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Comment by marvin | Hacker News Reader

It's been confirmed that this was actually a fire in the battery pack (one of the 16 cells of the pack). However, the fire did not start spontaneously - it was caused by the driver hitting a large piece of metal debris in the road. The fire was also contained to part of the battery pack and did not cause a runaway reaction like in some laptop battery fires. The driver was alerted by the computer system and could stop the vehicle in a controlled manner, and evacuate. There was no explosion, and the fire did not spread to the interior of the vehicle. The fire department was able to put out the fire with a single truck.

All in all, I think this is actually a positive mark on the engineering of the Tesla Model S. Statistically, there have been fewer fatalities with Model S than the average for the number of miles driven - this is in line with the car's crash test ratings. This is also the first fire after the 12 crashes which have been recorded. A fire like this was inevitable; gasoline cars also occasionally catch fire when they crash. The energy content of a full gas tank is also a lot higher.

However, investors are very fickle when it comes to Li-ion battery pack fires. Even if this is evidence that the Model S is probably safer with regards to fires than a traditional gasoline car, naywayers will jump on it. Not a fun day to be a Tesla shareholder :P

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Moreover, when this sort of thing happens to a car that uses gasoline, the results can be far more catastrophic.

"The freak accident occurred about 10:30 a.m. on Nov. 8, 1994, when the family was traveling to Wisconsin to celebrate birthdays. The van, driven by Scott Willis and carrying his wife and six of their nine children, struck a piece of debris that had fallen off a truck driven by Ricardo Guzman. The debris, a mudflap/taillight assembly, punctured the mini-van's gas tank, and the car burst into flames.

Scott and Janet Willis managed to untangle themselves and escape, but the children were trapped and five of the six perished instantly. The oldest in the car, 12-year-old Ben, died the next day."

http://articles.chicagotribune.com/2000-05-01/news/000501016...

This is possible with a gas car, but the gas tank doesn't occupy the whole bottom of the car and even if it is punctured, it won't ignite unless there is some additional spark or heat source.

Given the number of gas cars on the road, anything described as a "freak accident" must have a very low probability. If this is the 13th serious accident of a Tesla, it's unlikely that the probability is very low.

>If this is the 13th serious accident of a Tesla, it's unlikely that the probability is very low.

I'm not sure you've followed the thread here...I don't think anyone's (accurately) saying that this is the 13th spontaneous battery accident. I'm pretty sure the other 12 are standard traffic accidents, of which this is the first to produce a battery fire. All in all, it seems a rather small sample size to make any kind of determination.

Assuming that the normal rate of battery fires after collisions is one per million, the probability of observing such a fire after only 13 collisions is rather low. (Not impossible, just unlikely.) so perhaps the rate is not one per million. Doesn't mean it's one in thirteen, just not one in a million.

If the chance of a catastrophic event happening is one-in-a-million, then it is equally likely to happen on the 13th and on the millionth coin toss.

> Assuming that the normal rate of battery fires after collisions is one per million, the probability of observing such a fire after only 13 collisions is rather low.

What you're arguing is that the probability of it happening on or before the 13th time is less than it happening on or before the millionth time -- Which is self-evidently true of _any_ probability, and is a much weaker argument.

> perhaps the rate is not one per million

This is much closer to the argument you should be making. I.e. "Given that a purported one-in-a-million event occurred after only the 13th test, what is the probability that their estimate of one-in-a-million is accurate?"

(I don't know the math to answer that question, but I hope somebody that does will come along and chime in.)

Time for some fun with binomial probabilities!

Assuming I interpret the actual problem at hand correctly, this is how we formulate it statistically.

We have an event that occurs with probability p = 1/1000000, given an accident (of which there were 13).

The probability of having zero catastrophic events, given that we have observed 13 accidents, is (1-p)^13 = .99987

(For some real hair-raising fun, try this calculation with the success/failure rate of a typical condom.)

