Tesla's market cap now accounts for roughly 1/3rd of the global automaker market
datamentary.net
datamentary.net
The intuition is that Tesla cars are like iPhones. I think it's wrong. This is a low-margin business, where you increasingly compete with all of the goods and services people buy, like housing, education, healthcare. It's not a "buy a new phone for Christmas every 2 years" business.
People are on the phone all the time, so paying $200 more for an improved experience for several hours per day is justified. But paying $5k or $10k more for an improved experience for 1 or 2 hours per day? If you're rich, maybe. If not, why not move closer to your work instead, so you don't have to use the car? Why not take a longer vacation, or eat out every day, or retire earlier, or pay for your kid's college education?
I think the evidence proves otherwise. It's the other automakers that have had no news.
1. They announced and are rapidly building a factory in China
2. They announced the Cybertruck, and are rapidly building a factory in Texas to build it.
3. They held "battery day" where they deep dived into how they're streamlining the production of cells to crack the $100/Kwh mark
4. Factory in China is now building over 20k vehicles/month.
What really happen was: for several years Tesla was executing very well but faced unprecedented amounts of FUD. That kept (many but not all) investors away.
But you can only fool people for so long.
Investors finally realized that none of the FUD of imminent bankruptcy etc. is happening and things flipped.
That was the reason for the 10x run up of the stock price within 1 year.
Not Tesla is fairly valued based on modest assumption about the future 5 years out and doing DCF (Discounted Cash Flow analysis).
I think the narrative flip really came down to — “oh they may always be on the verge of bankruptcy, but they can always raise from the public because the public loves Elon”
So really they will always have runway to get to those goals, timelines really don’t matter.
In the last year they've announced and built most of the Berlin factory. It seems on track to start producing next year. That's on the home turf of Volkswagen, Daimler, and BMW. Pretty big news. The same year also saw the announcement of the Texas factory where they are also executing rapidly. And that of course came on the back of the Chinese factory. The news for Tesla in the last few months has been of them executing extremely well. They're growing production and turning profits in a market where all their competitors are shrinking production and losing money. There's also been some minor news about them ramping up production of their in house designed batteries a few new models and model variants. The cyber truck announcement was only a year ago; so that counts as well and half a million reservations for such a thing is nothing to sneeze at. Then there was a minor thing called Corona which should have put the brakes on profits; except it didn't in Tesla's case.
Tesla's valuation is based on their historic ability to execute and their competitors apparent struggle to do so. Turning profits in the middle of two major lock downs is pretty hard evidence that they are doing something right. So, maybe it's not that irrational for investors to look at Tesla and see a strategy that while ballsy is apparently working and looking like it might be just the right strategy for the foreseeable future as well.
Your picking nits over government subsidies. Everybody else has that same advantage. In any case, without government subsidies, most of the Detroit based car manufacturers would have gone bust around the 2008 crisis already. I'd say 700M is peanuts compared to that probably; and they are still losing money. General Motors' losses alone this year exceed that.
1) If they win the self driving race that will be incredible value beyond just manufacturing cars.
2) Battery manufacturing in general is huge on its own.
3) The roof top combined with domestic battery side is potentially significant in replacing (full or part?) domestic power companies
4) Insurance - Musk said this could grow into 30-40% of their business
5) Super charger network gives them a first advantage to replace petrol stations to a degree.
6) Elon factor of what's next.
And dont get me wrong, I do feel its gone beyond reasonable value, but there is more than a car company there.
If I understand this correctly, they'll be able to write their own checks because they will essentially...
1) Own self-driving and thus, most personal transportation
3) Own / replace a large segment of public utility / power companies
4) Own / replace a large segment of insurance
5) Own / replace transportation power network
Right now, it's silly to think of Tesla as some kind of mega-monopoly across industries. So we invest in them betting on them becoming that. Is that what we want?
My counter-argument is that one of the bigger markets for automobiles, the U.S., is designed around personal choice, personal autonomy, etc. Many people just want a working car to give them freedom, and will buy whatever popular, trusted brand is available. The rest want one of the smaller brands, something that seems different from the mainstream (even if it's really barely skin deep). That has kept quite a few big players in the automotive marketplace, and despite consolidation over time, there's still variety, which buyers want. This argument really only addresses them as a car maker, though... and not at all for their spread across industry lines.
The most sold cars in Europe are models that start around 15~20k€. The cheapest Tesla starts at 51k€; that's about 3 times the price. Even if you only look at electric cars, the best selling one is the Zoe which starts at about half the price of the cheapest Tesla.
> Both Tesla and Apple have that premium brand reputation, and older brands are perceived as legacy.
In other words: overpriced crap vs. tried and tested.
Nokia had Maemo since 2005 and tried to move to MeeGo in 2010. IOS was 2007, Android happened 2008 and Microsoft had almost no success with Windows Mobile, only launching Windows Phone near the end of 2010. Weird definition of well behind.
That said, Windows Phone was widely available in 2010. Whereas Nokia hadn't widely rolled out either Maemo or MeeGo.
For example, if Honda or Toyota makes any of their mainline models with the simplified/basic interior but just with a well-made EV drivetrain compatible with the Tesla charger network, I'm probably buying instantly.
Although EU nations, until GF Berlin, aren't quite apples to apples in that regard. But my understanding is that they did final assembly of the S and X in Europe to avoid the tariff, it's only the 3 that suffers.
The Renault Zoe is the best selling electric car in Europe in 2020.
It's not like car manufacturers are standing still. They'll be pumping out electric cars year after year. When there's so much choice of EV, what's the reason to choose a Tesla? Europe is choosing the Zoe ahead of all other models right now.
The goal for Tesla is to accelerate transition to electric vehicles. Once that is completed Elon will move on to another project similarly to when he transitioned from X.com/Paypal to something else.
More tunnels would be cool, but I find it hard to believe there's really that much room for improvement over established companies.
I think the hyperloop is even more ludicrous given the technological problems involved in vacuum tubes. But I think Elon realises that which is why all he did is write a memo on it rather than create a company around it.
