Legacy autos vs EVs

[ptheland]

Exponential growth is like that.

One other thought on exponential growth. Exponential growth doesn’t just happen. It requires factories.

Right now, Tesla has 4 car factories (plus a battery plant somewhere - New York, is it?) And Nevada. Can’t forget the original. New York(?) is for the solar cell business. Nevada produces batteries and electric motors.

The Fremont plant is pretty much maxed out.
Shanghai should be maxed out by the end of 2023.
Berlin will max out in 2025, if not sooner.
Texas I’m not as sure of. I haven’t found a good source for it’s expected capacity. I just wag’d it at 1.5 million cars eventually since we know it’s bigger than Shanghai.

But based on those 4 plants, there’s going to be a production max out in 5 years or less. To grow further, Tesla will need more factories.

Plants don’t just spring forth fully formed. Physical construction takes between a year and 18 months, depending on size. Planning and design probably that long again. For plants of this size, finding suitable locations is not easy, either. But at a bare minimum, Tesla is going to need 2 years to get a new plant ready to produce. Three is more realistic, and even longer is certainly possible.

So what plans does Tesla have for new factories? To keep growing exponentially, they’ll need 2 more plants about 3 years from now. Based on the time needed to get those plants producing, the site itself should be nailed down in the next couple of months. India? Japan? South Korea? UK? I’ve read rumors of all of those.

And we shouldn’t discount the possibility of significant expansion to existing facilities. I don’t think Fremont has the room. Texas probably does, as does Shanghai. Berlin construction had a bunch of red tape problems that I doubt Musk wants to repeat. But even with the sites available, it still takes a minimum of two years for design and construction.

At any rate, to continue this exponential growth, we almost certainly need to know where that growth is going to physically happen. And we need to know by the end of this calendar year. Otherwise, it’s going to be impossible to continue that level of growth without some kind of significant slowdown or pause.

–Peter

[ptheland]

So what’s your analysis after “proper research” as to what are possible growth rates for Tesla and Toyota?

https://discussion.fool.com/as-has-been-pointed-out-i-screwed-up…

–Peter

[ItsGoingUp]

The Tesla part of that “proper research” is so misguided it isn’t even wrong. To see that, try applying your method to the Tesla of two or four years ago and see what you would have predicted for today.

-IGU-

[ptheland]

try applying your method to the Tesla of two or four years ago and see what you would have predicted for today.

For two years ago, that would have been incredibly stupid to attempt. It would have been the 3rd quarter of 2020, when the pandemic was raging. All bets were off at that point. Who knows what the finances would do. Also, Tesla was just turning the corner from unprofitable to profitable. That is a much different stage of the business, requiring different techniques for projecting the finances. It would take a much deeper dive into the gross profits and operating expenses. I am not willing to do that.

However, even with the pandemic uncertainties of the day, projection production seems more reasonable - at least to see what might be possible assuming the pandemic didn’t shut down production any further. So let’s do that.

In their Q2 2020 shareholder deck, they say their current annual capacity was 690,000 vehicles. That is my projection for the 12 months ended Q2 2021. Simple. Straight forward. It’s really just their number, as I said. So I’m using it.

Now the harder part. And you’re going to have to trust that I’m not cheating here. Projecting the second year out. So back to the Q2 2020 report. And earlier.

From Q4 2019, the Shanghai plant was planned to start producing Model Y in 2021. It was already doing Model 3. And they say the Model Y capacity should be equivalent to Model 3 capacity. The Q2 2020 report mentions an increase in capacity at Fremont to 500k for the 3/Y cars. So we’ll add that in as well. Let’s build up a number.

Start with the Q2 2021 projection of 690k. Add in an extra 100k at Fremont and 200k at Shanghai for the Model Y startup. Lets round that to 1,000k. And because I don’t think Model 3 production at Shanghai will stay static for that long, I’ll toss in an extra 50k for that. So my projection is 1,050k for the 12 months ended Q2 2022.

So what were the actual results?

They produced 711,552 vehicles in the 12 months ended Q2 2020. About 3% over their own expectations and my projection. That’s a pretty good projection. ***

And the 12 months ended Q2 2021? 1,107k cars produced. About 5% over my projection. Still, for a 20 minute back of the envelope projection, it’s not too bad. It looks like I should add about 5% to my projections using these simple methods to tweak them and make them a bit better.