Note that this is a purely frequentist interpretation and ignores any Bayesian inference (ie, we assigning a weight of 0 to our Bayesian prior, which is atypical). It's not a very robust way of modeling the situation, for a number of reasons.

I think the right test to apply is the Wilson test.

http://what-if.xkcd.com/65/

Given this XKCD article, I would suggest the probability of a battery fire after an accident is around 1 in 26.

That estimate is a little bold: we can reject the hypothesis that the probability is smaller than 1/260 with p-value 0.05 (good confidence), but with your threshold of 1/26 the p-value becomes poor.

Note that due to the lack of selection bias (battery fire was already among the top security concerns before the accident), we don't actually need a very stringent p-value, so we can be fairly confident that the probability is greater than 1/260.

But my point was that even with probability 1/260, it's likely to be much higher than for gas cars, or you wouldn't have to dig up 20-year-old articles about "freak accidents".

> But my point was that even with probability 1/260, it's likely to be much higher than for gas cars, or you wouldn't have to dig up 20-year-old articles about "freak accidents".

Gas cars have electrical fires all the time. We don't read about it because it's not news.

Admittedly, those cars tend to be poorly maintained, and not nearly new high end expensive vehicles.

Even new cars are not exempt. Electrical fires are often a total loss even if the car looks ok otherwise because of the way the wiring looms are embedded in the chassis.

If 1/13 car crashes resulted in the car bursting into flames, that car would be recalled.

What is the threshold for a recall?

I'm not sure you've followed the thread. The previous poster claimed the sample size is sufficient:

> Statistically, there have been fewer fatalities with Model S than the average for the number of miles driven

Which of course it's not. But the general tone here of "move along nothing to see here" is transparently wishful thinking.

Of course a battery fire after hitting some road debris after only a dozen accidents is something to be concerned about. Maybe we don't know just how much yet but no one should be dismissing it offhandedly.

> Given the number of gas cars on the road

On the other hand, gas power cars have been on the road for a century now, manufacturers have had time to improve safety based, on accidents. Electric car manufacturer can improve from what is right now an excellent record (no explosion).

Let's also not forget that there are more than just Tesla cars out there with the bottom full of batteries: Toyota, Honda and GMC hybrid cars are in the same situation, so the sample isn't as small as you make it sound.

It's worth remembering that airplanes are only the safest way to travel because they put black boxes in the backs of planes to figure out why they were crashing constantly.

Trillions of miles later, we freak out if a plane's landing gear fails and the plane has to skid to an otherwise uneventful landing.

And the fact that pilots spend a lot mote time in training than drivers, and the fact that there are two pilots, and Air Traffic Controllers, and computers constantly checking the pilots input as well as the flight conditions, and ...

That helps prevent pilot errors. It doesn't help identify mechanical/software failures after the plane is in billions of tiny pieces.

Also, plains undergo near-constant diagnostics and preventative maintenance work.

Don't most new cars carry some kind of data recorder? If a failure is due to pilot error or lack of maintenance, we can at least use the data pulled from the melted, twisted wreck to rule out design flaws.

They do, but its built into the airbag system, and only commits the last 15-30 seconds of vehicle data when the airbag is triggered.

Tesla and GM vehicles have more sophisticated telematics than other car makers, and I'm sure Tesla is taking advantage of the data (battery pack performance, etc). You'll also get a call if your battery charge drops to a level that will damage your battery.

Yeah, gasoline is actually surprisingly difficult to accidentally ignite, wheras lithium ion and lithium polymer batteries self-ignite if punctured.

Diesel fuel is even more difficult (drop a lit match into a bucket of diesel and it will likely just go out.) For some reason most people don't choose their vehicle by the safety of the fuel source -- which isn't to say that people won't avoid a Tesla based on news like this.

You completely missed the point. How many people died when the tesla caught fire? This is a prime example of the tesla being safer, and people are using it to pretend it is less safe.

I'm not saying the Tesla is less safe: I'm saying that, contrary to what the parent post implied in his wording, it's almost certainly more likely for the battery to catch fire than for a gas tank.