I feel like the Boring company is what he settled on once it was made clear to him how monumentally stupid hundreds or thousands of miles of near vacuum tube would be in practice. Even if you could actually build a working prototype, it's hyper fragile and will just never be economically viable compared to other solutions.
If that were true then Tesla would open its chargers for use by all brands of EV.
Teslas can charge on all other charging networks. When will Tesla reciprocate?
Tesla's mission is (from their website): "Tesla’s mission is to accelerate the world’s transition to sustainable energy."
A model s has a footprint of about 4m^2. In ideal conditions that would net you maybe 800W during daylight hours... 6.4kWh over the day. That would give you around 30 miles of driving range. Solar on personal vehicles will never be anything more than a gimmick.
Many potential Tesla solar customers (that I know of) have ended up using other solutions as Tesla simply didn’t have stock availability - it’s a novelty product line.
Many “investors” do not know the ground reality and base their decisions on the Twitter feed of an individual.
I order a system from Tesla on Sept 30th, it was installed Nov 3rd, and I received permission to operate on Nov 23rd.
Other quotes I received were targeting installation Jan or Feb 2021.
Unproven insurance model with a 40% potential.
Insane demand causing shortages in solar panels is a great company to give money to.
Remember the goal of investing in the market is to know where the market is going and to get there quickier. You are saying the market is wrong on valuation.. you can't really bet on that only market players reactions.
In the coming years there will be so much competition in this space.
And then you have Elon snubbing California, one of the largest consumer markets in the space.
I'd short.
https://www.cnn.com/2020/12/04/investing/tesla-short-sellers...
TSLA has famously bad QA issues, etc etc I don't need to go on. Few (including some of those who are holding TSLA stock right now) would say that there is meaningful justification for the current valuation.
And then you look at them as one of the few American brands absolutely killing it in China right now. Not as simple as it seems.
> I'd short.
Everyone who has done this so far as lost their shirt.
There's a good chance that "old" manufacturers with decades-old processes will have a harder time adjusting to an electric world than the hard time Tesla will have figuring out the rest.
Also, Tesla isn't just a car company, they're also a energy storage company. Which I suspect is a massive market too.
Toyota for example is set to introduce prototypes with solid state batteries in 2021.
Most consumers will opt for their familiar and reliable Camry that happens to run on batteries.
Tesla will need something new to entice consumers. But, I just don't see much more innovation outside battery tech happening.
This is where I feel the self driving part will come in.
1) First to market and length of lag for other manufactures there.
Imagine there 2 car companies with working self-driving 10+ years before others can catch-up. That will shift the market for domestic and commercial.
2) Self-driving safety stats - this is going to become huge when there are self driving choices.
If one company can say 'we are half as likely to have an accident' type marketing, this is going to become a new and significant factor in vehicle purchase, more so than safety rating are today (I believe anyway) as we are taking out the 'Im in control of my experience' factor.
3) Self driving will flow to other innovation. Cars will no-longer need to be 4 seats facing forward. Huge opportunity to re-think transport once you dont need a driver seat.
Can you link to some sources, please?
The only one that actually seems like it might be going into Volume production is the VW ID.3. There are plenty of articles from 2019 talking about how they'll be building TONS in 2020... but there are no articles in 2020 talking about how many they've built.
No other auto maker has any EV on the books they plan to actually mass produce, they're all just "limited volume".
Volkswagen’s ID.3 Leapfrogs Tesla, Renault In October European EV Sales Charts
https://www.forbes.com/sites/michaeltaylor/2020/11/26/volksw...
How many are they now building per month? - find my an article that answers that question please.
¯\_(ツ)_/¯
There is just a ton of money looking for a place to invest, and Tesla is certainly telling a higher growth story than any of the existing car companies.
Tesla has been growing revenues 50% on average for the past 10 years.
Most other car makers are roughly flat. This year ICE cars, globally, are in decline.
Tesla will grow 50% on average for at least next 5 years.
Also, there has been a ton of money looking for a place to invest for the past 20 years. And there are plenty companies that are investable. Just recently we had monster IPOs from DoorDash, AirBnb, Snowflake and others.
At the same time there are many more companies that one could invest in but doesn't so it's lazy to attribute "lost of money available" to outsized successes like Tesla or Snowflake.
- Toyota, $272 billion
- Volkswagen Group, $282 billion
And yes, even compared to Ford, Daimler etc. Tesla's revenues are quite small.
Stock price is usually factored as a PE ratio - Price to Earnings.
Price to Sales also exists, but usually only for emerging companies that have just gone public and are growing rapidly.
The only pro Tesla argument that I hear is that they are gathering more data. This is entirely fallacious because there are no meaningful milestones for data gathered, and it's not true. Google has orders of magnitude more of driving data from Android, Maps, and Waze.
[1] https://www.washingtonpost.com/technology/2020/10/21/tesla-s...
Tesla is doing a limited beta of full self driving now which will be widely expanded in just a few months. I don’t understand how anybody but Tesla is poised to have self driving cars in the near future.
Meanwhile Tesla has taken no steps to get approval from regulators (feel free to prove me wrong). Until they start to do so, their self driving program is pure vaporware.
Also, to date they have shipped no features that they are legally allowed to call "self driving" or "autonomous".
Tesla on the other-hand is MAKING money with self driving technology already.
What something is called doesn't really matter, I bet on the company that has 100ks to millions of cars with advanced self-driving computers and hardware on the road in daily use over a company that has a couple 100 cars in Arizona any day.
The complexity of self driving is in the complexity of the road network in the real world. The only way to solve it is to have millions of cars learning all the complexity and finding the corner cases.
The real money in self driving is not offering ride-share in small geo-locked areas.
"Yes. Autopilot is a hands-on driver assistance system that is intended to be used only with a fully attentive driver. It does not turn a Tesla into a self-driving car nor does it make a car autonomous."
And you fail to respond to my actual point.
If you compare Tesla to the other companies working on self driving, the only meaningful milestone where Tesla leads is the number of fatalities. The reason why Cruise and Waymo have not been as aggressive as Tesla in rolling out features to the general public is caution.