I really do know how to read and research and make reasonable projections. Us MBA bean counters get maligned a lot around these parts, but we do know how to do our part of the job pretty well. When you’ve learned projection techniques and put them in to practice for many years, you can get pretty good at this.

So I’m going to stand by my earlier projection for the next couple of years. Beyond that, things get dicier, and the necessary information gets more scarce. Companies don’t like to talk publicly about plans that far out. So any projections must of necessity get fuzzier. But it is possible to take publicly available information and look with some accuracy into the not-too-distant future.

Now that I’ve done more work just for you, how about you share your work. Explain to me how you think that Tesla will have more net income in two years than the rest of the auto industry combined. Show me the numbers. If you are so confident in them, lay them out for all to see.

–Peter

*** Do you really think I used this method without checking out their history? Of course I did. I checked a couple years’ worth of these reports to see how well their figures stacked up to actual future results. Their statements of annual capacity in the shareholder deck are pretty good projections of the production for the following year.

[btresist]

So, Toyota’s TTM profits are more like $20.6 billion. Tesla’s are still $9.5 billion.

I previously mentioned Tesla’s remarkable gross margin of 30%. Tesla’s net profit margin over the last quarter was 13%, an astounding number for a car manufacturer. In comparison, for the same quarter VW was at 6%. In effect, Tesla can sell half as many cars as VW (or any other legacy auto company) and be equally profitable.

In addition, the Tesla business model resulted in a 600+% increase in free cash flow from 2021 to over $2B for first quarter 2022. This suggests there is a lot of cash available for investment and growth, which is good given Musk’s stated aspiration of 10-12 new gigafactories and 20M in car sales by 2030. Those are wild numbers, so let’s take your much more conservative calculation of projected Tesla sales instead:

At capacity, I seen 4 million cars a year coming out of these plants.

(4M cars/year)X($50,000 mean price of a Tesla car)X(0.13 net profit margin) = $26B in net profits.

In other words, your own analysis shows that Tesla will soon surpass Toyota’s profits by a large margin and without having to build more gigafactories. But suppose Tesla does build more gigafactories and sales approach 10M vehicles, or 15M vehicles, or even 20M. Do the math on what those profits will be given Tesla’s ridiculous margins.

Don’t know that I would bet my retirement on Tesla, but I definitely would (and do) have some investment in the company.

My main fear for Tesla is Toyota. Toyota appears to be the leader in solid state battery technology and that could be an EV disrupter. I also think there may still be a story for hydrogen fuel cells, but that’s for another thread.

[captainccs]

That’s a pretty good crystal ball you got there!

The Captain

[captainccs]

Seeking Alpha says…

Tesla and BYD are the global battery electric vehicle sales leaders

Battery electric vehicle sales are up 75% globally on a year-to-date basis to smash the growth rate in the overall automobile market.

• Tesla’s (TSLA) YTD 616,456 - 16% market share
• BYD Auto (OTCPK:BYDDF) 407,353 - 11% market share
• General Motors (GM) 306,980 - 8% market share (mostly golf carts)
• Volkswagen (OTCPK:VLKAF) 7%
• Hyundai (OTCPK:HYMLF) 6%
• Stellantis (STLA) 4%
• GAC 3%
• Renault/Nissan/Mitsubishi 3%
• SAIC 3%
• Geely Automotive (OTCPK:GELYF) 3%

Top-selling BEV model, the Tesla (TSLA) Model Y

https://seekingalpha.com/news/3877980-tesla-and-byd-are-the-…

The Captain

[albaby1]

My main fear for Tesla is Toyota.

Looking at high level factors, I think the main concern for Tesla isn’t Toyota. It’s China. Specifically, Chinese industrial policy.

It’s all well and good to talk about Tesla selling 20 million vehicles and/or capturing nearly 30% of the car market. But that’s not going to happen unless the Chinese government is comfortable with a foreign company dominating their domestic market. The Chinese market’s the biggest in the world, and it will be even bigger by the time Tesla starts building eight digit car volumes. They’re totally okay with Tesla having a big share of their domestic market now. Tesla is helping them reduce dependency on foreign oil imports and burnish their climate bona fides. And their own domestic manufacturers are also output constrained and mostly in a different market segment than Tesla, so Tesla’s sales are almost entirely additive, rather than reducing domestic brand sales.