The parent post did not imply anything of the sort. It was explicitly and clearly comparing the severity of fires, not the frequency.

There are plenty of things to catch on fire in a normal car. I've only own 3 cars and I've been in 4 car fires. (no one was hurt in any of them.) None of them involved the gas tank.

On this note I, during high school, worked at a large multiplex movie theater for about a year. During my shifts we had three car fires break out in parked, unoccupied cars. This was considered totally normal by both my employers and the fire department.

This stuff is clearly happening all the time.

This. A coworker's engine burst into flame for no apparent reason as he was commuting to work a few years back. Nobody died, but the car was a total loss.

I think this is relatively common, too. In my life I must have passed a dozen cars burning on the side of the road.

Gasoline car fires take seconds, not minutes and there are lots of places where things can go wrong, pretty much every junction of the gas line plumbing, the tank and the injection system.

Whereas Teslas are only vulnerable along the entire underside of the car. And don't require an ignition source.

Note that the fire was contained and that it did not enter the car interior.

Containing a gasoline fire after it has had a second or two to run is very hard if not impossible.

That's Tesla's PR spin. You'd probably be in pretty bad shape from the heat if you were trapped in that car. The guy taking the video remarked he could feel it just by driving by.

A key question here is how easy it is to start a fire from a relatively minor and common incident such as hitting road debris. Sure, it's possible in gas cars, and gas fires burn quickly.

But if it's a lot more common in cars with giant vulnerability zones along their entire undersides where shrapnel can start fires through physical damage without even an ignition source...

All I'm saying is this is definitely something we need to monitor closely, not just dismiss offhandedly or spin with clever PR like "the fire didn't enter the cabin (but still could have killed you)".

The battery pack is directly under the passenger seat, and this is typically a non-structural compnent, of very thin sheet metal. One would not want to be riding shotgun.

This is the 13th serious accident of a tesla, but I believe it's the first battery fire.

As the article notes, that is a rather infamous case that is a large part of the reason former Illinois governor George Ryan was convicted, as it uncovered a cash for passing grades on commercial driving tests scheme. It was a horrible tragedy.

Huh. I never knew that - thanks for pointing it out.

Equally interesting is that his successor [0] as governor was Rod Blagojevich, who also went to prison for corruption. That wikipedia article mentions that in the last 40+ years, 4 Illinois governors were charged, convicted, sentenced, and sent to prison for corruption or (in one case) fraud.

Quite a tradition they have there. Pat Quinn must be nervous.

----------

[0] http://en.wikipedia.org/wiki/George_Ryan

It is, however, a fun day to become a Tesla shareholder.

Does anyone know if it's possible for a foreigner with a US bank account to buy/manage stock there? Preferably online.

You need a brokerage account with access to the US stock market. There are a few that allow foreigners.

I believe Charles Schwab provides global investment solutions that allow you to purchase US stock.

Yes. Check out Interactive Brokers

Yes, most US brokerages will accept foreigners. There's just a couple of things to pay attention to.

- Make sure you know the tax arrangements between your country and the US, and file whatever documentation is needed. In the US, you'll probably want/need to file a form W-8BEN with the IRS (http://www.irs.gov/uac/Form-W-8BEN,-Certificate-of-Foreign-S...) to prevent withholding taxes in the US. Most brokerages will be used to that anyway.

- Documentation of your identity. If you have a US bank account already, this will likely be trivial for you. But sometimes US financial institutions gets finicky about this. I had a US bank account with Chase years ago as I had a small business where I had to process a reasonable number of US cheques, and processing them with a non-US bank would effectively eat everything in fees.

I ended up having to go to the US embassy to get an apostille attached to copies of my passport and the application form (basically someone had to watch me sign the documents, and match them to my ID and then attach a document and seal as evidence that they had certified my signatures). Other times they don't care at all - it appears to be down to who has been subjected to cranky auditors and/or concerns about money laundering recently or not...