When it comes to gauging self-driving progress the most meaningful metric to look at is progress towards regulatory approval in more markets. It doesn't matter how _capable_ they are, if they can't demonstrate to regulators that they're able to safely operate then they won't be in the market. Tesla needs to step up and start making progress towards legally operating actual self-driving vehicles.
Saying that having a single car that is approved for self driving in a single geographic are is far more advanced then millions of cars that can drive with incredibly advanced driver assists literally all over the world is just an incredibly terrible way to measure progress towards the eventual full solution.
Its simply not a way of measuring progress that I is reasonable.
> aggressive as Tesla in rolling out features to the general public is caution
Its because they have a technology platform that simply can't be sold commercially as they are specialized vehicles. Plus these are not system that have been developed to work with a driver, its simply a totally different process of development.
- Waymo seems to be ahead in some targeted ring fenced areas given active service.
- Tesla seems to be more ready for nationwide rollout due to already collecting nationwide driver data + cars.
The question is which one is more likely to result in a broad scale market first, or other significant market revenue generating position.
It seems likely Tesla could roll out taxis to a ringfenced area in Phoenix (or similar ideal area) relatively easily. While Waymo is a long way from offering a nationwide service compared to Tesla. This in my mind puts Tesla ahead but there probably a bunch of other factors known and unknown too.
Not legally.
Nobody takes this into account. They just claim: "Tesla has this and that potential", "this and that market could be huge". Okay, this should give the stock price a significant boost, but not 10x. It's a bit like crypto speculation.
https://www.investopedia.com/terms/m/marketcapitalization.as...
> doesn't take into account any other factors such as projections, profitability or debt
You seem to confuse a few things here.
Explain how Amazon could ever be worth more than zero for most of its existence, then?
Price of stock is largely dependent on people willing to buy it and sell it. When more people want to buy it, the stock price generally goes up.
Why do people want to buy more than sell? Generally, it's when they think the future price will be higher. Projections, sort of.
Similar to how Apple thinks of itself as a hardware company, but also created iOS/macOS to sell those hardware.
Ford had an oh-my-God enormous first mover advantage with the production line. Japanese car companies started literally from nowhere, in an economy shattered by war. VW was literally kickstarted quite late into the game.
I don’t think it is right to assume that, even if Tesla makes the first affordable, good range electric cars, then the rest of the market can just fold. Especially since electric cars are simpler than ICEs so surely it’s easier to catch up.
The money flow used to be pension fund - > some middle men - > financial assets.
Now it is consumer on an app - > financial asset.
While I do not think `app traders` account for a huge chunk of investments, I still think more people are now shopping for stocks as consumers and not as traditional investors. People are picking stocks like they were goods. And they seldom move the markets.
Tesla as a brand is loved. The love for that brand transpires to the stock
You add to that the poor yield on nation bonds, the volatility, the multiple billions pulling out of the dollar, the value of city center real estate crumbling with WFH... there is a lot of money in the market right now. It's time to build.
.
Therefore to make a fair comparison you'd have to add in the rest of the global automotive supply chain, not just the OEMs. Add in the valuations of all the dealers and retailers on Earth (some of which are publicly traded), add in Nvidia and other chip makers' automotive businesses, add in the market cap of Waymo, Cruise, Zoox and all those major hardware and software players that plan to compete with Tesla's Autopilot / FSD software. Add in the market cap of all the charging networks in China. In an apples to apples comparison Tesla's market cap would be less than one third of the global market.
They have a chip team in Austin which is lead by Pete Bannon, formerly of PA Semi (which Apple acquired to build their A series chips, and now their M series chips). The chips they designed are fabricated by Samsung in Austin.
The "FSD Computer" that they have in their cars now has an Intel Atom board to run the user interface, and then dual arm SoCs to run the Autopilot stack. Each arm SoC has a special ASIC to hardware accelerate certain common neural net inference functions (I.e. dot products and other matrix math).
I don’t think it justifies their current market cap, but plenty of companies looked over priced 10 years ago yet ended up being great investments. Hell, I remember thinking Bitcoin was pricy at 30$, watching it crash etc.
https://en.wikipedia.org/wiki/Short_squeeze#:~:text=A%20shor....
https://markets.businessinsider.com/news/stocks/tesla-stock-...
According to your second source, there was $14.5B worth of shorted shares on 1/14/2020 and the closing price for $TSLA on that day was $107.58.
According to the source below [1], as of 11/15/2020 there was $27.19B worth of short shares. Closing price 11/16 was $408.09
Shares shorted 1/14/2020: 14.5B / 107.58 = 134.78 Million Shares
Shares shorted 11/16/2020: 27.19B / 408.09 = 66.62 Million Shares
According to TSLA July 2020 10Q they had 186M shares outstanding [2] so while not the most accurate when comparing a 9 month change in Shorted shares, we can estimate in the neighborhood of 1/3rd the shares on the market were covered by short sellers.
[1] https://www.marketbeat.com/stocks/NASDAQ/TSLA/short-interest... [2]https://www.sec.gov/Archives/edgar/data//1318605/00015645902...
It will be interesting to see whether they can maintain this stance as EVs transition from a small uninteresting slice of the pie (for dealerships) to the entire product line over the next few decades.
I strongly suspect Ford took a hard look at what Tesla is doing and sees the way the wind is blowing. It wouldn't have been a popular move.
https://insideevs.com/news/444131/ford-mustang-mach-e-online...
Ford's success with the F-150 line might be an exception here, but the pickup truck market will always be much smaller than the rest of the automobile market.
So watching the Model Y is probably a better indicator for the long-term growth of Tesla, and there's plenty of competition.
Just as a data point... GM's 15% profit margin[1].
[0] https://www.statista.com/statistics/276506/change-in-us-car-...
[1] https://www.cfo.com/financial-performance/2020/11/gm-posts-4...
https://finance.yahoo.com/news/ford-motors-debt-overview-120...