But there will come a day, probably within the next ten years, when China’s electric car market is more mature and Tesla’s success has to come at the expense of domestic manufacturers. There’s no way Tesla gets to 20 million units and/or 25-30% of the global market unless it has a proportionately large share of the Chinese market, and indeed would have to be the largest automaker in China. The Chinese government will face a decision whether to allow Tesla to continue that growth independently, or to force it to partner up with domestic companies and/or just slow them down in favor of their domestic brands. At that point, you will be seeing non-trivial exports of Chinese EV’s and cars to other markets as well (especially if Japanese industrial policy keeps holding back the development of their own domestic EV capacity for a few more years).

It’s certainly possible that some disruptive battery tech comes along…but I’m not sure that necessarily affects Tesla’s success in the same way that an adverse Chinese government would. No one knows whether China would actually make that turn - who knows what their place in the global economy looks like, or how their domestic manufacturers are actually doing in 2030. But that seems to me a bigger risk for Tesla than a battery change.

Albaby

[btresist]

It’s China. Specifically, Chinese industrial policy.

China is not the economic behemoth it used to be. Aging demographics have caught up with China, with slowing economic growth and rising unemployment. Unemployment among younger Chinese (16-24) is at 20%. It has reached the point where China needs foreign investment like Tesla and Apple to provide jobs and stimulate a consumer economy. I don’t believe China can behave in a way that drives out western companies.

As for Chinese EV exports, these will likely be contending in the low end of the car market, a sector that Tesla has so far shown little interest in being a major player.

A solid state battery has the potential for significantly higher energy density (longer range) and faster recharge than current batteries. Toyota and Panasonic are collaborating and together hold the great majority of solid state battery patents. They apparently have working models and are now trying to get manufacturing costs down. The first mass produced solid state battery car is rumored to be a 2025 plug-in hybrid Prius.

The Japanese car companies appear to believe that current batteries will never be good or cheap enough to replace most gas cars. This seems to be increasingly recognized by legacy companies like VW who while committed to going all electric are also finding the need to shift their business model from an emphasis on market share to a focus on high margin vehicles. The Japanese believe that shifting the majority of the car market away from internal combustion will require a new kind of battery or hydrogen fuel cells.

The Japanese may be right. It is an open question whether there is enough lithium and rare earths to build all the conventional batteries needed at competitive prices. Meanwhile the growing adoption of renewable energy requires some means to use the excess energy produced when the wind is blowing and the sun shining. Building a hydrogen infrastructure potentially solves both problems.

[albaby1]

China is not the economic behemoth it used to be. Aging demographics have caught up with China, with slowing economic growth and rising unemployment. Unemployment among younger Chinese (16-24) is at 20%. It has reached the point where China needs foreign investment like Tesla and Apple to provide jobs and stimulate a consumer economy. I don’t believe China can behave in a way that drives out western companies.

Perhaps - but they don’t need to “drive out” Tesla. They just need to adopt the sorts of soft protectionist measures that are pretty common around the world to protect domestic industries. Tesla’s “only” got about 7% of the Chinese EV market right now. For them to get to 20 million cars/25-30% of the global market, that’s going to have to get a lot higher. I don’t see China pushing Tesla’s market share below that 7% they have now…but that doesn’t mean that China’s going to let Tesla move from a modest-sized #3 to dominating their domestic market.

Plus, if China is starting to weaken from being an economic behemoth, then a lot of the growth projections for the global auto industry will need to be revised downward a skosh.

A solid state battery has the potential for significantly higher energy density (longer range) and faster recharge than current batteries. Toyota and Panasonic are collaborating and together hold the great majority of solid state battery patents. They apparently have working models and are now trying to get manufacturing costs down. The first mass produced solid state battery car is rumored to be a 2025 plug-in hybrid Prius.

That would be great for EV adoption. But it’s hard to see how that would be really damaging for Tesla, unless having a better battery was really their sole competitive advantage here. If Toyota/Panasonic develop a viable solid-state car battery, it’s extremely unlikely that the best thing for them to do with it is to limit its use solely to Toyota manufactured EV’s. They’d be manufacturing that battery in as high a volume as they could, and selling it to all comers. It would be very surprising if Panasonic’s agreement with Toyota gave Toyota any kind of exclusive right to that new battery tech. Probably priority on getting them from Panasonic as a supplier, which would be somewhat helpful.

Meanwhile, China has the absolute ability to keep Tesla from getting anywhere near those lofty sales targets. If China decides that Tesla shouldn’t ever be able to expand their production capacity to beyond one or two million units (to pick a number at random), so that their domestic manufacturers can dominate their market, then Tesla’s not selling 20 million units globally.

