Tesla Investment Memo Q4 2022

Ian Greer -

Introduction

This document presents updates to the investment thesis for exposure to Tesla (TSLA). The updates are based on news related to the Tesla Semi, Cybertruck, and a potential factory in Mexico, which are analyzed in order to update the long-term bull case for the company.

For background information on Tesla's fundamentals, please refer to my original report:

Should I Buy Tesla Stock?
“[Elon Musk’s] big idea is that in Tesla he can make electric cars really work. That they can outperform their gas-guzzling cousins; that they can out-style them; out-tech them; save customers billions of dollars a year on gasoline, and in so doing save the world from itself.” – Tim Higgins
Ian GreerIan Greer

Tesla Semi

On December 1, 2022, Tesla began delivering its Semi trucks. PepsiCo received 100 of these vehicles. The Tesla Semi was recently unveiled by CEO Elon Musk, who highlighted the importance of this production for the company's mission of promoting sustainable energy. Class 8 trucks, which comprise just 1% of vehicles in the United States, are responsible for 20% of U.S. vehicle emissions and 36% of U.S. vehicle particulate emissions. The Tesla Semi is equipped with a tri-motor powertrain that provides a smooth driving experience and has a weight of 82,000 pounds. It also includes features such as regenerative braking and traction control for increased safety and efficiency. The company has conducted testing of the Semi in a range of weather conditions and plans to use it in its own factories. In addition, Tesla has developed a megawatt charger for the Semi, which will also be used for the Cybertruck and will be added to the Supercharger Network.

According to James Mullarney, a financial analyst, the Tesla Semi has the potential to significantly impact Tesla's market capitalization. If the company is able to produce 10,000 units of the Semi in 2023, 35,000 in 2024, 75,000 in 2025, and 150,000 in 2026, it could add ~$660 trillion to Tesla's market capitalization by 2026.

Cybertruck

According to recent reports, it appears that production of the Cybertruck is on track to begin next year. Teardown expert Sandy Munro has analyzed a leaked photo of a prototype of the vehicle and stated that it includes a rear megacast, which would require the presence of IDRA's 9,000-ton Giga Press, which has reportedly been ordered by Tesla for the Cybertruck. Drone footage of the Gigafactory Texas complex has shown that components of the 9,000-ton Giga Press have been delivered to the site. Additionally, Tesla confirmed during its Q3 2022 earnings call that Giga Texas is set to begin early production of the Cybertruck in mid-2023.

Mexico Facility

Tesla may be establishing a new facility in Nuevo León, Mexico, according to recent reports. This follows Musk's visit to the region in October, during which he met with Governor Samuel García and US Ambassador to Mexico Ken Salazar. While details of the project are currently scarce, it has been reported that the facility will assemble cargo trucks and will be located in the municipality of Santa Catarina, a short distance from Monterrey and approximately seven hours away by car from Tesla's Gigafactory Texas facility. Nuevo León has previously shown support for the electric vehicle (EV) manufacturer, with the state government announcing in August that Tesla would have an exclusive lane at the US-Mexico border to facilitate trade with local suppliers. It is believed that the investment in the new facility may be finalized in the coming weeks, with an announcement expected after the end of the year. This development could potentially signify an expansion of Tesla's production capabilities, as the company continues to grow and meet the increasing demand for its EVs.

Conclusion

The updates to Tesla's Semi, Cybertruck, and potential new facility in Mexico suggest that the company is making progress in its efforts to expand its production capabilities and meet the growing demand for its electric vehicles. The Tesla Semi has begun delivery and has been well received by companies such as PepsiCo, and the Cybertruck appears to be on track for production to begin in mid-2023. The potential establishment of a new facility in Mexico could signify further expansion for the company and could potentially have a positive impact on its market capitalization. Overall, these developments support the long-term bull case for Tesla and provide a positive outlook for investors.

Disclaimer: This memo is not investment advice. Please do your own research before making any investment.