Ford is at 142B net debt. So if you add the debt to the market cap, you get about 177B.
https://m.benzinga.com/article/16826282
GM is around 88B net debt. Add to market cap to get 148B.
Tesla is probably close to 0 net with the latest raise.
https://finance.yahoo.com/news/teslas-debt-overview-12061451...
It feels like a bubble to me too, but on the other hand, the failure of traditional car manufacturers to deliver electric cars leaves the possibility open that Tesla will be the next Toyota/GM.
Volkswagen and Renault BEVs outsell Tesla in Europe, for example.
So 2025 is when major brands are serious about electric cars? Doesn't that seem late?
Why would that be late? It might be too early!
There is not a good infrastructure for electric car charging. Right now it is a luxury for homeowners and people who rent high-end apartments.
Even in California, where I see electric cars literally every time I drive somewhere, the infrastructure is easily overwhelmed -- last year there were long lines outside of Tesla Supercharger stations on Thanksgiving and Christmas, and that was just for Tesla owners! Imagine how bad it will get when electric cars become available at prices that most people can afford!
Considering those challenges, it's really very encouraging that mass-market automakers are willing to take the risk - especially since the government has not been willing to take the complementary risk of building charging stations on public streets to the extent that would be necessary for apartment-dwellers to be able to realistically consider owning electric cars.
Plus, it seems as a culture we are just wasting the productivity gains from increased technology and automation and dumping the value into money games; eventually i expect electric cars will be moot because there won't be enough jobs or job creation to sustain enough of a middle class to afford them.
Also the EV offerings in the US outside of Tesla are frankly pathetic. Overpriced, inefficient, and hard to obtain.
Their entire product line is available in hybrids with a low speed EV mode. Most of their competitors don't seem to be offering hybrids of larger vehicles like SUVs. But if you need a third row seat car that gets 50% better gas mileage than anything else in it's class... Toyota can sell you one.
I suspect the only reason they aren't selling full EVs is that the number of people willing to shell out for them is still so small.
Toyota should just market their hot electric sports car under the Lexus brand.
Those that can afford a Lexus can easily afford a luxury electric car. Or shell out $80,000+ for a fancy whiz bang electric car.
The Taycan has an MSRP of $103,000-185,000. Toyota sells cars to normal people, who are looking to spend between $15,000 and $30,000.
What do low interest rates have to do with this?
All stocks are up somewhat due to low interest rates -- why should Tesla's stock be an outlier unless something else explains its rise over the past year?
I'd like to see some numbers on this, but I don't think most Tesla buyers finance their cars. I bet most pay cash. So low interest rates don't really explain their sales numbers either.
So, how do you think low interest rates help Tesla?
Tesla might just be the next MySpace or Friendster. They're coming in, figuring out how to get the technology to work, paying for the infrastructure (or getting others to pay), and setting it up so that Toyota can come in and scoop up the market.
I think Tesla is in for a difficult future. They seem to not understand that the people that buy Camry are not the same that buy Mercedes. Playing the same brand to the luxury crowd and the cost-conscious crowd has never, to my knowledge, worked. People will probably point to Apple, but Apple isn't luxury. It's premium. You really have to compare Rolex or Patek to Apple Watch to see where the rubber meets the road. The Model 3 is about $10k over the price point they need to be, and rolling that out just about damn near killed Elon from reports I've read. As they target the cheaper market, their margins drop and then they risk losing the Mercedes crowd entirely. So there go their fat margins. I'd imagine their warranty costs also increase and will squeeze them as well.
I can't imagine Panasonic, LG, etc. sitting around while Tesla whips them around on the battery tech front, either. Tesla is like a toddler trying to be a conglomerate. Elon is stretched so thin he's going to have a mental breakdown.
If their hardware QA is bad, what makes you think their software QA won't fail and one day drive you into a barricade it thinks is a highway exit?
Would you get in an airplane that had daily software updates? It has more capabilities right?
- last time I checked Tesla’s have superior safety ratings.
Money is cheap, so it makes all the sense to buy risky assets. What has the best chance at growth, Tesla or BWM, Airbnb or Hilton ...and so on. Tesla could be overvalued by 100x, and be still undervalued because its expected growth is still much higher than that of your other alternatives.
At the end of the day, Tesla futuristic, exciting, and keeps innovating. Every one else is just playing catch up. What is more likely, old school car companies learn to innovate, or Tesla learns to produce cars with less defects and for less? They seem like equally likely, but one is a much harder problem than the other as it is rooted in the very origins and goals of the company.
it is interesting to see all the justifications people are giving for Tesla's completely irrational valuation
Solar Roof/Solar Energy -> Solar City was going bankrupt and had to be bought by Tesla to save Musk's cousins (Rive) and his ownership stake in Solar City
Electric Cars -> Check out what is happening on Europe. People keep saying Tesla is doing very well in China, without understanding that Tesla has a very small share of China and BYD is the largest EV maker in China
Battery Storage -> So something that is a very small share of Tesla revenues will magically one day become a massive business?
It's one thing to say - It will add $50 billion to the company Completely different thing to say it will add half a trillion
Self Driving and Robotaxis - This has been the dream for the last 5 years Tesla said 1 million robotaxis by end of Dec 2020
Where are they?
The combination of messianic leader who claims he is doing it only to save the planet and the human race
combined with Fed printing money like its going out of fashion and investors desperate for returns
Is a very dangerous combination
Tesla car production (2020) about 600,000 (?)
So Tesla makes around 0.7% of the world's cars. Something is wrong here.
If that expectation holds, the current high price may be sustainable. If it becomes clear that it won’t, there will be a big sell-off
They have more vertical integration, less reliance on suppliers.
They own their 'dealership', charging network and are also getting into auto insurance.
Also, residential solar and energy storage. Oh yeah and they are getting into mining as well to ensure they can keep up the battery production.
How many of those 92 million cars are EV? Tesla isn't really in competition with ICE car production - the next ten years is all about EV production and legacy car makers are off the back.