Thanks for that, it sounds like there's potential for getting in a bit of a hassle. Hopefully it will be fine, thanks again.

Why not simply use an online broker in your own country? I assume any online broker will allow you to buy stock on Nasdaq, where Tesla is traded. (I'm in Europe and just bought some Tesla stock through an online trader)

Oh. That might be simpler, I didn't know they could do that. I'm not very familiar with the stock exchange, thanks.

12 crashes is not a huge sample size. Also, potholes and other road hazards are so common that if 0.1% of encounters with them causes a fire that ruins the very expensive battery pack, it is an issue. Overall, yes, superior engineering prevented the problem from being worse than it was. However, there is still a problem.

IMHO, there is a major problem with Tesla's batteries. Boeing has had issues with its lithium-ion batteries catching on fire. I wouldn't be surprised if more Teslas have the same issues in the future.

> IMHO, there is a major problem with Tesla's batteries.

Is this based on any kind of information, or just supposition stemming from the problems Boeing had (where, IIRC, Tesla offered to provide engineering assistance).

Well, the Chevy Volts' lithium ion batteries also have fire issues too. Not to mention overheated laptops with li-ion batteries that have caught on fire.

We're still waiting on any categorical information from you, other than your baseless fears stemming from problems with wholly different companies using similar technology.

News, Every car has batteries that are potential fire/explosion/acid explosions.

I've seen a standard 12v lead acid battery evaporating/boiling hydrochloric acid out of its vent holes, I've also seen one smoking about to explode.

OK, add every laptop manufacturer, cellphone manufacturer, and any variety of portable device manufacturer on the planet to that list, then, as lithium ion or polymer batteries are flammable no matter what.

I assume you have a suggestion as to how this could be remedied? Or, actually, looking at your comment history, I see you are also a climate change denialist.

So, which oil giant do you work for, for whom you are spreading FUD?

Yes, please accuse anyone who disagrees with you as being a paid shill. Saying that the IPCC has lowered estimates, which it has admitted in its report, is now climate change skepticism? Really?

http://www.mercurynews.com/business/ci_24229744/tesla-says-c...

"But lithium-ion batteries have raised concerns in other vehicles. Two years ago, battery fires broke out in three Chevrolet Volt plug-in hybrid cars after crash-testing."

"Two years ago, battery fires broke out in three Chevrolet Volt plug-in hybrid cars after crash-testing."

"After" being the operative word. They crashed the Volts for testing purposes and then left them sitting outside with a nearly full but damaged battery. THREE WEEKS LATER a fire started.

When testing gasoline powered cars it is standard procedure to empty the tank immediately after crashing it, if they had drained or removed the Volts' batteries in a similar fashion nothing would have happened.

https://publichd.se/index.php?page=torrents&search=&active=0...

> ""After" being the operative word. They crashed the Volts for testing purposes and then left them sitting outside with a nearly full but damaged battery. THREE WEEKS LATER a fire started."

Well damn, those sound like verified deathtraps!

Seriously, the fact that she had to reach back two years probably says enough. On the general note of battery safety in crashes, there have been several Tesla Roadster crashes (to be expected with that style of car) (http://www.wreckedexotics.com/tesla/), how many of them resulted in dangerous battery fires? Clearly these batteries do not present a serious safety concern.

I hate the "you are a shill" retorts too, but damn if your response doesn't make it look like they are correct in this case.

> "But lithium-ion batteries have raised concerns in other vehicles. Two years ago, battery fires broke out in three Chevrolet Volt plug-in hybrid cars after crash-testing."

Imagine that, structurally compromised systems not disposed of properly are dangerous. That says more about GM than it does the technology.

When I have batteries take damage (falls, shorts, the ever popular screwdriver through them) they are disposed of properly immediately. I also only use proper chargers and don't over charge my batteries. Guess what? I've never had a fire caused by the battery (I've had people plug in components in reverse and blow up the diodes a couple times). I've been working with various battery technologies on a near daily basis for the last 14 years without incident.

