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Opinion: Tesla’s mastery of production will always attract investors

Tesla
The Tesla truck, imagined

The Gigafactory made Tesla (Tesla Stock Quote, Chart Nasdaq:TSLA) the only scale manufacturer of batteries on the planet, with the lowest cost by a wide margin. That cost established a new basement for the cost of making a battery pack that is charged and suitable for a small sedan. Or a truck, the Gigafctory can be reconfigured to handle many products since they are all essentially the same building blocks – LiOn cells. One pack every 30 seconds.

Aren’t they also transported on the company’s own EV semi-trailers? Not all of them, of course, they need every truck they can find to move the thousands of battery packs to the production line. They will probably start using rail as numbers get bigger -like a giant extension of the production line from Reno Nevada to Northern California in Freemont. That is quite a visual.

This during a week when Elon Musk mused about the futuristic looking Tesla pickup truck. The speculation about what this truck would look like has borne images that reflect a cab in the style of the current Tesla semi-trailers with an open bed. But once the power train is set the outer shell could look like a conventional pickup. Either way, Tesla’s pickup would enter it into the most lucrative auto segment in the industry. Pickup trucks were 16.4% of the market last year because people love trucks. And using Twitter to crowdsource features from future buyers Elon Musk took suggestions that include four-wheel steering, the capability to parallel park itself, seating for six people and a 240-volt connection for power tools. Not to mention the fact that electric motors, with all of their torque available from a stationary position, are ideally suited to the tasks trucks are routinely used for.

The Gigafactory achievement is just the most recent example of this company’s ability to solve production problems, mitigate or eliminate constraints and unleash a scale of output the world has never before seen. Output in units per employee is about to be the greatest measurement the auto industry has seen in its history as the multiple Gigafactories around the world rise up and run 24 hours. And with such a high level of automation these centres are more about the logistics of bringing in materials and transporting the output. Very few people have to live nearby.

That reliance on robots at the Gigafactory was over-employed on the line making autos. Tesla determined the problem areas, found solutions and then quickly implemented them. Ironically, the solution in most cases was adding more people. Tesla had to actually stop the line for a few weeks to do it but they cleared the pinch-points and are now showing the results -increased output coming on at an increasing rate. Financially the quarterly results were good too, but yes, some of that is accounting trickery.

That demonstration by Tesla of its mastery over production issues (also evident at SpaceX) will always attract investors. And if the ones who want to exit do so, others will want to own this asset, this IP. It will change the world we live in.

Oh, but wait a minute, it already did that.

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About The Author /

Blake Corbet
Blake Corbet is co-head of Investment Banking at PI Financial. He joined PI in November 2010 and brings over 25 years of investment banking experience and knowledge from working in Vancouver, Toronto, London and New York. Mr. Corbet started his banking career at Haywood Securities in Vancouver in 1990 as a banking analyst. In 1992, he moved to London, England where he worked for Salomon Brothers there and in New York for 5 years. After that, he spent 8 years with CIBC World Markets in Toronto. Mr. Corbet returned to Haywood in 2004 as Managing Director, Investment Banking covering the Technology and non-resource sectors. During the past 7 years at PI Financial, he has completed a variety of financing and advisory transactions across the Technology, Telecom and Healthcare sectors. Mr. Corbet has an Economics Degree from UBC and has been actively involved in the community.

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