a vehicle with no steering wheel. For the initial roll-out, they could have remote pilots to help the cars out if/when the cars encounter a situation where they don't know what to do. Tesla could also add a concierge service button in the vehicle for riders that have questions or concerns. If they cannot make robotaxi work there, it has no chance in the complex above-ground world. 

  • Dojo
    Dojo is Tesla's dedicated AI training supercomputer. You can learn much more about it here. Tesla is currently using GPU clusters to train their neural network systems. Dojo promises to cut the training time significantly, allowing more rapid iteration of the FSD software. This iteration speed is vital to the march of nines for FSD performance. Each build allows them to learn, to check one path in the maze, determine if it is a dead-end or not, learn, and then feed those learnings back into the next iteration. Nothing is more important to a fully functional FSD system than this iteration time. 

  • Redesigned Roadster 
    The Tesla Roadster is officially not going to be released in 2022, but that does not mean that we won't see teases of the updates. I want to see a demo of the SpaceX package hovering car. Will cold gas thrusters really allow a battery-laden car to float on air? That would be a sight to see. 

  • Tesla Bot
    This is a major AI talent recruiting project for Tesla. There will be activities to fan the flames of this hype. You can expect to see teases like an arm moving or legs walking... It's likely too soon to see anything like a Boston Dynamics demo this year, but total silence is not an option. 

Well, that's my list. What did I miss? I do expect a TSLA stock split this year? How about an app store for games, movies, and other in-car software? Maybe a human-piloted rideshare as a slow-start to the eventual robotaxi network? Tell me what you think will happen in the comments below.

Sunday, January 2, 2022

Green Abundance: No Sacrifice, No CO2 Future

I read a lot of "eco" articles and one thing that's often mentioned is how we'll need to learn to live on less for a green future. We'll need to travel less, reduce meat intake, walk or bike instead of drive... One article had a catchy 1, 2, 3:

  • Lower your thermostat by 1 degree
  • Reduce your speed by 2 MPH
  • Change 3 lightbulbs to high-efficiency LEDs

One such article was in the LA Times, the article was titled, "Surviving climate change means an end to burning fossil fuels. Prepare yourself for sacrifices."

This approach of asking people to sacrifice is completely wrong, IMHO. If a low / no carbon future is wrapped in a lifestyle of deprivation, only the most ardent will adopt it. To have a successful mass adopted movement, you have to have a compelling vision of the future; one with abundance, not deprivation. 

My definition of sustainability is living the best life we can today while maintaining an environment for future generations.

If your movement depends on people sacrificing, it's doomed to a niche at best.

Every time we've transitioned to a new energy source, it has been because it could better meet our needs; not because we had a moral calling. Kerosene replaced whale oil, not out of sympathy for whales; kerosene won because it was easier to get and cheaper to buy. Very few people will reduce their personal quality of life because "it's the right thing to do."

If your movement requires people to sacrifice their quality of life, it's doomed.

Green and Good

It should not be green OR quality of life; it needs to be green AND a better quality of life. Let's look at a couple of examples that I think are far more effective. 

Impossible Foods

Impossible Foods wants to make plant-based burgers (and other products) that are as good or better than the meats they are displacing. If you are happy to eat quinoa and lentil patties, I would never tell you to do otherwise, but you should know that joe-six-pack is never going to give up Sunday grillin' for a grain burger. Impossible Foods (and others like them) have a chance to woo people to plant-based alternatives that would otherwise never consider it as an option.

Tesla Vehicles

The type of electric cars that Tesla makes is another example. There were plenty of electric car companies that existed before Tesla. These other companies primarily offered small vehicles with short ranges and abysmal performance. Tesla, on the other hand, offered a no-compromise sports car, followed by a large luxury sedan (seating 7 with the optional rear-facing seats). These were a radical departure from the small (sometimes 3-wheeled) EV offerings of the day.

Other than being electric, Tesla was the opposite of previous generations of EVs such as the CityCar. 

A Tesla allows a driver to have the range and performance that's as good or better than their gas-powered analogs. All while being twice as energy efficient as a Prius. This is the way to get people to transition. If you prefer to walk or bike, good for you, I encourage you to keep doing it; but many people have commutes that make this a near impossibility. They are going to drive and that drive should be in a car that doesn't have a tailpipe. 


