Elon Musk’s plans for a battery plant so big it will cut the cost of lithium-ion cells for Tesla Motors Inc. electric cars by 30 percent are advancing as Panasonic Corp. signed a letter of intent to join the project.

Musk, Tesla’s chief executive officer and main shareholder, disclosed Panasonic’s growing interest in his “gigafactory” battery plant yesterday in a conference call to discuss first- quarter earnings. The Osaka, Japan-based electronics maker, Tesla’s main supplier of battery cells, expressed hesitancy in March about investing in the factory.

“We’re actually quite comfortable that we’re heading toward a final agreement sometime later this year,” JB Straubel, Tesla’s chief technology officer, said on the call. Groundbreaking on one of at least two possible factory sites may happen as early as next month, Musk said.

Musk has pinned his growth ambitions for Tesla to the new plant, which the company estimates will cost as much as $5 billion to build and eventually employ 6,500 people. The Palo Alto, California-based company has said it will both cut electric vehicle costs with cheaper batteries and produce power storage devices for homes and buildings with solar panels to curb electricity use from the grid.

Tesla has said Arizona, Nevada, New Mexico and Texas are possible factory sites and that it will break ground in at least two states. California is being looked at as another option, though its selection is “improbable,” Musk said. While Panasonic will be the only cell supplier at the factory, Tesla may buy cells from other suppliers, Musk said, without elaborating.

Quarterly Results

Chieko Gyobu, a spokeswoman at Panasonic, confirmed the letter of intent by e-mail.

“We are talking to Tesla about joining the gigafactory,” Gyobu said. “We’ll discuss details going forward.”

Tesla fell after the close of regular Nasdaq trading when the company reported first-quarter Model S sales growth that was below top-of-the-range analyst estimates. The shares declined 7.6 percent to $186 at 7:59 p.m. New York time.

Quarterly deliveries rose to 6,457 cars from about 4,900 a year earlier. While that exceeded the average of seven analyst estimates, it was less than the highest estimate of as much as 6,600. Tesla said tight battery supply restrained growth and will continue through the current quarter.

The delivery result “beat, but not by as much as people expected them to beat,” said Andrea James, an equity analyst at Dougherty & Co., who rates Tesla a buy. “Overall these look like good results.”

Expansion Drive

Excluding some items, Tesla earned 12 cents a share in the quarter, the company said in a statement. That matched the adjusted profit that the company reported a year earlier and exceeded the 7 cents-a-share profit average of estimates compiled by Bloomberg.

On a GAAP basis, Tesla lost 40 cents a share and said its net loss was $49.8 million.

The youngest publicly held U.S. carmaker has been expanding since its first profit a year ago sent the stock soaring. Tesla shares rose fourfold last year and are up 34 percent this year through yesterday. The company started selling cars in Europe last year and in China last month. Sales in Asia weren’t reflected in the first-quarter results.

Yesterday’s share-price drop may reflect the “overall market weighting and expectations of a bigger delivery number next quarter,” said Ben Kallo, an equity analyst with Robert W. Baird, who rates Tesla outperform. “Operating expenses continue to increase, but that’s to be expected for such rapid growth.”

Tight Supplies

Tesla said in February that tight supplies of batteries and China-bound shipments of Model S, priced from $71,000 in the U.S., would hold quarterly deliveries to 6,400 vehicles. Battery-cell supply will constrain production through the first half before easing in the third quarter, Musk said.

The company said it will be marginally profitable on a non- GAAP basis in the second quarter, even as research and development costs rise 30 percent from the first quarter.

While the company said it had no revenue in the quarter from California zero-emission vehicle credit sales, it generated $12 million from selling credits related to U.S. Corporate Average Fuel Economy regulations.

Tesla also had a charge in the first quarter of $2 million to retrofit Model S battery packs with titanium shields for extra safety in the event of a crash. Tesla forecast a “slightly” negative cash flow for the year.

