Tesla: Major Progress, Time to Reconsider?

Vic:
It is a supercomputer and almost an artificially intelligent extension of your brain,

Not really. I’m not even sure if the chips in the Tesla’s are any more powerful than those in the next PlayStation. Real supercomputers, by today’s standard (not 20 years ago) consume several megawatts of power.

That doesn’t take anything away from your other arguments for Tesla. I’ve owned the stock for several years. I got a model 3 ~5 months ago at it is a great car. Tesla isn’t like a traditional car company in that it owns all the ~dealers, it owns some the filling stations, etc. They will probably have an app store once they get a critical mass of cars.

Mike

I would image 5 years at best before the government allows something like a pilot program to commence, but probably more like 10 years before this gains any serious traction.

Huh? “pilot” program already exist by many companies.
But I agree it will be many years before any kind of widespread ownership of autonomous cars that don’t have a safety observer at the steering wheel.

Mike

I’d even prefer to have a simple electric car with minimal bells and whistles, one that simply runs well and extremely economically.

This would be a great concept. Except (as Musk figured out years ago) there isn’t a way to get there from here. Because the batteries are currently so expensive that building just a basic car with even modest range is so expensive that few consumers would buy it compared to a nicer gas car. And in order to get the battery cost down you have to make lots of them…as well as iteratively improve them, as well as get some technological improvements in them and the chargers.

The stepping stones to get there requires starting with a high end luxury car and going downmarket every few years with newer technology and higher volumes and lower costs.
Thus, the basic modest range EV will be the last step, not the first one, IMO.
It may be that these are just 10 year old used EVs that have lost battery capacity and aren’t useful enough for the initial owners any more.

Mike

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I'd even prefer to have a simple electric car with minimal bells and whistles, one that simply runs well and extremely economically.

This would be a great concept. Except (as Musk figured out years ago) there isn’t a way to get there from here. Because the batteries are currently so expensive that building just a basic car with even modest range is so expensive that few consumers would buy it compared to a nicer gas car. And in order to get the battery cost down you have to make lots of them…as well as iteratively improve them, as well as get some technological improvements in them and the chargers.

When I was invested in Kandi, the Chinese BEV maker, I looked at both business models, Tesla from expensive (roadster) down and Kandi from cheap (go cart) up. I found that both models have merits in their respective markets.

Denny Schlesinger

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I am sincerely surprised to find a discussion on TSLA alive and well on the Saul’s board (23 responses and counting), given the widely known and acknowledged charlatan-esq nature of the company and its most famous spokesperson.

One of its most notable achievements to date has been the avoidance of going BK by this time, a testament to how many folks (with money) have been convinced to ‘stay the course’. The house of cards nature of the entire escapade will be widely acknowledged ‘when the inevitable occurs’.

I concur with Saul: There are FAR too many, ‘FAR less risky’, places where one can make investments.

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There are FAR too many, ‘FAR less risky’, places where one can make investments.

Low risk, low reward.

A factor not mentioned so far in this thread, is the accelerating global wind at Tesla’s back - the imperative to fight climate change. As climate damage increases, political will to favor electric cars will increase. This will result in higher subsidies, favored fast lanes and parking spots, etc. Meanwhile gasoline will be increasingly taxed, gas cars will be increasingly penalized and perhaps even banned in some urban areas.

Paraphrasing what Peter Lynch famously said, ‘Buy what the Queen is selling.’ When guv’mt wants you to succeed, it will make it difficult for you to fail.

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When I was invested in Kandi, the Chinese BEV maker, I looked at both business models, Tesla from expensive (roadster) down and Kandi from cheap (go cart) up. I found that both models have merits in their respective markets.

How did that work out?
Going back 5-10 years, depending on when you want to cherry pick the data, Tesla is up anywhere from 150% to over 1000%. KNDI is down anywhere from 35% to 65%. It is probably clear which business model is creating more wealth.

To be clear…at these prices TSLA is a big risk, but I think there model is working despite the issues with Musk. Ask anyone in any country what brand of car they’d like, a Tesla or a Kandi.

Mike

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How did that work out?
Going back 5-10 years, depending on when you want to cherry pick the data, Tesla is up anywhere from 150% to over 1000%. KNDI is down anywhere from 35% to 65%. It is probably clear which business model is creating more wealth.

I was not addressing the investment in the vehicles but the adoption of BEVs.

Denny Schlesinger

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However, I’m sorry to say, Elon went through a very, very, VERY, flaky period this year. It had to be scary for Tesla management, Board, and stockholders. Tesla may turn out to be a great investment, but there are soooooooo… many less risky great investments around, it’s hard to justify putting one of them aside to invest in this extremely risky one. But that’s just how I see it.
Saul

Much more info on the level of risk investors are pre-exposed to with their Tesla house-of-cards bets. Several links of bonafide company problems. Post ends with “Enron will look like Child’s Play”.

(BB: In spades.)

