Morgan Stanley’s Adam Jonas gives five takeaways after Fremont tour

Morgan Stanley analyst Adam Jonas recently visited Tesla’s Fremont factory. The analyst got a tour, test drove the Model Y, Model 3 and Model S Plaid and met with the Investor Relations team.

After his day at Tesla, he provided five key takeaways in a note to investors.

Tesla’s Fremont plant is “bustling”

On his tour of the facility, Tesla did not hold back that the plant in California was never designed to produce 450k vehicles per year. The company knows the plant is inefficient, and its four-building design compared to Giga Shanghai’s linear design is a challenge.

However, Fremont is still North America’s most productive assembly plant, and a significant learning experience for Tesla, especially regarding manufacturing expansion and processes.

Fremont and Shanghai production map
Credit: Tesla

Tesla is demonstrating strong pricing power

Tesla is raising prices of their vehicles from a position of strength yet is still not seeing weight times go down. The company believes that the current high demand market will continue for at least 18 months.

Raw materials are not keeping Tesla up at night right now

Although there are supply chain constraints for raw materials, the chip shortage is a bigger concern for the company in real-time. Tesla is not worried about nickel prices as they rely on LFP for 50 per cent of models today. However, if nickel becomes uneconomic, the company could move to 60-70 per cent of models using LFP batteries.

Capacity and Margin

Tesla will be comfortably above 50 per cent volume growth without Berlin or Austin coming online in 2022. The company has also done an excellent job cutting down costs. For instance, removing radar from FSD, using common components across multiple models, and moving to the 4680 battery pack will cut battery costs as much as 50 per cent.

FSD Impact

FSD could be a significant source of pre-tax profit for the company. Although Tesla did not disclose exact numbers, investors believe that 15 per cent of US customers hit the FSD button. Once Tesla releases an updated city-wide FSD, the company could see a $360 million increment pre-tax profit realized. Naturally, this will positively affect margins for the company in the future.

You can check out the full report here via Sawyer Merritt:

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