Albaby

[ptheland]

In other words, your own analysis shows that Tesla will soon surpass Toyota’s profits by a large margin and without having to build more gigafactories.

I believe I did say that. (goes back to look) I had Tesla at $34 billion in profits at 4 million cars a year. $9 billion more than your figure.

I don’t dispute that Tesla is on track to become the most profitable car company out there. My concern is strictly about their valuation in the stock market.

Those are wild numbers, so let’s take your much more conservative calculation of projected Tesla sales instead:

I’m not at all saying that they are limited to 4 million cars. I’m just saying that’s my guess of how many cars they can produce a year from their existing factories. To grow significantly beyond that figure they need more factories.

And to keep up the high double digit year over year growth they’ve had in the past couple of years (and will likely have for the next couple of years) they need another factory or two very soon. In place and ready to produce two years from now, by my projections.

To have a factory ready to produce two years from today, they really need to have a site located NOW, and break ground on construction 6 months from now. That site could be a major expansion to an existing factory.

My concern is that I don’t see that. I can’t find anywhere that says Tesla has acquired a site. Perhaps they have and I simply lack the search skills to find that. If so, I’d appreciate one of the Tesla fans pointing me to that information, or at least saying where this site is.

If Tesla doesn’t have that new factory ready to go two years from now, it looks to me like their growth rate in production is going to fall to high single digits at best, as they bring the last bits of existing factories up to speed and make incremental improvements to their processes.

And without significant double digit growth, Tesla’s current stock price is much too high.

–Peter

[albaby1]

My concern is that I don’t see that. I can’t find anywhere that says Tesla has acquired a site. Perhaps they have and I simply lack the search skills to find that. If so, I’d appreciate one of the Tesla fans pointing me to that information, or at least saying where this site is.

I’m not a “Tesla fan,” but they’ve already identified expansion sites adjacent to both Berlin and Shanghai, and taken preliminary steps to develop them.

Tesla noted plans to build a second factory in Shanghai adjacent to the existing one back in May:

The company will build a new plant on nearby land in the same area, which is poised to add an annual capacity of 450,000 cars, including Model 3s and Model Ys, becoming “the world’s largest vehicle export hub.

https://electrek.co/2022/05/03/tesla-turn-shanghai-into-worl…

Similarly, the Berlin site has an adjacent 250 acre property that Tesla is anticipating expanding into:

As we reported earlier this month, Tesla has been looking to acquire a 100-hectare (~250 acres) parcel of land next to its existing property at Gigafactory Berlin. The factory currently sits on about 300 hectares that Tesla acquired for the giant manufacturing project already constructed over the last few years.

Now local paper RBB reports that the expansion has officially started this week with the submission of the expansion application with the municipality (translated from German):

https://electrek.co/2022/05/26/tesla-moves-expand-gigafactor…

The current Berlin plant sits on 300 acres, so presumably Tesla could just about double the overall capacity with that expansion.

Both Shanghai and Berlin started production about two years after public information about their plans (Berlin was announced in late 2019, Shanghai in mid-2017 - both had cars rolling out within less than two and a half years later).

[albaby1]

The current Berlin plant sits on 300 acres, so presumably Tesla could just about double the overall capacity with that expansion.

OCD - “sits on 300 hectares,” not acres. Drat unit conversions! So they could boost capacity by about a third, not double.

Albaby

[btresist]

Tesla’s “only” got about 7% of the Chinese EV market right now.

I don’t believe Tesla ever planned to get much of the Chinese market. China has about 26M car sales/year with the average sale no more than $10,000 USD. The great majority of Chinese cannot afford a Tesla for the foreseeable future. Tesla, like Apple, is using China to build its product for export. Tesla is not much of a threat to Chinese car makers for domestic sales.

Can Tesla actually sell 20M cars/year? Beats me. I find it hard to predict the future of personal car ownership versus more collective/shared business models. Musk may just have been throwing out a big number to motivate the troops and get PR. This is how Musk saves on advertising. But Tesla doesn’t have to sell 20M cars to justify its valuation. If it sells 5M it becomes by far the most profitable automaker. Those margins are remarkable.

