Tesla (TSLA) tumbles on price cuts, “appreciating asset” dream going away | Hacker News Reader

Tesla (TSLA) tumbles on price cuts, “appreciating asset” dream going away

electrek.co

21 pointsclouddrover59 comments

The realistic investment thesis for Tesla was always that it ends up as big of a player as GM, Ford, or Toyota. The valuation was driven by irrational optimism and hope it could sustain its margins as competition increases. It's looking like that's not going to happen (no surprise, here), and its margins will end up looking more like a legacy carmaker's. The open question is what happens to car prices as electric drivetrains take over. Between motors being cheaper and battery prices coming down, the BOM should drop, but does that turn into higher margins (mostly for legacy carmakers), higher base trims, or lower prices.

The common response to this is that they are an energy company and not a car company. However, while there has been some progress on the grid scale storage side, solar seems to have faded into obscurity. The only time they’ve ever paid attention to it was when Musk was being accused of acquiring Solar City to bail out his brother.

A lot of the growth in energy actually came from local storage, not grid storage if you look at the numbers. But its true that the energy business alone is already quick big and growing very fast.

That said, people who really understand Tesla, do not think of it as an energy company. Cars are and will be the majority of Tesla revenue, profit and growth.

But its certainty good to have power infrastructure and products.

Solar as you correctly said, is not working out very well, but I think they have found the roof market to be much harder then expected.

For Tesla solar has faded into obscurity, because they're a bit player in the solar market. But meanwhile solar has taken off in an absolutely immense way. The number of panels installed in Europe on account of Putin's empire building efforts has accelerated the energy transition quite a bit, likewise for things like heatpumps, house insulation and so on.

Even that is hopelessly optimistic. Tesla has no unique technologies. It can only make the simplest type of car possible: the BEV. It cannot even benefit from the advantage of cheap labor like China companies can. A realistic analysis would inevitable conclude that it will become totally uncompetitive compared to the competition that do have unique advantages.

First of all those 3 companies aren't the same, and just throwing them into the same bucket makes no sense.

In terms of profit Tesla is already better or very close to Ford/GM. And Tesla is far more global and invest in many things GM/Ford don't.

Tesla very much can still in pursuit of GM/Ford range, in terms of sales. Also GM/Ford are mostly shrinking at the same time. I don't see why Tesla couldn't reach that range. Tesla currently is in a very small part of the market and have shown to be able to go into existing markets and attack them. That is what will be happening with Cybertruck, it will likely also have better margins then Model Y.

> It's looking like that's not going to happen (no surprise, here)

Their margin were unrealistically high for sure. However, that doesn't mean they will turn into Kia anytime soon. Tesla aggressively cut prices to where it was a very serious problem for a lot of competitors, and still had very good margin.

Its also just not very smart to compare Tesla margin to other margins because Tesla is EV only. If you measured just EV margin, then Tesla margins are utterly amazing. Because basically all the other OEMs barley make any money or more likely lose a gigantic amount of money on EVs. For how long will the be able to invest that much at a loss?

Ford breaking out their EV business has shown this quite well. Ford even their predictions don't reach EV margin Tesla has now 5 years from now, not even close. And I think Fords predictions are widely optimistic. Just like GMs were a few years ago when according to them, Ultium platform would have huge sales and like 20 models by 2023.

Others might be slightly better then Ford, but the overall picture in the industry is very much that companies are losing gigantic amounts of money on EVs. Some company have barley even started at this process, Honda, Toyota and co.

Tesla is very growth oriented and aggressive and still have quite good margin, and for EV only their margins are very good.

> and its margins will end up looking more like a legacy carmaker's

That transition to EV will take another 10 years. You are talking about a situation where all legacy has mostly transition to EV and many of them will simply not exist anymore (mostly threw mergers). And some companies for China will be huge.

By that time a lot of things will be different and I think Tesla with its relentless investment into other areas, energy, infrastructure, batteries, refining, mining, robotics, AI hardware and AI software is far better positioned then most other car companies for that world.

You do not appreciate how far ahead Tesla is technologically. A look under the hood of a Toyota BEV, or a study of the negative profit margins of Ford and GM BEV’s would be worthwhile here.

And unlike Finder 4.3 and Finder 6, Tesla is no longer perceived as an upstart, but rather, an established leader.

But why would you look at Toyota? They're not exactly Tesla's main competitor when it comes to BEVs, they have been betting on hybrids and Hydrogen for way too long and only belatedly they've released a BEV.

Other manufacturers are much closer to Tesla in terms of range, quality and numbers. In fact, in quality some already surpass Tesla. Numbers aren't really there yet, but Tesla's market share is now about double that of VW and VW does a lot more than just BEVs.

Ford beat Tesla to the truck market with the F-150 Lightning.

Ford lost a billion dollars on its EV unit last quarter.

“The company loses money on every Ford Lightning it sells — and that was before it knocked thousands of dollars off the sticker price this summer, trying to keep up with a Tesla-triggered price war that's pulling EV prices down.”

Recent npr piece.

Bringing something to market at a big loss is not an advancement unless you have certainty that you can bring the project into the black. Ford has no such certainty. Moreover when there is rapid technological change, every product must be at least break even because product life is so short. “Ford F150” will persist as the name of a branded product, but the components inside will change much more rapidly than legacy automakers are used to.

I’m so tired of this number being thrown around. R&D costs aren’t losses. Ford expects their EV division to be net positive by 2025.

Tesla started in 2003 and wasn’t profitable until 2020. Only now when Ford takes a couple years to recoup their R&D on a brand new fledgling platform do people loose their minds and only then try their best to compare them to current Tesla who was hemorrhaging billions year after year for nearly two decades.

Rivian is operating at a loss. Lucid is loosing $500k per car. GE says they’re going to loose money on their EV division until 2025.

All the car companies are playing catch up. Ford and Chevy taking a couple years to do what Tesla did in 20 isn’t the bellwether for Tesla people use it as.

The other boutiques on the other hand - I really don’t know how they’re going to survive once legacy manufacturers really ramp up and start doing more vertical integration and write better software.

You’re looking at specs only.

Tesla’s costs are close to half, at similar specs. That is what technological leadership means. Not just specs.

Yes some models excel, have better this or that. Absolutely 0 have everything in one package at a competing price (while retaining margin!)

BEVs are very simple vehicles. Anyone can make them. There is no such thing as a technological lead here.

That’s just what the legacy automakers found, now isn’t it? I suppose anyone can write an operating system that a billion people will use rather easily, too.

A cat as an “appreciating asset”. Did people really buy into that??

I guess there really is no correlation between money and intelligence.

Cat list price differs based on breed and vicinity to shelters and farms. OPEX and write off is manageable given an average 15 year life span.

YMMV and not financial advice

Are Tesla cars widely thought to be "appreciating assets"? I've never heard anyone repeat this view, was this seriously claimed by Tesla?

Seems fairly obviously false.

I mean, Musk said that years ago on a podcast (and has maintained that position since): "I think the most profound thing is that if you buy a Tesla today, I believe you are buying an appreciating asset – not a depreciating asset." (1)

It is obviously false, but his case was that all Teslas would be working as robotaxis for their owners. "Insane lie or megalomania?" is the defense, as ever.

1: https://electrek.co/2019/04/12/tesla-vehicles-appreciating-a...

Not really. Musk was making this argument. But literally non of the smart analysts that do detailed models of Tesla ever put this in an investment model.

People who don't actually follow Tesla often only hear Elon and a few Tesla superfans and hardcore Tesla haters. In reality there is a lot of space in the middle that is up for debate.

Tesla stock was flying high, stories about self driving were part of that. But it was also a time when all EV companies were way overestimated.

In general, many Tesla were actually sold as appropriating assets. During the supply crisis some used Tesla actual out-priced new ones. But that wasn't based on self-driving.

Oh yeah. I have a friend that said exactly that. The depreciation according to them is negligible compared to other brands to the point that they consider it as an appreciating asset.

They sold a M3 bought in 2017 and lost about £3000 for a new M3 just to recycle the warranty.

If it really was marketed as an appreciating asset the SEC may come calling.

Then we get into the whole Tesla-doesn't-advertise thing and whether or not Elon's comments are under oath/contract/etc or opinion or intentionally-misleading-because-he-said-it-at-a-heavily-advertised-event. Who knows.

never forget the time Musk said because of Tesla Fleet, owning any other vehicle besides a tesla was "financially insane"

> “Buying a car today is an investment into the future. I think the most profound thing is that if you buy a Tesla today, I believe you are buying an appreciating asset – not a depreciating asset.” -Elon Musk, 2019

https://electrek.co/2019/04/12/tesla-vehicles-appreciating-a...

He did preface the statement with ‘I believe..’ which is probably why there’s no SEC investigation, but I’m no securities lawyer.

Elon was talking about Tesla car with FSD. Once Tesla does their part the car would become a valuable robotaxi capable of earning itself back in 1-2 years every year for a decade.

My cat gets more valuable (to me) every day.

A car, not so much.

That will saturate. Then you will have to decide whether to become a cat person.

Cat decides you.

I wouldn't replace the meow meows for anything

I can assure there is and it's a positive correlation. Single data point/anecdatum and all that but I dont see myself as stupid and my lolcat collection is appreciating nicely thank-you.

In the end it's a gamble, that worked out well for some people so far. It's been a pretty common scheme in Germany to buy a Tesla with subsidies and sell it to the second hand market after 6 months (usually going to Scandinavia, where there are tax incentives instead).

desirable models of Porsche cars will appreciate

This is dated Fri sep 1st where TsLA closed at 245. The previous Friday, 25th aug, it closed at 238

I’m not sue what “tumble” means in this instance

Sure Tesla isn’t at the heights of a couple of years ago, but neither is the S&P in general. Given that at the start of 2020 TsLa was about $30 and it’s now about 8 times higher, a “tumble” would be back down well below 10.

Headline writers are incapable of simply presenting facts anymore. Stocks don't go up or down a couple of percentage points, the "rocket" or "tumble." Judges don't issue rulings, they "excoriate" one side with a "blistering opinion." Movies don't underperform they're "huge, embarrassing bombs."

This is just one more area where social media and a click-based economy have made things demonstrably worse.

Except that the previous day, August 31st, TSLA was up to 257.96

So... that's a tumble.

And it is up 2% for the week, but down 3% for the month, and up 22% for the last 6 months.

Tesla is a volatile stock, in part because it is quite speculative.

Investing in the technology leader blunts the speculative aspect. And the volatility is caused by panicky, inexperienced investors jumping in and out at the margins.

It is a theory that Tesla will dominate all profits in the EV industry similar to Apple in the smartphone market. It isn’t a sure thing, it is a theory.

Being a true believe is a faith based endeavor. It isn’t clear at this point it is right.

I guess that’s crucial when you invest in derivatives. ;)

Having rocketed through the week?

Just think of Tesla as Apple. The legacy automakers have soured the auto investment space. But Tesla is a general, diversified technology company.

Given what joke carplay is I wouldn’t even compare to Apple

I always thought people who “prepaid” for FSB were kind of silly. So I don’t have much sympathy for rich people who drop such money on things that don’t exist yet.

It seems 360k people have bought this since it went on sale in 2016[0]. 7 years is a long time to wait.

I imagine people will end up end of lifing their cars before FSD actually comes out.

It’s odd though as I have a friend who didn’t buy the total one but prepaid for some things and they say they are pretty happy with what it can do now- adaptive cruise control and lane changes. So that seems similar to Subaru and Toyota and everyone else’s adaptive cruise control. And I think those folks charge a few grand too.

[0] https://en.wikipedia.org/wiki/Tesla_Autopilot

Who on Earth thought that a mass produced car could be turned into an "appreciating asset"?

That's how it was advertised in 2019 by Musk when turned into a robotaxi [1]

1. https://electrek.co/2019/04/12/tesla-vehicles-appreciating-a...

The whole article was stupid, but it led to a lively discussion. Of course a car isn’t an appreciating asset. It accumulates your farts.

Invest in bikes and nuclear and trains

Its very hard to invest in these things. Most advanced nuclear is not public. Trains are usually part of really old really large companies. And with bikes there are just so many competitors its hard to have any understanding in that market.

As a society, of course we should invest in bikes, nuclear and trains.

But as an investor, EV and batteries make more sense.

The thing is, we don't need new technology to solve our problems. Trains and nuclear work fine with 1980s technology and supply chains.

However transforming the car industry to electric is a gigantic growth opportunity.

you just explained why capitalism is problematic: always short term

Has nothing to do with 'capitalism'. It has to do with what government invest money into and how they drive infrastructure. There is a huge opportunity in EV because governments uniformly push for it and the car and car infrastructure have been the majority of infrastructure investment over the last 70+ years.

And investment is not always short term either but if there is a huge push of money and an exploding industry and you think you can recognize that before others, then its a good opportunity, and its not short term but more mid-term.

If you invested in Tesla around 2016 its not short term where you win a lot of money. The same goes for investment in the battery supply chain.

At the same time the idea that these intensives are not universal, is simple wrong. Human always like short term success. So to blame short term thinking on capitalism is ridiculous. The Soviet Union often preferred short term political wins over long term success as well.

In a well functioning economy things are supposed to get cheaper to raise the relative net wealth of everyone. TSLA has been overpriced for years according to the CEO.

Tesla is slashing the prices of their cars because of Chinese competition. The market is functioning quite nicely- at least until Musk can convince Washington to put BYD on a sanctions list.

I think the biggest question is if Tesla is going to be able to establish itself as a luxury brand as well as a mid brand. The margin is in the luxury segment.

No that's not at all it. 'Luxury' is not a real thing. Its a purely subjective category bad based on nothing. Tesla is already selling cars at the avg sales price of new cars.

The question that is more relevant is if they can establish themselves into the very large Pickup and SUV markets. And can they make a profitable low cost EV.

> Tesla is already selling cars at the avg sales price of new cars

without an EV credit, tesla is NOT selling anywhere near the avg price of new cars. I just checked in Canada a base model 3 is 55k before tax. Avg new car cost is 35k before tax, thats a massive difference.

> In the United States, the average selling price for a new light vehicle came to around 46,290 U.S. dollars in 2022

and

> The cheapest Tesla model is the base Model 3, which starts at $40,240

The US is the far bigger market. But your point is correct that this is not true for every single market.

They’d have to try making luxury cars first.

> “appreciating asset” dream going away

_Surely_ no-one ever believed this?

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