Disclaimers: I'm a robotics/electric vehicle enthusiast. I don't do this stuff as my day job any more. I formerly worked in a university research lab building H2 powered race cars.

So, which oil giant do you work for, for whom you are spreading FUD?

First of all, I absolutely agree with what you have to say about the danger of batteries as an energy storage source. Spot on. Good work.

But please, please, please, let's not throw around "paid shill" accusations here. Even if it may be true, it degrades the discourse of conversation for the entire community. Your comment's point was perfectly valid without that.

Sally888 is a transparent concern troll. It's disappointing to see HN fall for it so easily.

I agree that we shouldn't be throwing around "paid shill" accusations. Downvoting is better.

Your humble opinions appear to be (a) anti L-Ion battery and (b) climate change skepticism. Is this a fair summary?

What a blatant ad hominem and straw man attack. Do you like to misrepresent someone's positions because they have differing opinions from yours?

So these are not your opinions?

You said "IMHO ..." and then asserted something with no evidence. So the only germane information is the quality of your opinions. I made no assessment of those opinions, I simply listed what I found, based on your posts, and asked for confirmation. If merely listing these things constitutes an ad hominem attack, then it says more about your opinions than it does about me.

Let's be fair here.

"You said "IMHO ..." and then asserted something with no evidence."

Why would you expect something else when someone starts their post with IMHO?

> If merely listing these things constitutes an ad hominem attack, then it says more about your opinions than it does about me.

Your post had an obvious tone to it.

Tone, obvious or otherwise, does not constitute ad hominem either.

If your answer to the question was "no", you should say "no" and then clarify. It's not that hard.

I neither like misrepresenting other people's positions nor am I prone to doing it despite not liking it.

Have I misrepresented your positions?

If your answer was "no" then why not say that?

...not sure if you've mistaken me for someone else. I have no part in this discussion except making the procedural point.

Whoops. Sorry about that.

My point (addressed incorrectly) stands. It makes less sense for me to answer "no" than for the person I was responding to to answer "no". If I was making a "straw man" then in what way was it straw? If I was misrepresenting his/her opinions, how so? Otherwise, if more-or-less accurately summarizing a person's positions is ad hominem then what does that say of those positions?

Elon Musk mentioned the battery problems that Boeing had / has, and offered to work with them to solve the problem that they had solved themselves..

Yes, but it seems that that may have the same issues themselves. Li-ion batteries are notorious for catching on fire. Yes, the sample size is too small to make a determination on Tesla but I suspect they may run into the same issues as Boeing as they sell more cars.

This is why people call you 'shill'. You aren't disagreeing, just using leading speculation. These are specifically not the same issues as Boeing, whose design Musk criticised for ability to produce 'domino effect' fires that get out of control very fast. That did not happen here.

Casting aspersions like 'li-ion are notorious' also stinks, much like the smell of gasoline before it (notoriously) explodes.

Ignoring the facts of the particular case whilst hugely generalising about the technology isn't a good foundation of debate.

What are your qualifications with regards to battery chemistry and energy management system engineering? I ask only because you said this is your opinion.

The sample isn't 12 crashes. It is the 12 cars that crashed plus all the other cars that didn't.

That's... not true. The question is "how likely is there to be an electrical fire in the Tesla, given that it has crashed (or is crashing)" not "how likely is there to be an electrical fire".

It's easy enough for things not to catch flame when they're being used properly; the real test is how things behave when other things are going wrong.

That's not to say that this means all Tesla cars are fiery death-traps of doom. Just that the sample size really is the number of crashed cars.

Following your logic, we can ignore Tesla cars that catch fire without crashing, because we can assume they're not going to catch flame when they're used properly; We can assume cars that don't crash aren't going to catch fire anyway, so, even if they may happen, let's throw that data away, because we know our assumption holds true.

That's ridiculous.

That is besides the point. We are talking about what happens when your Tesla S does crash. There is on "if" in the certainty that Teslas will be involved in accidents. The questions are "will they catch fire when they crash?" and also "how bad will that fire be for persons and property involved?"