Cars are the horse and buggy market. Electric Vehicles are the entirety of the future car market. If you have 0% of the horse and buggy/car market today, but have over 50% of the electric car market, you are very well positioned for the future.
I'm exaggerating. The horse and buggy analogy is flawed (VW, BMW, GM, Ford, Toyota, Honda, etc are all real electric car competitors). But just looking at Tesla vs the petroleum car market is also flawed. The reality is in the middle, with Tesla well positioned to be a top electric car manufacturer, but not to dominate the market.
2) Cars are just one thing in Tesla's portfolio. Both home and grid scale energy storage is another.
This is also true of other companies.
Honda also makes jets, watercraft, ATVs, aircraft, mountain bikes, lawn equipment, and solar cells.
Toyota also makes homes.
There are gigantic segments, like trucks in the US, they they don't even have an offering in yet.
Tesla also controlled a huge amount of the global battery supply and threw its own production will control even more.
This transition will take another 10 years, what matters is not now, but what the situation will be in 2030.
Although TSLA's market cap is down a bit from when I wrote the article, it still makes up something like 30% of the global automaker market, despite only publicly listing 10 years ago!
Is it overvalued or in a bubble? I'll leave that for you to decide.
Nope.
Pre-pandemic a brick and mortar was doing about 5-10% via online and it was at best break even.
Why would you invest money in something that was unprofitable when Amazon wasn’t even profitable for so long?
The more forward thinking realized that the catch-up bill was only going to get more expensive, as Amazon continued growing and optimizing.
The less forward thinking... well, there's Sears.
As consumers, we rarely see "how" free 2-day shipping, same day delivery, BOPIS, etc. But suffice it to say, it's very expensive to retool legacy supply chains optimized for brick and mortar inventory delivery.
Kudos to Walmart, Target, and Home Depot for seeing what was coming.
You can't offer 2 day shipping, if your supply chain doesn't support it profitably.
Amazon's genius was leveraging marketplace and FBA to scale the logistics they also used (gee, kinda like AWS) while taking a cut.
In particular, I personally don't use Amazon much. Granted not in the US so maybe the site is different etc. But to me they are like an 'ebay' in terms of my trust in what they deliver, when sometimes I want a 'department store'. Now not everyone is like me but I suspect enough people are that Amazon isn't going to take over all shopping.
Amazon puts them all to shame.
Seems like a major disruptor.
^ in industries that meet the following criteria:
- Customer base has always-on internet connectivity
- Integration points into meat space are already digitized
- Is not regulated, or is regulated in such a way that regulations can be ignored / externalized
It's all this frothy fed money and Elon, the guy steering the damned ship, doesn't even think the value is warranted. He's been saying for a year that the company literally cannot live up to the hype and the price will need to correct. I think investors are going to lose out big and Elon is going to look like the bad guy. After all, he kept irresponsibly using the Reality Distortion Field Generator which Jobs, peace be upon him, left him in his estate.
In the year 2017, Musk claimed that by 2019, the world would have cars that can drive itself while the passenger sleeps. He just didn't mention it would drive you into a highway divider head-on at 80mph.
Damn these rants.
And you're mis-representing what Musk says or thinks. He tweeted, once, "the stock price is too high". That's it. It could have been a joke. It certainly doesn't imply that he doesn't think the value is unwarranted.
As to "but Elon said..." blame game, here's Ford, in 2016, saying they'll have self driving cars in 2021: https://www.nytimes.com/2016/08/17/business/ford-promises-fl...
Tesla just released FSD beta, capable of doing fully intervention-less drives (sometimes).
What does Ford has today?
And its also funny that people relentlessly shit on Elon for the few predictions he has gotten wrong, and ignore all the correct predictions. Funny how that works when you constantly prove everybody wrong but nobody remembers all those idiots who were wrong. Elon himself says he is giving median outcome predictions, half of his predictions are assumed by him to be wrong.
Also funny how one accident of a system that save countless lives is used to shit on him, but giving him credit for the countless lives that the system saved are ignored.
You should reevaluate your priorities.
And to simply ignore that the same system has saved a lot of people is just ignorant way to preserve your worldview.
Or neither...
To keep this valuation assumption in place, tesla can lose a lot of market share and only "keep" 20%-30%.
In this case it will outsold any other car brand and will outperform it's valuation.
They could remain their share higher. In this case they are undervalued.
They obviously can loose competition to traditional players, but also to emerging Chinese brands. Musk himself consider them a bigger competitor.
The market itself can shirk a lot, due to robotization, in this case you don't have to own a car in most of the cases. In this case the entire market will be changed dramatically and current valuation doesn't make any sense.
The magic ingredients at Tesla are just not that magic.
The belief that all the other established automakers won't catch up is absurd.
Most other automakers... not so much.
In any case, infrastructure matters even more for EVs. I was in the market for an EV car in Japan, and ended up buying an ICE car, with the intent to switch in 5~10 years when the infrastructure catches up. I live in a brand new building and it's not even equipped for EVs! Crazy.
The only EV owners I know have houses. I hope things will change thanks to the new Suga administration that seems somewhat more forward thinking than the Abe one in these matters... We will see.
- Tesla battery production is overtaking the rest of the world combined. For electric cars you need batteries, and Tesla has them. Everyone else is at a minimum years behind in this regard.
- Tesla's prices keep going down, while some of the most competitive electric cars being released besides Teslas (Porsche Taycan for instance) are more than the price point TSLA was at 10 years ago.
- Tesla has the most extensive charging infrastructure of anyone, period.
Just go to any site showing chargers in your area. Turn on just the Tesla and Supercharger plugs. Then turn on just the J1772 and CCS plugs. See which one looks to be the bigger network.
Tesla was forced to make CCS compatible versions in Germany IIRC, so they could adopt the industry standard globally but instead choose to continue pushing vendor lock-in instead of open standards.
Either way that doesn't change the fact Tesla might be the single biggest network of chargers out there, but they're not the most common chargers out there. The majority of chargers out there will not work on a Tesla without an adapter.