Less than five minutes, including viewing all the links in the post.

https://discussion.fool.com/tesla-the-fraudulent-agile-tech-comp…
Thomfranklin
“Tesla: The Fraudulent Agile Tech Company”

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Note that Thomfranklin is often referred to on the public Tesla board as the “grayling” because a number of posters there have him on ignore because of his constant barrage of negative posts, most of which are poorly sourced, e.g., backed by a twitter rant.

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For years; I felt that was Tesla was overvalued and headed towards bankruptcy. However, over the past few months, I’ve reviewed the facts objectively and come to the conclusion that I was wrong.

Tesla is not just another auto company(an argument often cited by the bears) - it is a revolutionary, technology company which has created its own industry! In Saul’s parlance, it is a ‘Category Crusher’

Yes, Tesla has a hefty market cap of $60 billion BUT it is growing its top-line by 40-50% per year (will continue to do so) and on a forward basis, its PEG ratio is just 1.7 which is not bad at all and quite similar to the PEG ratios of the legacy auto makers which are also selling for 1-2 times PEG.

Tesla is growing top-line at 40-50% per year; whereas the legacy auto makers are growing in single digits and this explains why Tesla is trading at an inflated forward PE ratio and the legacy auto makers are trading at 5-8 times earnings (hint: their earnings are not growing and are under threat from the EV revolution).

Coming back to Tesla’s competitive advantages (moat); it is way ahead in terms of its battery technology (in terms of range); it owns one battery gigafactory, it has cracked ground on another gigafactory in Shanghai AND it is planning on a 2nd gigafactory in the US; its cars are super sexy; its customers absolutely love its products; most don’t ever want to switch to another brand; it has built a massive supercharging network which covers the entire US, Western Europe, China and parts of Japan, South Korea, Australia and Canada; it is ahead of the pack in terms of its chip/software for autonomous driving; it has a visionary Founder/CEO with skin in the game and it is backed some very large and successful investors - Tencent owns 5% of the company, Ron Baron (billionaire hedge fund manager) has a big stake, so do Fidelity, T Rowe Price etc.

There is no doubt in my mind that the EV revolution is real and here to stay - the cars are clean and cheaper to run/maintain.

At the moment, the cost of the batteries is what is holding back the S-Curve adoption of the EV technology but as the prices of batteries continue to fall rapidly; it is only a matter of 2-3 years; before the ICE vehicle loses its cost advantage.

Currently, EVs represent around 2% of total car sales globally and according to various studies, they will morph to at least 30% of total car sales by 2030. Think about this - in 11 years from now, around 30 million EVs will be sold per year (vs. less than 2 million EVs sold today)! I don’t know about you; but I see this as a growth industry.

Today, Tesla sells less than 300,000 cars per year but it is probable that its unit sales will rise 10-15x within 10-12 years.

Car sales growth aside, I think Tesla’s real competitive advantage lies in its neural network/ride sharing service which it will launch in a few years.

Once Tesla finalises its autonomous vehicle and obtains regulatory approval, it will be able to upgrade (on air) the software of all of its cars sold since 2016 and turn all of them into fully autonomous vehicles (all Tesla’s sold since 2016 came equipped with fully autonomous hardware). If owners choose the fully autonomous option, they will then be able to put their vehicles on the Tesla neural network and earn extra cash (Tesla’s super computer will list their vehicles on its ride sharing network and when these owner cars aren’t in use, they will then be leased for rides in major cities). Since these will be fully autonomous vehicles, there won’t be any driver costs and Tesla will keep 25-30% of each fare. In addition to these owner cars, Tesla will also put its self owned cars on its ride sharing neural network.

Tesla will become the ONLY ride sharing company in the world which is vertically integrated and manufactures its own batteries/cars - Waymo, Uber, Lyft etc. don’t have this privilege - and I can only assume this will be a major plus for the company.

Last but not the least; Tesla is the only auto maker which sells direct-to-consumer and has totally bypassed the dealers - so its margins are higher AND it only produces vehicles after it has received a customer’s order - this drastically reduces inventory and improves cash flow.

All of the above factors have led me to admit that I was previously WRONG about this revolutionary business; consequently, post its recent earnings results, I have now invested in Tesla.

Best,

GM

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Nice post, GM.

I am a big fan of Tesla and hold a 15% position, but I believe this isn’t quite correct:
it will be able to upgrade (on air) the software of all of its cars sold since 2016 and turn all of them into fully autonomous vehicles (all Tesla’s sold since 2016 came equipped with fully autonomous hardware)

Over the last year Tesla has developed new hardware for autonomous driving that is much more powerful. That has led many to wonder whether hardware upgrades will be required to run fully autonomously, and personally I believe that is likely. In October, they also removed an option for free future upgrades to that Full Self-Driving Capability package, priced at $3000-$5000 (that was probably not a very popular option anyway). The separate Autopilot package (not autonomous, but auto braking, staying in lane, moving with stop and go traffic) that is fully functional now is a popular $5000 option. This leads me to believe that the upgrade to that will likely cost more than $5000.