There's also "Under what conditions when Tesla cars crash will they catch fire", and then you only look at your 12 crashes, and that's when everything goes wrong.

    The Space Shuttle Challenger exploded shortly after take-off in January 
    1986. Subsequent investigation determined that the cause was failure of 
    the O-ring seals used to isolate the fuel supply from burning gases.....

    NASA staff had analysed the data on the relation between ambient 
    temperature and number of O-ring failures (out of 6), but they had 
    excluded observations where no O-rings failed, believing that they were 
    uninformative. Unfortunately, those observations had occurred when the 
    launch temperature was relatively warm (65-80 degF).

http://www.datavis.ca/gallery/missed.php

Let's look at this question "how bad will that fire be for persons and property involved?"

You look at your 12 crashes where fire occurs, so (e.g.) 6 crashes. Of 6 crashes 3 were accompanied with injuries. All 3 crashes that were accompanied by electrical fires and injuries occurred was when the car's speed was between (e.g.) 40mph and 50mph. Does that mean when the speed is not between 40mph and 50mph, people won't be injured when there's a crash and a fire? It means nothing like that but it's too easy to make a wrong conclusion; you're skipping all the other data where injuries and/or fires happen independently of crashes.

Sure, you can look at all the crashes, but you'll still run into exactly the same problems with insufficient sample size because now you're dealing with a rare event, which means the required sample size balloons massively.

> Not a fun day to be a Tesla shareholder

Only if you're fickle and lack conviction. People are talking a lot about "is Tesla at a fair valuation" and I personally believe that it's impossible to know what a fair valuation is until a few more years have elapsed.

I could reasonably see Tesla bouncing back to $300/share over the next 18 months or staying at or around $200. The current drops are more likely related to general market unease and opportunism rather than anything endemically wrong with Tesla. Also, with "momentum" stocks I'm sure some people got in looking to make a quick buck and also some people are surely taking advantage of the general shutdown-related cacophony to short the stock so they can buy it at lower prices (I would).

Fluctuations like this illustrate why one of the most important qualities an investor can have is patience. If you're trying to get rick quick, you'll be in trouble. But if you invest in solid companies that you understand, you should do well. Provided you do your homework, of course.

I'll reiterate Peter Lynch's excellent advice from "One Up on Wall Street" - if the stock drops but the fundamentals still make sense, stick around to see how the story develops.

You talk about fundamental value and then throw out a $200-300 share price. What valuation methodology could possibly come up with that absurd number?

The correct stock market value of a company is the discounted sum of all its future earnings. This number is impossible to calculate, but investors can estimate it with probabilistic models (a discounted cash flow model, taking into account the probabilities of different scenarios).

E.g. a simplification of such a model would be to create some plausible-looking probability histogram for the "fundamental" value of the company in 10 years. Many investors believe there is a significant probability that Tesla will be worth >100 billion in 10-15 years, i.e. one of the world's major automakers (perhaps one of the largest) due to a global shift to electric vehicles and its 5-year head start and patent moat. It's probably worth noting that multiple major analysts have performed such a DCF analysis and arrived at a number in this ballpark.

Under these assumptions, a $200-300 share price isn't absurd. I can agree it's speculative and extrapolating a lot. But on the other hand a $40 price as some analysts are calling for, is IMHO more absurd since it ignores some very likely growth prospects. If companies were always valued on "fundamental" value, buying growth stocks would be guaranteed to make you a massive, market-beating return.

Can you pointed me to one of these "major analysts" who has come up with $200-300 fundamental value along with a detailed explanation of how they came to that number?