If having the largest network of charging systems was really a long term play of theirs, you'd think they'd move to actually supporting the plugs which will probably be on ultimately the majority of cars on the road and take money from everyone instead of only customers of their cars. I question the long term importance of their charging network as more and more J1772/CCS cars get on the market and more J1772/CCS continue coming online. Imagine of Ford and Exxon had some exclusive pump and port agreement where Exxon stations could only sell gas to Ford cars but Ford gave adapters to allow Ford owners to fill anywhere, albeit with a bit more work. Sounds pretty dumb, right?
It's like people complaining that Apple doesn't use USB-C in their phones, forgetting that when Apple made the switch to Lightning, USB-C didn't exist.
I realize USB-C didn't exist when they made Lightning. It still doesn't make sense why they have not migrated to USB-C either, other than continued vendor lock-in/control over the accessory market. With practically all MacBooks and many iPads being on USB-C, it makes less and less sense to have Lightning and USB-C at the same time. There's a standard out there they've halfway adopted, but they choose to not commit to it. All of their portable devices could charge off USB-C, and sell small USB-C to Lightning tips for the brief transition.
I agree, Tesla is in somewhat the same situation. They could start producing CCS compatible cars in the US, they could retrofit ends on their chargers with J1772/CCS plugs, but instead they continue to build proprietary stations and proprietary cars.
You're right both companies are in the same boat and do a similar thing in relation to connector standards. This doesn't make these actions good though.
It wasn’t until VW started thinking about the Taycan and eTron that anyone actually deployed CCS chargers with more than about 50 kW in California (while Tesla customers were enjoying 120-150 kW). And most of the of public DCFC before about 2017-2018 in the US were actually Chademo, not CCS (which is why there is a Chademo adapter for Teslas).
Up until a few years ago, people were saying that Tesla should adopt Chademo because it was a common standard and offered more power than CCS (at the time) and there were more public chargers. Today, there are still more cars on the road in North America that can use Chademo than CCS. CCS is not commonly used in either China or Japan.
The best-selling electric car in many European countries is the Renault Zoe now, and it sells for about half the price of the cheapest Tesla.
First, that's only partly true i.e. a matter of timing.
Second, it doesn't really matter though.
They will sell cars and trucks that are much the same as today, that people want, but are electric.
On the other hand Tesla market share of EV cars in Germany in 2020 is barely 12% (in terms of unit, certainly higher in EUR) [1]. I expect numbers to be worse in countries that favor smaller cars (France, for instance).
Most European auto makers are barely starting to release EV cars, and Tesla is already close to single digit market shares. They are here to stay, but like other US brands I don't think they have such a bright future outside of the US.
[1] https://cleantechnica.com/2020/11/22/18-plugin-vehicle-share...
Battery technology is also, of course, critical to get the right balance of price, range, charging speed, production numbers, etc.
So given global regulations putting pressure on industry conversion from ICE to electric powertrains, there is zero doubt that investments will be made by big players and they will have to stop playing games and putting out weird-looking vehicles they do not really intend to sell. This will have an impact on Tesla's presumed dominance of electric cars, but how much of an impact is hotly contested!
Many of those cars in Europe are also plug-in hybrid, a pass over solution that also has to be replaced. Even more of them are small city cars with short range.
The same stories btw were going around about China. Tesla is losing market share in China and so on. And then Tesla opened a factory there, and guess what happened.
The same thing will be with Europe, once Tesla has a huge factory there, their market share will grow again.
That Tesla has even 12% (again with plug-in hybrids) share in Europe with a factory in California, compared to all the German and French companies who are producing locally is actually impressive.
Tesla globally has 28% of the pure BEV market, and that what matter the most.
The best selling BEV in Germany in October is the Renault Zoe, with a range of 300 to 390km (190 to 240mi). Second is the Volkswagen ID.3, with a range of 330 to 550km (205 to 340mi). These are compact cars, but perfectly sized for the European market, with decent range. Until recently the Model 3 had only 250km of range I believe.
I don't think Tesla is going after this market, to be fair. And I'm not sure they should. But they can certainly make a dent in BMW/Mercedes market shares. Which is already pretty incredible, frankly, as American cars have historically not been very competitive in Europe.
Unless, of course, that self-driving technology matures...
Tesla will enter that market and they should. They want to sell 10 million + cars.
Model 3 has far more range then 250km, it had then that even when it was released years ago. Its comparable with the ID.3, more then the Zoe.
Range of model 3 is 350 miles. But you also confusing WLTP and EPA. EPA is more conservative. sometimes up to 50%. Tesla will at least double their sales in EU in 2021 due to delivering cheaper, locally Berlin produced, with local service model 3 and Model Y.
So far Model 3 is the best selling EV by volume despite been a very expensive car, In some market $50-80k. And even with this price it easily oversold nisan leaf, zoe etc... WV probably will be the biggest competitor in EU, but don't compare their first pre-order delivery sales with delivery of the car that is 2-3 years on the market :)
In my opinion the biggest challenges for tesla are 1. an ability to quickly enter local markets. They still not represented in many markets. E.g. LatAm is almost 0. You can't buy tesla in brazil... at all. 2. Deliver wider range of models and more often refresh it. Yes, tesla is still not on par with production abilities of traditional auto makers. Model S and X are very old cars even they update a lot inside. Model 3 is getting old as well. Those are great cars, but if you spent $80k+ on model s and you see on the road same 5 y.o. car that is not that shiny , you have same feeling, that your car maybe is not that cool and bright. But every new model production is a huge problem for tesla. Maybe model Y was simple, but the rest.... They learned how to scale production. Now they have to learn how to scale scaling.
To explain #2. I want EV I considered Model Y. For me it's still a small SUV. Due to the fact there is 0 other brands in this segment with decent mile range, performance, and software, Model Y was no brainer for me. If there will be another brand, even not that great but it will be bigger , but not CYBERTRUCK big, I'll chose another brand for my next car, simply due to size, despite been a loyal tesla owner.
Plus, millennials seem to greatly prefer the Tesla buying experience over traditional dealerships.
