Tesla Motors Inc is building itself into the biggest maker of Li-ion power packs in the world, and, for once, the firm appears to be ahead of schedule. James Albertine of Stifel says that he expects the Gigafactory in Nevada to begin its work in the first quarter of 2016, and he has a $400 price target on the firm’s shares as a result.
Mr Albertine said that a recent sit-down with Jeff Evanson, VP Global Investor Relations kept him and his team hopeful on the future of Tesla Motors. Among the major factors that he expects to send Tesla shares to $400 are the early Gigafactory open, the Model X launch on September 29, the reveal of the Model 3 and the roll-out of Autopilot.
For now the Gigafactory is the most vital long term effort at Tesla Motors.
Tesla Motors is building the future in Nevada
For fans of Tesla Motors fans the Gigafactory is worth noting, but it’s never going to compete for focus with the launch of the Model X or the firms other road-worthy products. Those with shares know that Tesla Motors needs the massive plant in order to do its work.
Mr. Albertine says that the plant will bring “expected reductions in battery cell/pack assembly costs.” He reckons the Gigafactory is more and more of a focus for those with shares in Tesla Motors. As EV competition appears to be getting serious for the first time, with Apple being touted as a major player, those backing Tesla Motors are looking for advantages that secure their money.
“As they dig deeper on potential cost efficiencies related to battery cell/pack production more investors will agree that TSLA’s competitive advantages appear to be growing not fading,” Albertine says.
Tesla Motors, on its own website, says “we expect to begin cell production in 2017.” Stifel’s $400 price target is a bet that that’s wrong.
Delaying the Gigafactory
Wall Street isn’t really used to Tesla Motors getting tech up and running ahead of time. The massive delays in the roll out of the Model X are a testament to the kind of process that the market tends to expect from Elon Musk and his team.
In a statement to Japan’s premiere business news outlet Nikkei, on February 15 Tesla Motors battery tech head Kurt Kelty said that his team was ahead of schedule on the Gigafactory.
The plant that we see in the first months of 2016, if it opens at all, will be just a precursor of the full force of Gigafactory 1. The first run will likely be a pilot program that will try to figure out the best way to make power cells as the firm prepares for constant expansion over the next decade.
The Gigafactory, and the lower cost power packs it makes, are likely to be key to the Tesla Motors Model 3. That car will go up for pre-order in the first quarter of next year, and will go on sale about 2 years from now according to Tesla Motors CEO Elon Musk.
Musk says that the car will cost $35,000 before any tax breaks or grants. In order to get there, the Gigafactory needs to be working at high capacity. Mr. Albertine thinks that’s more likely given the Q1 2016 launch date. We’ll have to wait and see whether that comes true, or whether Hofstadter’s Law takes over.