Short answer, no. I don't have access to the actual reports since they are reserved for paying customers, but prominently Deutsche Bank ($200), Northland Capital Markets ($230) and Global Equities ($225) all have price targets considerably higher than the current market price. All of these companies stake their reputation on being right, as most professional analysts do.

http://www.streetinsider.com/rating_history.php?q=TSLA

If you have access to analyst reports, the one from Deutsche Bank is probably the one to look at. The best source I can find is this video from August before the recent PT upgrade, but there was an interview somewhere where Dan Galves goes into more detail about the DCF model they are using.

http://www.cnbc.com/id/100946446

http://www.streetinsider.com/Analyst+Comments/Tesla+Motors+%...

Main point being, there are people with a solid economics background who disagree with your claim of absurdity. You're of course welcome to put your money where your mouth is and short; Tesla was for reference the most-shorted stock on the NASDAQ at $30/share.

Price is not the same thing as value and analysts are usually wrong (search for the studies). The important thing in a valuation are the assumptions: You can come up with any number you like, the reader has to decide whether they agree with how you got there.

Here is a justified valuation of $67. Tell me what assumptions are wrong how how that would yield a value of >$200.

http://aswathdamodaran.blogspot.ca/2013/09/valuation-of-week...

This analysis underestimates the probability of higher sales and margins in Tesla's future. Specifically the point where growth will slow down to "auto industry averages". Up this number and the expected net margin a bit, extend the discounted analysis a bit beyond 10 years and use a slightly lower discount rate, and you'll end up with a number higher than $200. This is all guesswork based on unknown parameters; all we can do is assign some probabilistic assumptions.

Furthermore, direct comparison with the established auto industry is dangerous, since we are likely to be in the beginning of a large-scale transition to electric vehicles. The established auto industry will have trouble with this transition due to vested interest in internal combustion vehicles. Tesla has already demonstrated that it can tackle innovation on a level the established industry is unable to (cutting out the dealerships, fully utilizing the advantages of electric drivetrain, software-like configuration of cars including battery swap), so from my perspective it seems exceedingly likely that it will at the very least grow into a major automaker. But the upside from this point is discounted by analyses such as the one you linked.

That said, I don't really care whether you agree with this. You're certainly welcome to take the other side of the bet; I have my money where my mouth is. Would you be willing to take a short position in this stock?

Obviously if you just put in more favorable input parameters you will increase the share price. The entire point of the exercise is to justify your choices: What input parameters exactly give you a >$200 valuation and why do you think they are reasonable? He's already putting margins at top 5% of auto industry. As for discount value he wrote "the value per share that I obtain is not very sensitive to the [cost of capital]": Are you arguing with some other factor that contributes to the discount rate? How common is it for growth to persist over 10 years in the auto or industrials sector?

> The established auto industry will have trouble with this transition due to vested interest in internal combustion vehicles.

Ford is already shipping an electric Focus. GM has stated they are working on one that will compete with Tesla's $30000 model.

> so from my perspective it seems exceedingly likely that it will at the very least grow into a major automaker. But the upside from this point is discounted by analyses such as the one you linked.

No, it assumes it grows into a major automaker with revenues comparable to Audi and has margins in the top 5% of the industry.

I've presented my case as clearly as I could without writing a whole blog post. You are obviously certain that you are right and that I am wrong by a factor of 3.

I invite you to take a short position and put your money where your mouth is. It's a bit annoying to argue with someone who apparently doesn't believe enough in their case to act on it.

I'm not certain the $68 valuation is right, the opposite in fact. That's why I was looking for a compelling argument for a $200-300 valuation for which I have found no defensible justification from you or anyone else.

Again, valuation is not the same as price and we are not talking about price. Tesla's stock price is not being driven primarily by fundamental value. From the same author: " Once you accept the pricing proposition that the market price is what it is, the key to winning at the pricing game becomes forecasting changes in price rather than assessing whether the current price is right. As a consequence, your focus on news stories will become incremental and each news story will be assessed in terms of how it will change the price, rather than how it will affect overall value."