Margins.
GM, Ford, Honda, Toyota, etc. are competing with a commodity product in a commodity market. There's no big difference between a Toyota Yaris, a Honda Fit, a Kia Rio, a Ford Fiesta, and similar cars from every other brand.
They're all within a few hundred bucks of $15k. They all cost do the same thing, cost the same to produce, and I imagine the margins are razor-thin. If any of the brand could lower prices by $500, they'd own the market.
Tesla sells a unique product, with unique technologies.
If Tesla has 5% of the market, but 10x the margins of its competitors, which doesn't seem an unlikely outcome:
1) Its profits will be roughly 1/3 of the total profits of the whole market
2) It will be much more stable. Razor-thin margins mean companies go bankrupt with even minor instability. If Ford's costs rise by 5%, it's dead. If Tesla's costs go up 5%, it's a almost a rounding error.
I think the key question is whether Tesla can execute, but right now, things look promising, although far from certain.
[1] https://www.cnbc.com/2018/03/14/fords-f-150-truck-franchise-...
With a little sanity, luck, and changing political winds, it could disappear in an instant.
Making a good EV is hard. The set of technologies required is still unknown -- bear with me for a little bit.
In the early days of the PC; anyone competent could make a perfectly competitive computer in their own garage in a few months, buying chips, etching PCBs, and coding up a basic operating system. Wozniak did that, as did a few others. It seemed like it'd be simple forever, but it wasn't. Today, the tech tree to make something like a MacBook is long, wide, and extensive. There's a massive engineering team for the mechanical design alone, let alone the OS or the CPU. I can still make a computer, but it won't be competitive.
Same thing happened with airplanes; shortly after the Wright Brothers, all sorts of amateurs made basic planes on their farms. It's still possible to do that, but you won't be competitive with an Airbus jetliner.
Early radios were a few vacuum tubes. Compare that to making a modern cell phone.
Part of the reason ICE vehicles are complex are the same process. The first mass-produced ICE vehicle, the Benz Patent-Motorwagen, was pretty simple. It cost under $5000 in today's dollars ($150 at the time), and looked like a glorified tricycle with an engine.
If you throw engineers at tech, it goes up in sophistication. People figure out how to do things better. Anyone can make an EV. I'm confident, though, that we'll see the same progression as we did in every other fields. If Tesla has enough of a head start making things cheaper and better -- and they seem to -- it's unlikely the established players will be able to compete.
Running at a loss to build out market share, technology, branding and economies-of-scale is a standard startup strategy. Tesla is still in that stage.
The key question is whether things like the Gigafactory provide Tesla with unique economics and competitive advantage. If they do, Tesla will be able to have lower costs or more expensive products than GM. If not, it's overvalued.
That's just GM. Ford and others are the same. The Ford F truck line is practically a money printing operation.
A fancy UI on a screen is not a defensible moat, not when you suck at manufacturing (QA is still bush league).
Yes they will. I'd bet that the price of oil is not going to go above $80 or so in the next twenty years.
Two major reasons, and a bunch of minor ones.
1: massive quantities of non-OPEC oil are available in shale and tar sands. Right now these are only barely profitable, but if the price of oil increases production there will increase, stabilizing prices.
2: renewable energy is now just barely cheaper than other forms of energy, but they're projected to drop dramatically over the next years, radically transforming the energy market.
Some uses of hydrocarbon cannot be easily replaced by renewable electricity but most can. When a cheaper substitute is available, demand and price drop.
The only way the consumer price of oil is going to go up over the next few years is if governments come their senses and put in place a carbon tax or equivalent. (And that's reason #3 -- the environmental movement will demand that the world use fewer hydrocarbons, forcing less demand, forcing prices before the carbon tax to go down.)
Assuming they can maintain that level of supply as demand drops. Some the economies of scale they operate with will be lost as demand slows and then the logistics that requires large and ongoing investment may slow considerably, although much of the latter is probably outside the 20 year horizon.
It could play out very differently on the consumer side though. If electric vehicles became 50% (or some arbitrary significant percentage) of the market then a lot of local gas stations will close, the ones that remain may have to start charging higher prices (again losing the logistics and scale advantages of today). There may be some tipping point where the whole retail side of the industry finds itself in a death spiral where gas stations are charging more and in less locations, making oil powered cars less convenient and driving more people to electric vehicles.
You can get this at any dealer, just pay sticker price. They'll love you.
This really has nothing to do with it. An optioned out Model X costs as much as a house. The type of person who can afford that couldn't care less if gasoline were $10/gallon. It's a status symbol, on top of just being a great car. It wont be until they are competing in the sub $30k market that an EV purchase will ever be driven by economics.
Usual disclosure: TSLA investor, owner
It also has, I would bet without having actually done the comparison, much more stock market volatility than the overall industry, because assessment of Tesla's likely future state fluctuates a lot more than assessment of the likely future state of the incumbent major automakers.
I’ve yet to read a comparison of Tesla to the sum of all those different markets.
If retail, grocery, hotels, restaurants, and other traditional industries are any indication, an inability to innovate is deeply entrenched to the point that even knowing that Amazon or Airbnb or DoorDash was coming to eat them, they did/do squat.
I think the market is drastically underestimating how seriously the entrenched automakers are taking electric. They are coming from behind for sure, but I think one of the things you see consistently with Tesla is they are still very much trying to figure out the manufacturing and logistics pieces of building cars (rolling out new lines, scaling them, etc). The existing automakers know how to do all that. Are they going to make mistakes? Sure, but in 5 years you will see dozens of electric models spread through out them, and that will hurt Tesla.
I have to disagree to some extent with that. I think by now Tesla has figured out the logistics of assembling cars at least as well as other manufacturers, but they still nees to build more lines however.
However Tesla is not stopping there and is continuously improving its logistics past the industry standard, it's not catching up anymore, it's pulling out. For example a lot of effort right now is invested into streamlining battery making and integration, this is something no other OEM is really doing right now. Tesla is willing to take on battery production and even potentially mining, allowing them to fine-tune and optimize the process end to end as much as possible, while traditional OEM rely on suppliers for everything and any improvement needs to be negotiated and takes forever.
