When Credit Suisse raised Tesla’s (TSLA) price target to $400 from $280, it noted that “batteries are Tesla’s pillar of growth for the next two decades.” Tesmanian noted that Credit Suisse is expecting Battery Day to be Tesla’s Master Plan Part 3, and reminded us that Tesla hinted at a long-term battery capacity of 2 TWh. That is more than 30 times its current capacity. This could support growth in three areas:
- Stationary storage
- Supplying others who want to incorporate Tesla’s technology into their own products.
Battery growth is key for Tesla’s goal of selling 20 million vehicles annually. If Tesla is able to achieve this, it will grow to be twice the size of Toyota, or maybe even more than that by then. Credit Suisse thinks that this is overly aggressive, yet believes in Tesla — that it could reach 5 million vehicle sales a year over time. One of the old Tesla myths was that there was no demand, so Tesla would never turn a profit. With services such as in-house insurance and premium connectivity, coupled with booming demand, that is all proven false.
One of the main challenges that Tesla had to overcome was the cost of making the battery, and Credit Suisse fully expects Tesla to show that it has not one but many ways of showing how it has done this. This is one reason why it’s important to value Tesla not as a simple car company, but as a technology company.
We may still be thinking too small about Tesla’s battery potential. One can assume that once Tesla has perfected its secret recipe for developing batteries for vehicles and stationary energy storage, its recipe or production process could be applied to all types of battery products.
In the video above, Ross Gerber, CEO and President of Gerber Kawasaki, which is a Tesla shareholder, pointed out the obvious to David Westin on Bloomberg Wall Street Week. Gerber pointed out that Tesla shareholders are investing for the future, not the past. “I think that what we are looking at is that the entire infrastructure for the automotive industry is changing from gas to electric and Tesla’s leading the way. Tesla is so far ahead of its competitors that it’s going to take years for anybody to develop a vehicle they can scale to compete, but what it is is that consumers want electric vehicles and consumers want Teslas.”
Gerber reminded Westin that Tesla’s Shanghai factory is coming fully online, and when Giga Austin and Giga Berlin are both online, “their ability is to actually double production in the next two years and then double it again in two more.” Gerber then added that other car companies across the world aren’t even growing — much less doubling production. He also pointed out the obvious mistake of labeling Tesla a car company. “Tesla’s a technology company. They’re developing self-driving, and also it’s a solar and energy company, and the battery component of their business has enormous value as well. So, Tesla isn’t a car company — I think that’s the mistake I think a lot of people make in valuing it.”
Gerber also pointed out that Tesla is building its technology in-house and that it owns a lot of its intellectual property (IP). Gerber explains that when you go into the Tesla factory, the first thing you see is employees working on computers. “They’re a software company, first and foremost,” he explained.
Tesla’s Pillar of Growth
That phrase stood out to me when I read Tesmanian‘s article, and I wanted to elaborate on that for a moment. Tesla’s pillar of growth for the next 20 years could be batteries, but I think there is more than one pillar. That’s the beauty of Tesla — this is a company that is reshaping many industries that affect millions of people.
Tesla’s pillars are:
- In-house services such as insurance
- Autopilot and FSD (Full Self Driving)
- Building factories
- Elon Musk’s Twitter interactions with customers.
The last one is included because Elon Musk is well known for listening to both his customers and supporters. He took the advice of many while designing the Cybertruck and pointed out that many of the ideas that were implemented into the Cybertruck came from Twitter.
I included building factories for a few reasons. With the Shanghai factory coming fully online and the Gigafactory in Berlin being built at record speed, it seems Tesla has perfected the art of yet another service: building factories. Whether or not Tesla would choose to monetize this (sell it as a service for other companies) or not isn’t the point. The point is that this skill is something that will supercharge Tesla’s growth. And it will be needed when Tesla starts building terafactories.
- Elon Musk: “Tesla’s Long-Term Competitive Advantage Will Be Manufacturing”
- Tesla = Approximately A Dozen Startups