Energy Abundance, Not An 'Energy Diet'

Asking people to go on an "energy diet" will fail faster than a New Year's resolution. Solar energy needs to be sold as "better than the grid," not as you'll have to keep the lights dim and wear a sweater in your house. Instead, if solar can be paired with batteries and provide energy even during a black-out all while lowering your energy costs, solar could be part of a luxury resilience package, not a Spartan one.  

Asking people to go on an 'energy diet' will fail faster than a New Year's resolution. 

We should not be striving to just 'replace' our current energy usage with renewables; we should be striving to create an abundance of renewable energy. This will open new markets and innovations: direct air carbon capture, desalination, green hydrogen generation... who knows what opportunities a renewable energy abundance would create.


"Negawatts" vs Deprivation

Amory Lovins loves to talk about energy efficiency. He says phrases like, "The cheapest unit of energy is the one that you never generate and never use." He dubs these savings due to efficiency as "negawatts." The distinction between efficiency vs reduced use (or what I'll call energy deprivation) is important. Both of these result in lower energy use, but the impacts are radically different. 

Improving efficiency means that the same benefits can be realized with less energy. That's great. If your vehicle is 10% more efficient, then you can still get to all the places that you need to go in a day, and it costs you 10% less in fuel.

On the other hand, if you had to reduce your miles traveled in a day, then you may not be able to get to all the places that you needed to for the demands of your life. This reduces your quality of life and will not be sustainable.

I wanted to make it clear that I'm all for energy reduction via energy efficiency. In fact, efficiency improvements are one way that we can help to achieve an energy abundance.

 

Electrify All The Things

The formula for moving to a zero-carbon future goes something like this: 

  • replace fossil fuel burning machines with electrically powered ones
  • generate electricity with renewable sources 
These are not a one and then the other, progress on both fronts needs to be made every year. 

Home heating would move from methane furnaces to heat pumps. Personal transportation would move from internal combustion engines to electric vehicles. Cooking would move from gas ranges and stoves to induction cooktops electric ranges. All the loud, polluting, 2-stroke lawn care equipment would move to electric... And remember, the goal is to displace the existing fossil burners with renewably powered products that are better at the job.

 

The Urgency 

As India and China are immerging from poverty, their per capita energy consumption is quickly rising. If this increased energy usage comes from the same sort of fossil sources that powered the western world in the 19 hundreds, we're doomed; weather events and wildfires will be even more extreme... Instead, if we can use Wright's Law to reduce the cost of renewable products, these immerging economies can leapfrog to a better future.

Conclusion 

As Jevons Paradox demonstrated, after a disruption, there is MORE supply and prices are cheaper! Let's use this emergent property to accelerate renewables and electrically-powered products, while living a life of abundance; while providing a habitable planet for future generations.

10 Reasons Tesla Will Be Even Bigger in 2022


Originally published on Saturday, August 14th, 2021
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Following Tesla is always exciting. They are irreverent and unbound to the past. Next year will be no different. Tesla will break new ground, will grow, and it will continue to be exciting to follow. Here are a few of the growth drivers you can expect to see in 2022:  

  1. New Gigafactories - Tesla is building Gigafactories in Austin, Texas and Berlin, Germany. Both of these are scheduled to be complete later in 2021. That means in 2022, they will be producing products and ramp up output. In 2021, these projects were primarily just massive expenses; in 2022 these investments will begin paying dividends. 

  2. Plaid - For most of 2021, the Model S and Model X were not in production. These two vehicles are currently Tesla's most expensive and they stopped producing them in Q4 of 2020. The refreshed Model S and X (including Plaid trims) started limited shipments in the second half of 2021 and will be in full production for all of 2022. Tesla has previously sold about 100,000 units annually in the S/X category. 100,000 units at an average price of ~$100,000 each is ~$10B in revenue that Tesla could bring in from just these high-end vehicles. Even if they only sell half this amount, that will be a nice bump to the top line and vehicle margin.

  3. $25k Car - Call it the Model Next, Model 2, or whatever you'd like; it will be a big deal. For every $10k you move down the price curve, the available market roughly doubles. That means there are currently buyers out there that want a Tesla, but cannot afford a Model 3 or Y. The $25k car could be the one they are waiting for. I don't expect to see the $25k car in production in 2022, but I think we'll see an unveiling event and a lot of preorders; deliveries in 2022 would be a nice upside surprise.