And as others have mentioned, it may not be just about cars. Both GM and VW have talked about high margin revenue streams from shared ownership and subscription services with the suggestion that they are morphing from car makers to software companies. Can these legacy car companies historically designed to build cars make this transformation more successfully than Tesla? I have my doubts. Just one example, once the autonomous driving software is developed, Tesla can charge an annual subscription fee for initial installation and future upgrades. Talk about high margins…

https://www.volkswagenag.com/en/news/2021/03/volkswagen-is-a…

[captainccs]

If so, I’d appreciate one of the Tesla fans pointing me to that information, or at least saying where this site is.

On Earth. Rumors about Mars are premature.

The Captain

[albaby1]

Can Tesla actually sell 20M cars/year? Beats me. I find it hard to predict the future of personal car ownership versus more collective/shared business models. Musk may just have been throwing out a big number to motivate the troops and get PR. This is how Musk saves on advertising. But Tesla doesn’t have to sell 20M cars to justify its valuation. If it sells 5M it becomes by far the most profitable automaker. Those margins are remarkable.

They are. And I can’t really speak to what portion of Tesla’s valuation might be derived from its other ventures. But returning (again) to the context of Legacy Auto’s role in the future of cars and EV’s, there’s tension between that happening, and some of the brighter expectations of Tesla’s future.

For example, Tesla has remarkable margins. But, it also only sells (essentially) two models of car, both of which are very expensive in their market segments - the cheapest Model 3 is 50% more expensive than the average transaction price for a mid-size sedan, and the cheapest Model Y is 40% more expensive than the average transaction price for a mid-size SUV/crossover:

https://mediaroom.kbb.com/2022-07-12-New-Vehicle-Prices-Set-…

No other automakers operate exclusively in such rarefied air - most of them are large conglomerates that have marques in both the luxury and mid-range and more affordable segments. Maybe BMW? But they have higher margins than the industry as a whole as well, when they’re having a decent year (most recent gross/net margins were 20%/10%). And selling very expensive cars puts Tesla in the part of the market where it can sell its super-high margin add-ons - the software extras - to a larger proportion of their customers. If Tesla ever did decide to actually sell at volume an inexpensive (or at least average price) electric sedan, as Musk constantly threatens to do, it’s hard to see them keeping those kinds of margins.

But if Tesla keeps growing at 50% per year, and approaches getting a very large share of the overall market, can they avoid moving down-market? Certainly Tesla can sell a very large number of expensive vehicles. They haven’t brought a pickup truck or a coupe (back) to production - so they can expand their offerings somewhat while staying at the expensive end. They don’t need to expand into enough price segments to drive Legacy Auto out of the market. But they may not be able to do both - expand large enough and fast enough to get very high volumes and remain in the most lucrative, high-cost/high-margin end of the market.

Which is fine! AAPL makes a ton of money selling only pretty expensive products! But neither do they have 30% of the market.

Albaby

(I think we’re very far away, still, from anything other than Level 2 autonomy being commercially viable without geofencing and human monitoring).

[mschmit]

If Toyota/Panasonic develop a viable solid-state car battery, it’s extremely unlikely that the best thing for them to do with it is to limit its use solely to Toyota manufactured EV’s. They’d be manufacturing that battery in as high a volume as they could, and selling it to all comers. It would be very surprising if Panasonic’s agreement with Toyota gave Toyota any kind of exclusive right to that new battery tech. Probably priority on getting them from Panasonic as a supplier, which would be somewhat helpful.

Just follow the money.
Panasonic (partner to both Tesla and Toyota) is building a $4B battery factory in Kansas.

https://www.utilitydive.com/news/panasonic-to-open-ev-batter…

And possibly another one in Oklahoma, just like the Kansas plant. WSJ says they are twin factories, IIRC.
https://techcrunch.com/2022/08/26/panasonic-considers-oklaho…
(see link for table of more than a dozen new battery factories)

Why would Panasonic build two new factories for batteries that would be Osborned by another technology they are developing?

https://en.wikipedia.org/wiki/Osborne_effect

Let’s wildly speculate a bit…

• the solid state batteries are nowhere near ready to mass produce. Go with what you know today.
• they are magically better and will be ready soon (a few years), but cost will be high and limited to higher end cars first
• we need all the batteries that can be made with any technology and partners (like Tesla and others) will take every battery made, including for power walls, grid storage etc
• the factories can be converted and/or expanded to include the new solid state batteries so build out now or be left in the dust

Mike

[mschmit]

For example, Tesla has remarkable margins.

