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Tesla battery day is coming. Here’s what you can expect.



Tesla

is hosting its long-awaited battery technology day next week. Analysts use phrases such as “long-awaited”, “important milestones” and “mind blowing” to describe the event.

Tesla (ticker: TSLA) CEO Elon Musk added to the hype recently tweeted “many exciting things will be revealed.” He closed the tweet with a flash of emoji.

The event is a big deal for the stock. It will shape investors’ views on the future of electric vehicles and Tesla’s technical management. To prepare for Tuesdays, investors can divide probable topics into several categories: battery cost, battery reliability, and battery capacity. New battery technology should also be discussed. And investors should also be prepared to hear about stationary power, which includes Tesla Powerwall deals.

Battery cost

Cost is a big deal for all EV manufacturers, including Tesla. Historically, electric cars have been more expensive going forward than comparable petrol-powered models. This is mainly due to the fact that high-tech batteries cost more than a petrol tank.

Battery costs are falling. Some industry people tell Barron̵

7;s costs have decreased by 75% over the last ten years. The cost game today is for battery cells to hit $ 100 per kilowatt hour.

Credit Suisse analyst Dan Levy believes that Tesla’s events will focus on cost reduction, possibly offering $ 75 per kilowatt hour. Cost reduction “can help unlock sales at lower price points and thus drive further growth,” Levy writes in a recent research report. He rates shares equivalent to Hold and has a price target of $ 400 for the share.

Morgan Stanley’s analyst Adam Jonas also values ​​shares equivalent to Hold’s. However, its price target is lower at $ 272 per share. He asks in his preview report, “could Tesla communicate plans … to target $ 50 per kilowatt hour?” This is the lowest cost target for battery cells Barron’s has seen in a research report on Wall Street. (By the way, Jonas’ preview note is the one with “mind blowing” in the title.)

Anything under $ 100 per kilowatt hour, along with a credible plan to get there, should be a boon for Tesla shareholders.

Reliability

Wedbush analyst Dan Ives believes a million-mile battery will be “front and center” on Tuesday. It is a battery that can take a million miles through all charge cycles. Such a battery would last longer than the car’s body and open up opportunities for reuse and recycling. Reusing batteries is another factor in cost reduction.

Ives rates the shares Hold and has a price target of $ 380 for the share. New Street Research analyst Pierre Ferragu also values ​​stock holdings. His price target is $ 300 per share.

Ferragu has a different opinion on the million mile battery. He thinks it is irrelevant to Tesla’s long-term success. Other carmakers can achieve the same thing, so he believes that battery reliability does not help Tesla stand out from its competition in the long run.

Capacity

Ferragu believes instead that Tesla’s secret project “Roadrunner” could be big. Roadrunner is an internal project, apparently designed to improve all aspects of battery design and manufacturing.

“The key to success here is to develop the chemistry, the design of cells, the entire driveline and the manufacture of all these components entirely,” writes Ferragu. “The current setting is suboptimal. Tesla jointly develops chemistry and cell architecture and does not manufacture. We see important benefits in bringing everyone under one roof. ”

Ferragu also reduces the weight of giant “tera factories”, which in theory are orders of magnitude larger than Tesla’s Nevada Gigafactory.

(The numeric prefix tera is one with 12 zeros. Giga is a 1 with nine zeros after it.)

Capacity still means. Tesla has enough battery capacity to produce approximately 600,000 to 700,000 vehicles per year. The company will need to increase capacity to achieve the expected growth targets.

Ferragu believes that investors want to know that Tesla will have enough capacity to make 2 million cars by 2025. This means that battery capacity will increase by about 3 times until now. (Tesla has about 63 gigawatt hours of battery capacity today.) Morgan’s Jonas predicts that Tesla will produce 439 gigawatt hours of batteries by 2030. That is a sevenfold increase in ten years, or about 21% growth per year on average.

Any guidance from Tesla management on capacity can be compared with these figures.

Technology

Startup QuantumScape becomes a listed company by merging with a SPAC. It plans to bring solid state battery technology to the EV market. Solid state batteries have more power density – more electricity can mainly be pushed into a smaller unit, which reduces costs and improves weight.

With solid state competitors focused on solid state power density over 400 [watt-hours per kilogram], we would expect [Tesla] to give their expected time to reach such levels, “wrote Oppenheimer’s analyst Colin Rusch in a report that previews battery day. Today’s batteries have approximately 260 watt hours per kilogram of capacity.

Musk recently tweeted about higher energy density batteries, saying they were probably three to four years away.

Rusch qualifies as a Tesla bull. He rates Tesla stock purchases and has a target of $ 451 for shares.

Stationary power

Investors should not forget about stationary power. “Stationary storage growth, despite being solid, has been far from Tesla’s previously stated target,” Levy writes. “In 2014, Tesla cited a goal of reaching 15 gigawatt hours with the Tesla Energy volume by 2020 … t year they had only 1.7 gigawatt hours.”

One problem is that the capacity of the battery cell has been limited. Tesla has been busier with building cars. According to Levy, the storage market is “emerging” but represents upwards when costs fall and capacity rises.

Wild cards

Several analysts are wondering if Tesla will become a supplier to the EV industry. Sells batteries and battery systems to other car manufacturers. It’s a potential wild card.

Baird analyst Ben Kallo suggests an interesting idea in his preview report. Tesla can “adopt an ownership model for batteries, whereby the company manages distributed energy resources, similar to an electricity company.” He points out that Tesla already has “Autobidder” which is a technology that helps tools to handle electricity stored in batteries.

Autobidder is a new issue for an analyst to address. It does not often come up in management conference calls.

Saved

To be sure, there is a lot to follow. In the end, investors want to be convinced that Tesla’s technical management is sustainable and that it has sufficient capacity to make at least 2 million cars by 2025. With that milestone reached, bulls can justify higher-than-average margins and growth into the future.

Tesla shares have risen more than 400% the year before, much better than comparable returns

Dow Jones Industrial Average

and

S&P 500.

Tesla shares fell 4.2% on Thursday, but are still higher than 13% for the week. The Tesla share will increase by 4% in trading before Friday.

Write to Al Root at allen.root@dowjones.com


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