I don't trade individual securities, I wouldn't trade a "hot" stock based on valuation since the price is then driven by other factors and I certainly would be reluctant to short any stock because shorting is a complicated trade: Shorting is a short term play, you need to know when to short or else you will be crushed by fees. You can also be bitten by things like squeezes and acquisitions and the fact that shorting without protection is unlimited liability. Shorting is far more dangerous than going long and even sophisticated professional money managers get burned, even when the stock is actually overpriced. QE-infinity makes shorting even more perilous.

What is annoying is that you pretend you did a valuation before investing in Tesla and traded based on the valuation. Now you rationalize the trade to yourself by interpreting information in a way that suits the outcome, post hoc ergo proper hoc.

You might make money but it won't be because of any justifiable insight you had.

Well, I'm sorry that I annoyed you ;)

If you do find a way to do a proper DCF with mostly-known variables on a growth company likely facing an industry-wide paradigm shift, make sure you capitalize on it by making an exception to your rule of not trading individual securities :P

No one has claimed that this is a science, and this includes the hardcore value investors who often miss risks which the market had in fact priced in.

Yes, Li-ion batteries can be like little bombs. Considering the batter was engulfed in a flame and safely contained...I'm pretty surprised and have a more positive view of Tesla now.

Indeed. SpaceX isn't public, or I would've bought their stock after seeing how their vehicle handled the aborted launch during their first ISS resupply mission. These guys understand the meaning of "fail safe."

>The fire department was able to put out the fire with a single truck.

Goodness I hope so... A modern fire engine can pump a couple thousand gallons of water and foam every minute...

A modern fire engine pumps around 1250-2000gpm.

However it also only has around 750-1000 gallons of water onboard. So you'd better hope that there's a hydrant nearby.

Also, hand lines are only 150-250gpm. A deck gun is pretty useless for a car fire (a - can't be aimed at below 0deg, and b - you'd have approximately 30 seconds of usable time to get any deluge on the car and extinguish it, which is not particularly realistic if it's at all involved).

You just need to get creative. Assuming you had a hydrant, you could just hook up a couple portable monitors, or maybe the engine has a tele-squirt. (I kid, obviously...)

Obviously there are limiting factors beyond the flow rate of the pump. My point was simply that a car fire that exceeds the firefighting capabilities of a single engine would be a very impressive car fire indeed.

True. The last car fire I put out with two dry chem extinguishers from our rig (which is good, because our rig was an ambulance…)

But yeah, maybe a ground monitor would work. :)

I'm kind of fascinated by the idea that the car is telling you to stop and get the hell out before doom happens.

Does anyone have an image or video of that kind of notice?

I used to have a K car that would tell me things like "Your door is ajar" and other random bits of information.

Then one day, it said, "Your electrical system is malfunctioning." We all bust out laughing. If was funny until the engine stalled after 4 more miles.

Turned out the alternator was dead.

"My fault-detection circuitry may be malfunctioning, but I'm not sure how to tell"

in movies cars catch fire and explode all the time. guess, the movie industry will face an inevitable change when 20-50 years into the future everyone drives electric.

Anytime energy is stored to be released there is a chance of disaster. Usually this manifests itself in fire.

who in the world can tell the material of the thing you just run over on the highway?

That said, I've seen more Lamborghini and lotuses on the highway bursting in flames than model S's (Ss? Ses?)

And

> Statistically, there have been fewer fatalities with Model S than the average for the number of miles driven

Biggest fallacy ever read here. Most car accidents happens when people are traveling large distances or coming back from unusual places such as parties and bars (not home-work commute) and the Tesla and other low range electrical nowadays are mostly commute machines. (yeah they can be used for those things, but 99% of the people that actually buys them do not)

> Most car accidents happens when people are traveling large distances or coming back from unusual places such as parties and bars (not home-work commute)

Source please? I've always heard that the majority of accidents happen within the first few miles of a drive, but have not put in any research.

That's only because most trips are of a few miles.

What is the source for " Most car accidents happens when people are traveling large distances or coming back from unusual places such as parties and bars (not home-work commute)" when most of the data I've seen says that most accidents occur within 5 miles from home and that only 1% of accidents occur further than 50 miles from home.

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