It should be obvious where a lot of that comes from.
Tesla is the car maker AND the dealer. They take the profit from both of those sides while the legacy makers give a large part of the profit margin to the dealers and to advertising against each other. (Has there been a Superbowl without multiple legacy car makers advertising?)

You might think that the dealers “earn” their cut.
Sure, but they carry a big percentage of real estate burden to store 50 - 75 days of inventory.
And they have lots of prime real estate for their stores. (Tesla does this too but to a lesser amount)
Tesla has ~10 days inventory (about what it takes to ship and arrange pickup)

The dealers pay sales commissions. Tesla doesn’t, AFAIK.
Dealers provide service and warranty repairs.
Tesla does this too but emphasizes OTA updates and mobile service which probably has lower costs.
And EVs, in general have less service needs.
To be fair, Tesla’s costs will go up here as their fleet ages

Mike

[btresist]

If Tesla ever did decide to actually sell at volume an inexpensive (or at least average price) electric sedan, as Musk constantly threatens to do, it’s hard to see them keeping those kinds of margins.

Tesla cannot sell at volume an average priced car since it is already selling everything it makes at a premium price. What would be the point? Tesla could cut the Model X price in half, which would put its margins at the industry average. This would result in a 12 month wait list and less revenue. Everyone loses.

Tesla seems to be following the only rational strategy available at the moment, which is to price its cars as dictated by demand (which happens to be at a premium) and use the revenues to expand production.

Going after market share comes later.

Given the data we currently have, it doesn’t appear that the legacy automakers can come close to matching Tesla profit margins when it comes to producing EVs. Until that changes that strikes me as being an almost insurmountable competitive disadvantage if the automotive future truly is battery powered. The only legacy company that seems to have a strategy to overcome this disadvantage is Toyota with its hope to outflank Tesla with solid state tech or hydrogen.

[albaby1]

Tesla cannot sell at volume an average priced car since it is already selling everything it makes at a premium price. What would be the point?

I think you misunderstand my point.

Tesla has, from time to time, suggested that a future model (not any of their current offerings) would be designed and produced as a low-cost electric vehicle. They’ve backed away from those plans for now, but it’s been something they’ve alluded to over the years:

https://www.cnbc.com/2022/01/26/tesla-is-not-working-on-a-25…

I agree that Tesla shouldn’t really be moving downmarket right now - there’s still plenty of room to expand in the luxury-priced space that they currently operate in. At least for the next few years. But they’re probably not going to dominate the auto industry (by volume), and drive the Legacy Auto manufacturers out, if they stay entirely in that space. And I don’t think they can move out of that space while maintaining such lofty margins.

Given the data we currently have, it doesn’t appear that the legacy automakers can come close to matching Tesla profit margins when it comes to producing EVs. Until that changes that strikes me as being an almost insurmountable competitive disadvantage if the automotive future truly is battery powered.

Why? It’s not like there weren’t vast differences between the margins of automakers here in the automotive “near-past” that was 100% ICE. Luxury automakers (like Daimler and BMW) typically had much higher operating margins than more mass-market automakers (like Toyota or Honda). Higher-end vehicles have always provided higher margins than cheaper ones. That didn’t stop the lower-margin manufacturers from often being much larger, both in units and total revenues, than the more niche luxury automakers. Different manufacturers will have different margins not just because of their relative efficiency at making vehicles, but because different segments of the market afford the opportunity for higher margins.

We’ve seen a very clear example of that recently. The auto industry has been battered by supply constraints, especially on the chip side of things. Several of the manufacturers responded - smartly! - by shifting production upmarket: they allocated their chips and other bottleneck supplies to higher-cost, higher-end vehicles as much as they could. That’s why Mercedes-Benz Group’s profit margins have skyrocketed, for example. BMW also posted some very nice margins doing the same thing. Tesla’s benefiting as well, by putting orders for the most expensive versions of its vehicles to the front of their virtual queues.

Tesla’s entire product line is situated in the luxury end of the vehicle classes they serve. Because their market line is entirely expensive vehicles, they’re able to load up all of their offerings to include lots of nice fat high-margin features (like infotainment and driver assist systems) that just wouldn’t make sense in more downmarket products. But just like the higher margins of Mercedes and BMW didn’t drive the Toyotas and Nissans and Hyundais out of business, it’s not likely that Tesla’s fat margins will affect too many other automakers (or that they could maintain them if they ever tried to compete with products at cheaper price points).

Albaby