The company is now making 700 Model S cars a week at its factory in Fremont, California, near San Francisco. By the end of the year, Tesla expects to assemble 1,000 vehicles a week.

Plant Modifications

The Fremont plant will be idled for about 10 days in July for a planned retooling intended to boost assembly speed, Musk said. Even with that temporary shutdown, Model S deliveries will reach at least 35,000 this year, he said.

In the second quarter, Tesla said production will probably rise 13 percent to 19 percent from the first three months of the year, with deliveries increasing to about 7,500. The company forecasts being marginally profitable on an adjusted basis for the April-to-June period. Adjusted gross margin may increase slightly from the first quarter’s 25.4 percent.

Deliveries of Model S cars with right-hand drive begin in the U.K. in June, with Hong Kong and Japan to follow, the company said. Tesla said it wants to expand its business in China as fast as possible, including the installation of a large supercharger network.

Design prototypes of Tesla’s Model X crossover-utility vehicle may be ready in the fourth quarter, the carmaker said.

Copyright 2014 Bloomberg

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About kingstonrenewableenergy

Kingston Renewable Energy (KRE), Hydropower products, wind energy, renewable energy products, We manufacture, supply and install. Richard Kingston KRE is the home of Fluxy, a beautiful Irish made wind turbine designed to last several life-times, and a host of other Hydro products branded under KRE hydro. KRE HYDRO- KRE are currently installing a range of Hydro products including high head low flow systems and low head high flow. These are pelton and Turgo types for high head, crossflow Banki turbines for medium to low head and Powerpal for Ultra low head. We also plan to introduce a custom timber/steel/aluminium waterwheel service for those of you who are lucky enough to have disused mills on their land and who would like to restore them to their former glory (and make a healthy profit in the process). All hydro installations are custom designed. This is necessary because everybody's land and water resource is different and to benefit from the highest efficiency and lowest payback time the hydro system must be customized according to what flow, penstock length required, and what head is available. Hydropower is currently by far the most cost effective renewable resource in Ireland under the existing Feed in tariff structure and export rate of 9c per unit (wholesale rate for bigger systems is €0.087/kWh). It is surprising how much energy is to be harvested from even a small stream and we are offering 4 to 7 year payback times on average and high profits thereafter. KRE FLUXY- It has been a long journey from when I originally set out to buy a wind turbine to power my own house in 2007 and discovered that the existing machines on offer in the market failed to meet my desires as a customer; that is, to possess an aesthetically designed machine with a low embodied carbon footprint and a long design lifespan. This led to my resolve to make this a possibility as I knew there were other like minded folks out there who had the same needs when buying into renewable energy. I have always been a keen environmental activist and had a strong understanding of engineering and material sciences which enabled me to see failings in the high tech electronically controlled machines commonly available today. These weaknesses come from over complicating the wind system with servo motors, sensors, gear trains, relays and logic circuits; fine for large utility scale turbines which are constantly monitored and have continual maintenance on site but not for a small wind turbine in the back yard to run the house. I could see that wind turbines needed to be brought back to a less complicated yet modern design that would withstand time and the turbulent and violent winds we see in Ireland and fulfilling the old engineers adage of ‘KISS’ or ‘keep it simple stupid’. With less component parts, there are less things to go wrong. My vision was to create a machine that offered the benefits of being an economic investment, a positive for the environment and also to be a design piece that our customers are proud to have flying in their grounds. And so, I present you with the fully mechanical Kingston Renewable Energy Fluxy wind turbine. Please feel free to contact us at any time if you have any questions or think you may have a good wind site. We will happily do a site assessment come rain or shine. Stay posted for the monthly blogs from our inspirational team here at KRE. Check out our latest installments in our crusade to get higher feed-in tariffs in Ireland so that we can compete with the rest of Europe in the micro-generation stakes. The Hydro section of our website will be updated shortly to show our newest installations and showcase our products. Yours sincerely, Richard Kingston

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