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ARK Invest's Tasha Keeney on biggest takeaways from Tesla's battery day

Tasha Keeney, an analyst at ARK Invest, joined The Final Round to recap Tesla’s battery day, discuss her biggest takeaways, and her outlook for the stock through the rest of the year.

Video Transcript

MYLES UDLAND: Well, one stock that is lagging the broader market, that is Tesla. Shares right now are off about 10%. This, coming following yesterday’s highly anticipated battery day. And for more on everything we learned from the company during that presentation, we’re joined now by Tasha Keeney. She’s an analyst over at ARK Invest. So Tasha, let’s just kind of take it from the top. Highest levels takeaway, or highest level takeaways from you from what we heard from Elon yesterday.

TASHA KEENEY: So the biggest story has to be Tesla’s reducing costs by a dramatic amount. So they’re planning to reduce battery costs by over 50% on a dollar per kilowatt hour basis. Their new changes are also increasing the range of the cars by 50%. And then finally, on an investment basis, they’re reducing investment costs by about 70%. So this is really dramatic cost reductions. Of course, they’re going to take place over the next few years. But it’s going to enable Tesla to produce a car that only cost $25,000.

So Tesla’s always been a leader in electric vehicles. And at ARK Invest, my colleague, Sam Korus, has done a lot of great work on batteries. We’ve been saying for a long time that they’re at least three to four years ahead on batteries. I think with these announcements, they’re even further ahead. And it’s only becoming harder for automakers to catch up, especially because they’re lowing the price, lowering the price of the product. And we’re going to get that nice inflection point in demand from electric vehicles as they become cheaper than gas powered cars. I really feel like we’re at that inflection point now.

MYLES UDLAND: Yeah, and I want to follow up about the Model 2. Were you anticipating that Tesla was going to announce something like this? And I guess as you think about the company going forward, is it, they’ve started at this kind of luxury level, and it’s attracted that consumer base, but have you always seen the company as one that wants to and needs to work downstream in terms of price point and needs to be able to broaden its offerings considerably to be competing with Honda instead of BMW and Mercedes?

TASHA KEENEY: Well, I feel like the Model 3 was really the cornerstone case of creating this mass market car. So in a sense, Tesla’s already there. They’re already competing with major automakers. In fact, if you look at just electric vehicles, it’s really not a competition. I mean, Tesla’s the best by far in the market. But we did expect Tesla to perhaps introduce some lower price variance. And really, this also means that you can think of their total market share and the electric vehicle as being a bigger total addressable market.

Because you’re getting now, these consumers that would go for this lower price bucket. Even though, Tesla had already been pulling in consumers from all price ranges. For a lot of people, Tesla was the most expensive car they ever bought. I still think this gives them access to that bottom segment. So again, it’s just, they’re lowering costs, they’re sort of expanding their opportunity. And if you’re a traditional automaker, I mean, I’d be very scared if I was watching this presentation about how you were going to keep up at all.

SEANA SMITH: So Tasha, it sounds like you have a pretty positive takeaway from everything that was announced yesterday, when you talk about the fact that the battery then will enable Tesla to lower the price of their vehicles. So then why is the stock off just around 10% today?

TASHA KEENEY: Yeah, that’s a great question. So I think it could be that investors are seeing that three-year time horizon. Maybe they’re looking for something more immediate. But ARK is a long-term investor, and we think that you have to be a long-term investor when you’re looking at disruptive innovation. Because if you’re not, you’re going to miss these inflection points, you’re going to miss that exponential growth. So to be upset about a three-year timeline when they’re announcing this amazing 50% cost reduction, to me, seems a little silly. So I think, we still have a very strong conviction in the stock. It’s still our top holding.

DAN ROBERTS: Tasha, Dan Roberts here. Playing off Seana’s point about the stock today, I saw a lot of reports that battery day was underwhelming. Now you sound very bullish on the batteries. So I’m just wondering why you think some people were underwhelmed. Sounds like maybe the time period. But what were people hoping to see there wasn’t there? And then I would just ask you, as along with your bullishness on the batteries, could there be a day when the batteries are bigger business for Tesla than selling its own cars?

TASHA KEENEY: Yeah, well, I think these cost reductions sort of open up our opportunities for them in batteries, not just in vehicles, but also in energy storage and other markets. And again, it seems as if the reaction is really just a short-term knee jerk reaction to this being a three-year extended timeline. I think there was a lot of hype going into battery day, and maybe some people were expecting something more immediate.

But I don’t think that’s what you should be looking at if you’re looking at a company like Tesla, that’s really pushing the envelope in disruptive innovation. And I would say, Musk in general, if you look at his track record, he’s generally sort of giving these really lofty goals and he often falls short of them. So if anything, I think he’s being more measured. And we’ve seen, I think, a progression of that over the past year or so. So I think this is really only a good thing, and it’s sort of a sign that they’re becoming a more mature company.

MYLES UDLAND: And then, Tasha, finally, just a headline crossing today. California is going to phase out, or they want zero emission vehicles statewide by 2035. As you think about this kind of timeline for California, probably the most progressive state, as it comes to regulating autos, is that kind of in line with how you guys at ARK are thinking about where electric cars go in the US? Is it more aggressive than that kind of timeline? Or is it a little more conservative?

TASHA KEENEY: Yeah, I’m glad you asked that question, because I think often when we talk about electric vehicles, we’re also talking about subsidies. But actually at ARK, all the technologies that we model, we model without subsidies, because we want the underlying technology to be successful on its own. So I think these announcements of these cost declines are exactly proving that. That you don’t necessarily need subsidy for an EV to work. It’s going to be cheaper on a sticker price basis than a gas powered car.

That said, we do think that that inflection point, in terms of that cost parity, is going to come up in the next two to three years. So I think you will see a surprise in demand for electric vehicles. Our forecast is that there could be 37 million EVs sold by 2024. So I think that surprises expectations, because most people have been measuring this growth by looking backwards. At ARK, we look forward, and we try to you use these costs decline curves to set up the adoption curve to represent that exponential growth properly. So I think again, we’re really at a pivotal time, and we couldn’t be more excited.

MYLES UDLAND: All right, Tasha Keeney, analyst with ARK Invest. Tasha, always great to get your thoughts. Thanks for joining the show.

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