Tesla last battery day had an extremely interesting presentation about battery making and logistics that illustrates just how deep the stack they are willing to go for the sake of optimization.
2. Their investments in research there are basically 0, compared to big players.
3. Even if they would magically capture large market there, it’s a business that operates on razor thin profits (expect for scams like Enron), that doesn’t drive high valuations.
Most of them include banks, for example. They usually started out financing their customers' car purchases but in many instances have expanded beyond that.
Peugeot makes pretty nice bicycles :)
Tesla building parts that most companies outsource isn’t that profitable on it’s own, but it’s likely to scale with increasing EV sales and future repairs.
Etc etc. If you want to do in depth analysis it takes a lot more time than simple direct comparisons suggest.
Tesla is tough to value, but I hang onto my shares for a few reasons.
#1 I've profited enough that I've been able to cash out my original stake. Right now any investment in Tesla is house money.
#2 Tesla is in a fairly unique position to gain from a lot of strong trends right now. Electric cars are just part of it. Tesla has their hands in a lot of the technology required for green power. Energy storage, solar, Tesla has their hands in it all. We're at the beginning of the curve on almost all of these technologies and Tesla has a pretty strong competitive advantage.
#3 Elon Musk. I'm not a fan of many of the things he says and does, but he seems to have a talent for coming out on top and being ahead of the technology curve. I would honestly prefer owning SpaceX to Tesla, but since Tesla is the only Musk company which is public, I'm content with a piece of it.
#4 Cars. The idea that VW/ GM/ Ford would leap frog Tesla once they started competing hasn't happened. Almost all the Tesla competitors either have far lower ranges, higher prices, or sometimes both.
I have no idea if Tesla is worth 1/3 of what the rest of the auto industry is worth. But a giant chunk of auto industry infrastructure is going to be obsolete within the next 30 years even as Tesla is perched to continue growing so perhaps this isn't too odd.
Toyota produce the same number of cars they did 10 years ago, and their stock price is the same as it was 10 years ago. Yes, Toyota make an insane number of vehicles and make profit doing so, but chances are they'll be doing basically the same thing 10 years from now.
The article says Tesla's Revenue grew 28x in 10 years from 100M to 28B. The market is hoping/predicting/betting that will be the same in the next ten to roughly equal VW and Toyota at 280B by 2030. The ten years after that might see similar growth too..
Their vision is much bigger than the auto industry. It is to accelerate the world’s transition to sustainable energy.
I like their execution so far with the model 3, model y, and their focus on making a ton of batteries efficiently.
They seem to be one of the most innovative companies in the world: superchargers, solar roofs, power walls, energy storage, electric cars, self driving cars, etc... and their innovation seems to be based on inventing on principle as coined by Bret Victor.
The environment may be in flux with the financial markets frothy and governments are devaluing money, but I sure like this company’s prospects. I assign them many multiples over GM, Ford, etc... In the last 10 years, Tesla has started selling energy storage, power walls, solar roofs, etc.. . What have Ford and GM done in the same timeframe? Project out relative innovation rates over the next 5-10 years.
Just concede that you invested because you felt like it. It's probably okay, you very well might end up making a ton, and honestly who's to say the traditional methods are correct or are even applicable in 2020? But let's not kid ourselves trying to justify Tesla's value using traditional metrics.
https://www.macrotrends.net/stocks/charts/AMZN/amazon/pe-rat...
Look at 2012 and 2013 Amazon. Peaked at over 3600 PE for one quarter and for several quarters it was over 1000 PE.
Why don’t you look at the entire history? The last column is the PE.
2014-03-31 336.37 $0.63 533.91
2013-12-31 398.79 $0.58 687.57
2013-09-30 312.64 $0.28 1116.57
The previous 3 quarters it lost money and the one before that it had a 3000+ PE quarter.
Also the 4 quarters after this, Amazon lost money.
And you try to tell me to concede. Do you not have any other way to evaluate stocks than traditional metrics?
You had no idea at what price point I invested. I mostly invested in the 200s and 300s pre-split. It split 5/1. It is over 600 today. Does a 60b valuation of Tesla sound like a deal?
When all you have is a hammer, everything that isn’t a nail must be bad.
The EV market will grow as fast as the battery market can support it, and Tesla is by far the largest current buyer of batteries and they will continue to expand that. While at the same time also attempting to be one of the biggest battery companies in the world.
The Tesla 'pilot plant' they have in California, is targeted to be the 15 biggest battery factory in the world by end of next year. Its the same size as the plant VW and Northvolt have planned in Germany by 2026.
Tesla will in start building multiple huge battery factories next year, in Berlin and in Austin, Giga Nevada (biggest battery factory in the world, with Panasonic cooperation) will continue to grow and they will also continue to be one of the biggest costumers for LG and CATL.
We are quickly at the point where the raw material inputs will have a seriously hard time keeping up. Massive amounts of new nickel, lithium, cobalt and battery grade graphite need to be minded and refined. Nickel is the best investment, as there is basically no way around massively increasing nickel in the next 10 years.
This is before we even consider grid batteries. Li-Ion grid batteries, even when not able to be a backup for the cities are seriously useful for basically every grid operator in the world. While other storage mechanism exists, li-ion batteries are arguable the best in the market and will be for a long time.
Tesla is already a serious contender in that market (largest market share by far) both in terms of home and grid batteries. They already have all the software and electronics required, and already are in contact with utilities around the world.
People are very fast to claim 'bubble bubble bubble' but I would push people to seriously consider the market dynamics at play and how the transition EV and renewable energy will play out in the next 15 years. Tesla if you like them or not, is well positioned, in terms of EV, Grid Batteries and Solar installation, all of these will grow globally and exponentially over the next 10-15 years.
For example another weird stock is Snowflake, which is currently at 100B but they themselves claim their total addressable market size is only 70B. Ditto for airbnb and doordash.
Just how many company buy outs are done via cash?