The scary thing for me with Tesla stock is primarily the risks in going to large scale mass market cars, as well as the risk of another car company, or another startup, emerging to win the mass market EV space.
But, here's the reason I just placed a limit order for tomorrow morning (I'd check into TSLA a couple of times this year and thought, "Nope, still trading too high."): Tesla is currently selling as many cars in a year as Chevy sells in three days. So, the stories I can envision in my head for how this will play out are one of the two:
1. Tesla will fail to scale up. They will not be able to continue executing on their business plan effective. Growth will halt. The big auto makers will gradually move into the EV market. They will use their leverage as larger players with more money to throw around to beat Tesla on the battery front and on manufacturing costs. Tesla will remain a bit player, and be bought up for patents in a few years. The stock will not do well, long term, in this scenario.
2. Tesla will continue to execute well, if not flawlessly as they have done up to now (let's be honest, Tesla has an amazing record of doing the right thing at the right time). They will continue to grow at a very rapid clip. They will enter new markets. They will sell more cars than they can manufacture (and maybe more electric cars than anyone else can manufacture also, due to the current limited battery availability). They will continue to execute well on battery acquisition and development. They will continue to execute well on solving the cross-country EV trip problem...before any other manufacturer. And, they will become a major automaker. The market is huge. They're less than 100th the size of Chevrolet or Ford. That's a lot of room for growth, even with their share price being hundreds of times earnings (yes, it really is a very expensive stock, in that regard).
So, my primary question is: Will they execute really well. History says they will.
And, my next question is: Will I get other chances to buy at a discount over what it's trading at now? I don't know. I've regretted not buying stocks in the past due to it looking really expensive. I put off buying GOOG for a long time. Watched it from IPO on up to $750+. Then it went on sale for $340, and I backed up the truck as well as my stock portfolio would allow (so, I'm currently approaching a triple bagger on GOOG). TSLA is no GOOG. Probably never will be. But, it's potentially a much larger company than it is today. I'm willing to bet a few bucks that it will be. But, it is definitely gambling and not value investing.
This battery supply thing reminds me of this story: http://qr.ae/N0Uxr
Business: What's the shrewdest, smartest maneuver you've ever seen in business?
Cool little blurb hand-soap:
There was only one problem: Nothing he was selling could be patented. The concept of liquid soap wasn't new, and simple pumps had been around since the dawn of civilization. As a result, Taylor knew several huge soap manufacturers were ready to happily steal his idea the very moment it looked like it could succeed on a large scale. Armed with superior resources and the ability to quickly R&D an imitation product, the industry giants were ready to crush tiny Minnetonka.
Taylor, however, was ready for this. Before any other company had the chance, Taylor decided to go shopping one day and bought a few plastic pumps. And by a few we mean FUCKING ALL OF THEM. There were only two companies nationwide manufacturing those little pumps, and Taylor ponied up $12 million -- more than the total net worth of his company at the time -- and ordered 100 million of them, effectively buying every single pump these two companies would be able to manufacture for the next year or two.
To get his range he needed long wheelbase large cars. To get range he needed more than a 1000lbs of batteries.
He won't get to the lower end of the market unless batteries improve and by then he will have ceded it to the established players who will and are willing to offer more than electric only solutions.
Which brings up a question -- how much horse power is needed just to keep a car cruising, without accounting for acceleration? Edit: just looked up on Wikipedia, the Model S gets 100 miles per 35kWh. So that works out to (assuming 65 mph) about 23 kilowatts average continuous output, or 30 HP. Considering that many car engines are 300 HP, I don't see a 30 HP engine being that extreme.
I still really want a hybrid truck, running diesel, with the ability to seat 2 people, secure cargo space (like a custom bed with lockboxes), 4wd, and the ability to run the engine for a week or two in place as a generator (e.g. at a remote comms site). Run the engine during the day to keep the batteries charged, operate at night off battery.
I wonder how it would deal with towing. That I6 would be inadequate for peak towing, so it would depend how often a truck going up grades, offroad, etc. and towing would need battery augmentation.
The WEC is pushing supercapacitors into the hybrid drivetrains as a superior method of scavenging (but not storing) energy.
electric/batteries works great for start/stops. For highway cruising, which 100 miles range would probably include a lot, internal combustion engine isn't that bad. I'd expect that there isn't much practical difference efficiency-wise between 20-30 miles battery range hybrid and a 100-miles range one, especially considering that the latter would be carrying additional at least 200kg of batteries.
I think we will start to see cars' internal combustion engines which are specifically targeted to work only as generators, i.e. highest efficiency only for specific rpm value - current ICEs available are "wide rpm and load range" designed to be a primary engine of a car. Volt (and Karma) as far as i understand have such generic engine, not a "generator" one. Dropping a lot of old requirements and having the ability to match generator to the engine, we may see very different engine types coming in which would match new requirements much better.
It seems like an incredible proposition that Tesla will expand fast enough to shut out fuel cells before they get established.
I'm not holding my breath - fuel cells are as sustainable and non-oil as flex-fuel (read: vaporware).
Musk makes some very unrefutable points here deriding fuel cells, and Ive had that opinion long before people were listening to Musk: http://cleantechnica.com/2013/10/25/elon-musk-munchen-fuel-c...
The cost of fuel cells has decreased to 5% of what it was then, and at least three manufacturers are coming out with limited production fuel cells cars. Just because it took 50 years to get ready doesn't mean it isn't ready.
Musk's point is basically that the energy density of fuel cells is worse than batteries. That's true, but they can be refueled instead of mechanically swapped. He says the current total cost of the system is higher than batteries. That's true, but Toyota is halving the cost every 5 years as they ramp up production, where battery cost is falling maybe 10% in that time.
This is true, but misleading. The cost of lithium is a vanishingly small component of the price of the battery, a typical quote is between 1% and 0.1% of the production cost. Lithium is one of the most common elements in the earth's crust, and is plentiful enough in seawater that it cannot run out -- before it's cost is high enough to have any real effect in battery prices, it will be well worth extracting it from the seas. (In which there is enough supply for millions of years.)
The rapid increase in demand caused by proliferation of lithium-ion batteries has spiked the price over the past decade, but that is simply because mining operations take years to spin up, so large changes in demand always lead to large-scale price action. This has not yet had anything but a negligible effect on battery prices, and it will not have one in the future.
I do not understand the current meme of trying to paint all economic issues as resource-limited. That's just not how the world works.
Batteries are not falling in cost as predicted: "Though the projected prices are lower than current prices, they fall substantially short of the expectations which were perpetuated, notably, by Tesla CEO Elon Musk."
Tesla is buying 75% of all cylindrical li-ion batteries and to reach even 1% of global marketshare they'll need 30x more. "Cell supply is crippling Tesla’s ambitious effort to expand its global reach."
“One of the bigger challenges for us is going to be lithium-ion cell production,” Mr. Musk said at Teslive. “We need a lot of batteries.”
Whatever the merits of fuel cells, there's no way batteries won't be a limiting growth factor for battery powered vehicles.