  4. Chip Shortage - To survive and continue to ship cars in 2021, Tesla enabled many alternative chip providers. In one case, they have 19 options for a given component. This means that in 2022, as ANY of these providers escape the constraints of the chip shortage, Tesla will be able to utilize the volume of those components. Additionally, it means that Tesla doesn't have vendor lock-in. They will be able to select the vendor with the best availability, price, reliability... 

  5. CEO Compensation - Musk's compensation plan had 12 tranches. These have nearly all been met. There's only about $500M in stock-based compensation left in the current plan. This is significantly less than he was awarded in the stock run-up approaching the S&P 500 inclusion. This compensation reduction will improve Tesla's OpEx burden. Of course, a new compensation plan will be put in place at some point and we'll have to see what that one looks like. 

  6. Growth Rate - Tesla has been growing at about 50% per year. 2022 looks like it will continue this trend. Tesla will likely ship more than 1.5 million vehicles in 2022. They are asking their battery suppliers to double their battery cell supply to Tesla. Why would they need 2X the supply if they ramp up their own production and only ship 1.5X the number of vehicles? Two reasons; one, the Semi, and see #7 for the second answer.

  7. Tesla Energy - Summers are getting hotter, winters are getting colder; we are more dependent on home HVAC than we've ever been. It looks like this trend will continue. Sadly, with this growth of dependence, our electrical grid has too often also become less stable. This has some people looking for ways to solve this problem for themselves. One way to do that is with home energy storage systems like Tesla's Powerwall products. Utilities and local governments are looking to solve the grid side of this problem too. One solution is grid-scale energy storage like Tesla's Megapack. I expect to see growth in these products to outpace vehicles in 2022.

    7b. Fungibility - Tesla has two major product categories for cell utilization: vehicles and energy storage systems. This allows fungibility in the supply utilization system. They can ask suppliers for more cells than the anticipated vehicle run rate. The surplus cells can go into energy products. If there's an upside surprise in vehicle production (a ramp goes smoothly and quickly, more Semis or long-range vehicles are ordered than expected...), Tesla will have the needed cells.
     
  8. US EV Tax Credit - Most EVs available in the US qualify for a $7,500 federal tax credit. The big exception to this is Tesla. Tesla hit their allocation of this credit in 2018 and phased out of the incentive. This means that Tesla has been at a $7,500 disadvantage compared to other EVs. However, the Biden administration has ambitious transportation electrification goals. To help achieve these goals, the federal EV incentive is going to be revamped. Instead of a fixed number of vehicles per vendor, there will be an incentive for all EVs. This means that Tesla will once again be eligible for the incentive. In addition to the previous $7,500, there would be an additional $2,500 if the EV is manufactured in the US and another $2,500 if the vehicle is made by unionized autoworkers. So Tesla vehicles manufactured at the Fremont or Austin factories would be eligible for a $10,000 incentive.

  9. RAISE the Roof - A bill was introduced in the US House of Representatives and the Senate to amends the solar investment tax credit to include integrated solar roofs. If passed, this bill would make Tesla's solar glass tile roof product eligible for a 26% tax credit for solar systems on residential and commercial properties. It’s called the RAISE the Roof act and the acronym stands for Revamping Appropriate Incentives for Solar Energy.

  10. Cybertruck - I've saved the best for last. The Cybertruck shattered expectations. It does not look like other trucks, it is not designed or made like other trucks. The shattered windows from the failed demo just increased awareness of the event. There are now more than a million pre-orders. This truck will start delivery in 2022 and bring an entirely new customer genre to Tesla - Truck Guys and Gals! 
Note that I didn't put the production of the 4680 cells on this list. They are certainly an important component in the Semi, Cybertruck, and other products. And we are likely to see them in 2022; however, the products they enable (which are listed) are the important achievements.

Similarly, I didn't list Full Self-Driving (FSD). I'm sure that there will be great strides in FSD in 2022, but I don't expect the launch of Robotaxis in 2022. FSD might, however, advance to the level such that the drivers can be removed from the Boring Company Loop tunnels. These tunnels are a controlled environment and much easier to automate than city streets. I think full autonomous city street driving will be at least 2 years after fully autonomous Loop tunnel driving.

Disclaimer, I am long Tesla. This is not stock advice.