Fluence 1Q23 cross-read for Tesla Energy
Guidance, Backlog, Deployment, Supply Chain, Europe, Bankability
I view the battery as one of the most important economic goods of the coming years and decades. It will enable us for the first time to store energy at large scale outside of fossil fuels. I know you can’t dig batteries out of the ground like oil, you have to manufacture them. But in principle it is a commodity just like oil. Semiconductors fall into this category as well.
To me, the discussion about whether Tesla is a car company or a tech company is pointless. Instead, they are simply the most prominent instance of a new category: Battery Refiners.
Battery Refiners will capture the lion share of the value creation associated with the rise of the battery. It won’t be the commodity manufacturers. Just like the semiconductor manufacturers did not capture the lion share of the rise of the microchip. Big Tech does not produce microchips. They refine them into software and hardware products for their customers.
Battery Refiners source battery cells and add value by wrapping hardware and software products around them. Cars are the first instance. But stationary energy storage and various software and AI applications will follow.
Tesla’s goal is to operate at a 3TWh capacity by 2030, sourced both internally and externally. If they achieve that and they maintain a gross profit of ~$150/kWh, we’re talking about $450bn in gross profit, which could easily value them at $10tn, a 20x vs. today. That’s the long term hyper bull case we’re talking about and I think it will be an aspect of the March 1 Investor Day.
FLNC 0.00%↑ is also a Battery Refiner. They reported their 1Q23 earnings today. They were founded in 2018 by Siemens (German industrial) and AES 0.00%↑ (US power utility). The stock was floated in 2021 and crashed by 70% in the overall growth stock carnage. They have started a big turnaround after the IRA was announced in July 2022. The stock is up 140% since then.
This company provides great insight into Tesla Energy because it is a pure play grid-scale energy provider, which means they provide much more transparency about the economics of the energy storage business than Tesla. They also have a huge chunk of their business in the US (~2/3 of their revenues) with significant US manufacturing, which means they have a decent IRA exposure as well.
So, here are a couple of the key takeaways: