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zirp = Zero Interest-Rate Policy

Thank you.

I do not follow tesla that closely, but do they not work hard on lowering the manufacturing price (fewer parts, creating batteri themselves) do that they can sell at a lower price, and if they can sell and still make money but the competitors have to either sell with a loss or have highere prices?

I think their strategy is to charge the highest prices they can, early adopters pay up, demand gets exhausted and they have to keep the illusion alive that supply is the growth constraint, not demand. Demand falling is a death knell for them so that is one thing they absolutely must avoid at all costs.

They want people to believe that the demand is a foregone conclusion and they need to build more factories to satisfy it. But clearly they are trying to maximize the profit. Of course they would like to lower their costs in pursuit of that but it’s not to charge the least they can, otherwise they’d have led with a compact EV instead of an $80k luxury sedan.

I’m struggling to understand what insight you think you are providing.

Tesla had a very explicit plan for a long time to make high margin luxury cars and keep scaling up production to make cheaper and cheaper cars to make electric cars dominate.

Lowering prices isn’t some sign of “struggling to hold on”.

Lowering prices for same product is very different from lowering prices of a new product.

This is why Luxury brands are normally split off into different sales channels.

The insight is that they may intentionally be propagating the "supply limited" story despite it not being true. I believed it (while thinking "but why? the chinese seem to have none of these problems").

They are lowering prices because demand is falling off. And it's not just one price reduction. They have done multiple at this point. It's one of the worst positions for a company to be in.

Lowering their cost makes Tesla in a position to lower they prices if they want to. Lowering prices because the demand is low is OK if you have better margin then you competitors and as far as I can tell they are making more money per car. Its natural that they decrease prices to sell more. But as long as they are making money on each car and is taking more and more market share I think they are happy.

Without any real substantive changes to the vehicles, Tesla's prices rose as much as 50% (for the Model X) from 2021-2023. Even the Model 3 has increased by about 25%.

You can make inflation arguments, but it's pretty hard to claim that Tesla is driving prices down. (Prices have come down in 2023, but it's too early to know if this change is sticky. The reality is, most observers think Tesla uses price to regulate demand - so dropping price could just well mean less people want Teslas than before.)

Your right, maybe my formulation was a bit clumsy. I'm not arguing that Tesla is driving the price down for consumers (more then necessary).

I agree that they use price to regulate demand. But they want to sell as much as they can. So if the price is too high they will not sell out all cars. And they can afford to lower prices more then many of their competitors because they earn more per unit sold then the rest of the field [source: https://asia.nikkei.com/Business/Automobiles/Tesla-earns-5-t... ]

Toyota has a 3000M/year across-company cost reduction target. It's Tesla who has to keep up with that, normalized by production figures. Not the other way around. Else bZ4X will start making more sense(or RAV4 for that matter) and they'll be out of market.

Not sure I understand you argument here. Toyota is way bigger then tesla. A quick Google search [1] shows that tesla makes 8x of what Toyota is making pr car. (Des 2022)

[1] https://asia.nikkei.com/Business/Automobiles/Tesla-earns-5-t...

> I don’t see how this company is going to sustain its valuation given the basic fundamentals at play.

Goodwill has always been the main driver of Tesla's valuation.

This may become a problem, with Musk turning into a cartoon villain recently.

It's odd to me how people perceive him as a cartoon villain. He's fairly ordinary in terms of views and actions other than being childish.

I'd hardly call endorsing conspiracy theories like "PizzaGate" to be ordinary.

I dont recall him endorsing that-

But, frighteningly enough, it is rather ordinary these days.

https://www.nbcnews.com/tech/tech-news/elon-musk-boosted-piz...

Not a single link to what Elon Musk actually did, just an opinion piece from a competing media company. Show me the exact tweet please.

https://twitter.com/NikkiMcR/status/1729532438508941359?ref_...

I don't read that as endorsing Pizza gate as much as it is saying that mainstream media, his competitors, are not to be trusted

Whenever people use the word "endorse" or "endorsing" in a political context I get suspicious.

Would the person supposedly "endorsing" the thing agree that that is what they are doing? Would Musk agree that PizzaGate is true if asked?

You draw your own conclusions:

https://twitter.com/NikkiMcR/status/1729532438508941359?ref_...

The main drivers of Tesla's valuation are that 1) they make incredible cars (some of the bestselling in the world already), 2) they have a massive head start on EVs, 3) they have fantastic margins (most other manufacturers are selling their EVs at a loss), 4) they have the full self-driving lottery ticket, which, while still unproven, will pay off huge if it succeeds.

They are planning a new cheaper model which will allow them to offer a car to a lower priced market. Also, Tesla buyers are very loyal so they will get a lot of sales when existing owners get new cars https://jalopnik.com/tesla-buyers-are-remarkably-loyal-to-th.... And BEVs are still the fastest growing segment of the market, but not even 10% share yet, so there is the other 90% of the market to go after.

Not sure why you bring up interest rates as a weakness when Tesla is the least dependent on debt of all the major car companies. High interest rates will be much more of a burden on their leveraged competitors. Same thing with the price deflation. Yes, that will hurt Tesla's profits, but it will hurt competitors that are selling BEVs at a loss even more.

Because higher interest rates make everything more difficult. It incentivizes people to save instead of buy expensive cars. It makes it more expensive to finance expensive cars. It makes it more expensive to raise financing to pay for factories and workers. It can very well bring about a recession where unemployment rises and your TAM shrinks.

Tesla is still trying to convince people it is in hyper growth mode constrained only by its ability to supply cars with robots, self driving cars, semis and compact cars all in the pipeline.

Let’s see how that plays out with fed funds at 5.5% for a few more months.

Tesla is in hyper growth mode. Q3 revenue was up 50% year over year, which is absolutely hyper growth mode for a car company, or really any company as big as Tesla. Fed funds rate during Q3 was 5.25-5.5%.

There is a grain of truth: Tesla's P/E makes no sense. However, we should count the lower EV prices they have achieved as a great success. Musk stated from the beginning that that was the goal: Prices would be high initially to fund development, and as they scaled the learning curve, prices would come down. If anything, they haven't gotten cheap enough! They need to get to BYD's prices and lower -- both for "altruistic" reasons (to achieve EV ubiquity) and "selfish" ones (to appeal to remaining consumer segments, who do not have demand for EVs at these prices).

Finally, our cheerleading or hate of public figures and of companies should not distract us from what's in our best interests. We should be happier as EVs are cheaper.

TSLA's valuation has been insane for a while. I would probably buy them as a car manufacturer if their price was more in the $70b range rather than $700b.

tesla valuation is a meme.

Perhaps at some point the other manufacturers will be able to sell direct to consumer like Tesla. Then it's game over.

They will keep selling cars but put more focus on their AI capabilities to stay on trend. I think we can already see this with their llm and robots, once they start making their own chips Elon will want vertical integration and start making their own silicone. the focus will be more on the autonomy of the car and larger tesla ecosystem rather than on the fact the cars are electric since every car is now electric.

If you have to rely on bank and external financing, your stock price is absolutely critical, no question.

Musk compensation package is tied to Tesla's share price(and profitability). Sp there is a high insensitive to pump the stock, hence the countless empty promises. Tesla bots have been pumping TSLA stock since 2013[1].

https://www.mdpi.com/2032-6653/14/2/43

Robotaxis.

Car rides are a big market.

There are 2 billion cars on the road.

If 10% of car rides are done in a robotaxi, that is over 200 million rides a day, over 70 billion rides a year.

Sell a ride for $10 and that's a 700 billion dollar market.

Capture 10% of that and you make $70B a year.

One taxi can do over 100 rides a month. That is $1000 in revenue. Operating cost should be less than half of that.

So you have 50% margin: $35B profit per year.

At a p/e of 30, that is over $1T market cap.

Teslas current market cap is $700B.

Robotaxi is not a foregone conclusion. Maybe they'll pull it off. I don't know if there's going to be a giant leap like GPT, or a continued slow indefinite grind like we've seen so far with self driving. I'd be skeptical of anyone who claims to know unless they've already accomplished it.

I think it is.

The current generation of neural networks already seem to do pattern recognition better than humans. And that is all that is needed to press the brake in a dangerous situation. All that is needed is to train them on enough examples of different situations that occur on the road.

I think, as Cruise found out, you can't have priors for everything (eg. don't drag a pedestrian you ran over down the road).

You only need more priors than humans have in their mind.

As I said, neural nets are already good at pattern recognition. That is all that is needed to recognise you ran over someone.

Humans are still better at long reasoning sessions. Aka "thinking something through". But that is not involved in recognizing you ran over someone.

You think a human wouldn't drag another human under their car because they've pattern recognized that from a prior example?

Not just one example. They learned from many examples that dragging someone or something along is not a good thing.

I've seen examples of humans beings shot out of cannons where they were perfectly fine afterwards and the crowd applauded. I haven't seen any examples of people being shot out of cannons where they were not fine afterwards. Should I shoot people out of cannons?

What's your point?

That understanding is not the same as pattern matching and if that's all you rely on to drive your car you're going to end up dead or seriously injured.

Even when pattern matching is your only tool and you have seen only positive outcomes of humans beings shot out of cannons, you will still not want to shoot people out of cannons. Because it matches so many negative patterns. You learned that explosions are bad, cannons are bad, weapons in general are bad, loud bangs are bad, people flying through the air are bad etc.

So this is not an example of pattern matching being insufficient to avoid danger.

Even if this were a given (and it isn’t), I think it’s unlikely Tesla robotaxis capture the transport market like that.

There’s a lot of cars to replace. Capturing 10% of yearly car sales, worldwide, is already a very tall order.

Capturing 10% of all cars on the road would require this level of gargantuan sales for many years, and that’s just so 10% of cars in the world are your brand, not so 10% of rides are on cars owned by the fraction of people who bought your brand and decided to let it drive strangers while they’re not using it.

Moreover, beyond the safety concerns there’s policy concerns— knowing how to safely drive in Indonesia doesn’t mean being allowed to drive in Indonesia. Resource constraints— where is all the lithium going to come from, and how will the people around the world feel about this?

And there already are alternatives beyond the car industry. Public transit, for example. Demand for not driving or not owning a car can’t only be safely fulfilled with robotaxis.

I said 10% of rides will be robotaxis and 10% of that will be in Teslas.

That is 1% of all rides taking place in Tesla robotaxis, not 10%.

Also it is about rides, not about cars. Less than 1% of cars being Tesla robotaxis is enough for 1% of rides to be Tesla robotaxi rides. A robotaxi will do multiple times more rides per day that the average car.

>All that is needed is to train them on enough examples of different situations that occur on the road.

The only real way this would work is if you build a pipeline where you have a simulated world with realistic physics, rendered through some pipeline to represent camera images (in relatively high fidelity) and/or lidar outputs, and teach the network to predict the evolution of these scenes, and do this with a shitload of random data

This is probably orders of magnitude more expensive to do than training GPT models, since for vision, you would have to render it with ratyracing.

Have you not seen the results that have been shown recently with Gaussian splatting? Photorealistic rendering looks like it'll become a hell of a lot cheaper than raytracing soon enough, and this might actually be a realistic idea.

I dunno if statistical methods can be applied to generating photorealistic images from simulation, where you don't have enough information in a scene, since you are starting with 3d models.

Human drivers are proof that this is not needed.

I hate that companies in the vision self driving space like Tesla and Comma AI have made the act of driving seem like its trivial.

Human drivers drive with EXCEPTIONALLY more "software" under the hood. We simulate the world around us using learned rules across multiple domains. For example, if someone has never driven at night, but understand that the cars have tail lights that are red, we can deduce that pairs of red lights are cars on the road without ever being subjected to the visual of driving at night. Its this kind of processing that lets us be safe.

In the current form, ML models are way subpar to this. A superhuman driving agent should be able to drive through a construction site with cones and debris, or a busy parking lot, or a grass field full of logs. No model out there can do this. This is why you absolutely need simulations if you want to do it traditional way. Comma AI has gained quite a bit of success in training in a simulated environment that simulates deviations from straight line driving on real world video.

    we can deduce that pairs of red lights are cars on the road

Generalization, abstraction, understanding. That is what neural networks are about. Current NN's are already very good at that. FSD constantly has to understand lighting situations it has not seen before.

You still need training data.

Even if you had a simulation set up for training, and enough compute on the vehicle to run something like MuZero real time inference for self driving, you would still run into the problem of humans setting up all the possible driving scenarios, which will likely leave some out and the model will never learn the right actions for those - meanwhile, to any human, the action would be very obvious. Over time you could probably get close enough to a very very small error rate, but you would still be hesitant to trust the system.

A true superhuman driving agent would most likely be able to take a picture of a scene, and then give a prediction of evolution of object position in 3 dimensions for a given time window, and give a confidence score on that. For example, if the single image is from few on a highway, it should be able to predict that cars are in fact moving, because the chance of cars standing still on a highway is very low.

And to train a model like that, you most likely need a base model that can "understand" physics.

Additional images from the past or the future would generate prediction that is more accurate, and also improve the model self assessed confidence. And then you would have some heuristic algorithm like MCTS based on confidence levels on the best course of action.

It's not just objects, but it has to predict what people are doing, going to do, or are trying to communicate. For example, police redirecting traffic, a passenger having a medical emergency, other drivers driving erratically, etc.

And current generative AI has jack all to do with humans.

The players deploying robotaxi right now are entering a market that resembles shared micromobility(scooter, e-bike) - what they need is not just vehicles, but to get on the side of the appropriate regulatory bodies and to get eyeballs on the product. It's a fight won one city at a time, and it favors partnering with companies like Uber that have built experience in both of those aspects.

This is a fight that Tesla doesn't seem to be engaged with - it's staying on the manufacturing side of the issue. Its opponents are going to see this as a gun they can fire to shut out Tesla's supply-centric economics: install regulations on robotaxi - vehicle form factor, signals, testing - that make it impossible for anyone but a well-capitalized player to enter. Then it doesn't matter how cheap the vehicle gets if the other costs required to operate legally keep small players out.

Tesla's recourse in this market is to either sell a commodity product that passes regulation, which is terrible for their bottom line, or to become a robotaxi company themselves, which is not unfeasible(they have the Supercharger network, they can grow more vertically) but which they aren't currently aimed for. If they did that the fast path would be to find a ridehail partner and acquire them.

I believe in the robotaxi concept, but I don't think it's settled as to what form it ultimately takes.

I'm sure that if Tesla creates the best robotaxi software, it will find its way onto the road one way or another. My feeling is that they will operate the robotaxi fleet themselves. But they might also just sell or rent the cars. Or even just the software.

Given what's happening with all the rest of AI, I suspect the demand for commuting is going to go down by the time robo-taxis are viable.

Will robots that lead to less commuting be simply balanced with more fun trips for similar revenue potential, or will they lead to a complete shift of world economics that means the money stops being meaningfully comparable to today's?

Robotaxis will bring down the price of rides. That means the number of rides will go up.

Less people will commute to work. But more people will meet for a coffee and order stuff online which then gets delivered in 30 minutes by a robotaxi.

> Less people will commute to work. But more people will meet for a coffee and order stuff online which then gets delivered in 30 minutes by a robotaxi.

We havn’t ever seen a situation where a reduction in the cost of work lead to less work being done.

What happens is that employers (and the market) demand more work, and only labour law holds back the demand that employees work all their waking hours.

You’ll probably respond that UBI will give everyone all the free time they want… but capital owners will have to fund UBI through tax. And capital HATES paying tax.

This feels like stuck gears to me. What am I missing?

> You’ll probably respond that UBI will give everyone all the free time they want… but capital owners will have to fund UBI through tax. And capital HATES paying tax.

> This feels like stuck gears to me. What am I missing?

Communism.

Or at least, some variant of it. If your government owns the full automation and operates it for the citizens, that's much the same as the upper limiting case of a corporation owning the same full automation for the benefit of the shareholders.

(I'd say "and this time nobody needs to go to the gulags", but having the government aligned with the citizens is a separate problem: any given state might get it right, or history might rhyme).

I can’t tell if this is sincere or a joke.

It kind of reads like some sort of VC version of the Drake Equation.

This is simply "calculating yourself into richness", and in the mean time forgetting a lot of cost and failure modes. If you can get money from a VC that way the joke is on the VC.

I've heard the same flavour of equations from everyone I've ever heard talking about starting a company. One guy was calculating that if he sold his gadget to "just" 10% of people in Africa, he'd make so much money.

Spoiler: he did not sell a thing to 10% of people in Africa.

You are claiming thay current human driven taxi/ car rides market are making 700 billion dollar profit per year (70B / 10%)

They don’t

Not profit. Cost. Using robotaxis is going to cost less than operating your own car.

The cost of operating the current car fleet is way higher than $700B. Buying the cars alone is higher. There are 70M new cars on the road each year. At $10,000 per car, that would already be $700B.

Why would it cost less?

What is the difference in utility of a robotaxi and a meat taxi besides maybe a reduction in cost per ride (how much is labor vs. non-labor cost), and why isn't everyone using Uber to get everywhere now?

The robotaxi vehicle still needs to be manufactured, purchased, financed, maintained, fueled, insured, with room for profit for the robotaxi company. None of these things are free.

Capacity utilization will make using a robotaxi multiple times cheaper than owning a car. You car stands still most of the time. A robotaxi can drive most of the time.

Automation and economies of scale (maintenance, repair, cleaning, charging) will also contribute to the lower cost of a robotaxi fleet compared to privately owned cars.

Why will people choose robotaxi who are not currently using Uber?

Because the robotaxi arrives faster, is cheaper, safer and more convenient.

Besides driver breaks, robotaxis are bound by the same constarintsbas normal ones. So no, it won't arrive faster, might (and that is already some claim) be a tad cheaper if you ignore CAPEX, have yet to prove to be safer than humans (so far self druving cars are not, and by a long shot, safer than humans) and convenience doesn't change except for the most, how to put it politely, asocial beings that cannot stand being anywhere near to other human beings, in case of taxis a driver.

It arrives faster because there are more of them. Every time the density doubles, wait times roughly halve.

It is way cheaper because majority of Uber cost is the driver.

Safety: https://news.ycombinator.com/item?id=38456847

It is more convenient because it has more space. No drivers seat, steering wheel etc.

More taxis mean more CAPEx, mean utilization goes down off-peak, bothe of which result in lower profitability.

Robot driver or not, basic financials and operational constraints still apply. They can only be ignored for quite a while if a company has endless VC money, unit economics ultimately catch up so, always.

> It arrives faster because there are more of them

I think you’re overestimating how many people will buy Teslas.

Also, how many people who own Teslas would robotaxi it. A company might do it as a business, but it’d just take waking up one morning to discover a drunk passenger puked all over your back seat, or fluid remains of someone having sex in there [1] for individual owners to pull out of the program.

[1] https://sfstandard.com/2023/08/11/san-francisco-robotaxi-cru...

It is way cheaper because majority of Uber cost is the driver.

That is only true because Uber doesn't have to pay for buying and maintaining the cars in their 'fleet', having offloaded that cost to their drivers. If Uber were to move to owning robotaxis then they have to have to move the car ownership costs back onto their books.

The total monthly cost of owning and maintaining a car is just a few hundred dollars. The total monthly revenue of a taxi is several thousand dollars.

When you take the driver out of the equation, the cost of providing rides plummets massively.

Who is paying for fuel and insurance?

That's in the "few hundred dollars" monthly total cost.

Ever heard of deprecation of assets?

But sure, as long as other take all the costs and most of risks away from the new liberatrian tech nobility we are suppossed to not care about those little things, right?

It trivial to project big profits if you assume a monopoly. The problem is that it's true for any sector, you have to justify why Tesla is the one to achieve it or else your numbers are meaningless.

If you are truly an investor as per your username and the above is your serious reasoning for buying Tesla stock...

Which is exactly ehat Tesla did trying to maintain a "tech" market cap instead of defaulting back to a more realistic car maker one. Among other things.