Tesla removes ‘Full Self-Driving Capability’ package from its options due to ‘confusion’
https://electrek.co/2018/10/19/tesla-removes-full-self-drivi…

So in the best case, no additional hardware would be required, but owners would have to pay somewhere in the neighborhood of $3000-$5000 to turn it on. I bought a Tesla X last year, and bought Autopilot but not the Full Self-Driving Capability. I’m looking forward to checking out the latter when it becomes available, but I’m guessing I’ll need to pay more than $5000 and get a hardware upgrade to enable it.

The following article has a nice summary through charts that shows Tesla’s development, including one halfway down showing the battery-pack price curve history and forecast, and how Tesla has done better that the industry curve:

Tesla’s Life After Hell: 7 Charts Show Musk on Firmer Footing
https://www.bloomberg.com/news/features/2019-01-07/tesla-s-l…

One other thing to keep in mind, is that the Tesla energy storage business is booming because it makes the grid more reliable and cheaper to operate. And it could become larger than the car business at some point:

What Is Tesla Energy Worth? Over $10 Billion & Growing?
https://cleantechnica.com/2018/03/25/evannex-tesla-energy-wo…

It really is about the battery technology. And I love my car!

Enjoy,
Brian

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Thanks for your post Brian; yes, Tesla does have a growing battery/energy storage business - something which I forgot to mention in my previous post.

Tesla is a 5% position for me at this point.

For years; I felt that was Tesla was overvalued and headed towards bankruptcy. However, over the past few months, I’ve reviewed the facts objectively and come to the conclusion that I was wrong.

While I applaud your honesty and feel that you are now more correct than you were, can you explain why anybody should believe your current assessment more than your previous one? Why do you believe it?

Life is filled with revelations – I was so stupid back than but now I understand. Then a few years later the same thing. And each time we actually believe that this time is different, that the current belief is actually right.

So have the “facts” that you “objectively reviewed” changed? Have you changed? Are you saying that Tesla was always fairly valued and you just didn’t understand, or that Tesla is now undervalued because something has changed about Tesla?

Me, I’ve always been a Tesla bull. I believe the stock price has been held down by false “facts” spread far and wide by short sellers (with the help of the credulous media) and believed by people who are insufficiently paranoid about their sources.

But despite Tesla’s precipitous growth, I don’t think it’s a “Saul stock”. Too tied up with manufacturing and supply chain and huge capital requirements.

-IGU-

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I have held TSLA a long time too. But agree that as a “good business” it’s not in the same game as a lot of Sail’s stocks
What Tesla has going for it is the near inevitability of BEV eventually replacing ICE, and a management that isn’t stuck in the “we have always done it this way” mode. The lethargy of legacy car companies and their lack of interest in producing large volumes of good BEV, gives Tesla an edge but the present price of TSLA the stock anticipates much of the future of Tesla.

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The only think Tesla is ahead of the curve in is battery technology. Which may make it worth their market cap if they perfect it.

The product reviews are bad, people are cancelling their deposits after not getting deliveries for several months, and the Next Hot Thing may be one of Volkswagen’s 30 EV cars instead, I don’t know.

They are heavily indebted. They can’t grow as fast as Elon promises. Elon is a genius but also a huge wild card.

GM will put fully autonomous cars on the road this year, and is certainly vertically integrated in the sense you are using it [GM & Honda have partnered on next-gen batteries].

I think it’s better to sell your cars to all the ride-sharing networks, instead of just your own. Seems obvious but what do I know?

No position. In any carmaker.

Naj

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As I mentioned in my previous post, I was wrong about Tesla.

I simply could not understand its competitive advantages and did not see how much its customers love its cars!

The bears often say “Tesla is just another car maker and competition will crush it” but they don’t see that so far, there is no other EV which has even come close to Tesla’s cars in terms of design/style, battery range, software etc.

In Q3, the Model 3 was the highest grossing car in the US (in terms of revenue generation) and in terms of the number of units sold, it took the 5th spot (behind two significantly cheaper models both from Toyota and Honda).

The other auto makers have now had years to come up with a Tesla killer, yet no company has been able to come up with a really cool EV which can match Tesla in terms of design and performance.

In any event, in my view, the EV market will grow so rapidly over the next 20 years that it won’t be a ‘winner takes all’ industry. So, even if other auto makers eventually come out with their own EVs (as they will), Tesla will continue to sell an increasing number of vehicles. Plus, its energy/battery businesses and autonomous ride sharing fleet business should also do well.

In summary, although I may be wrong yet again, I do believe that at 1.65 PEG, Tesla is currently fairly valued.

Hope this has been helpful.

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The only think Tesla is ahead of the curve in is battery technology… The product reviews are bad, people are cancelling their deposits after not getting deliveries for several months… They are heavily indebted. They can’t grow as fast as Elon promises… GM will put fully autonomous cars on the road this year…

Remember what I wrote about false “facts”. Pretty much nothing you wrote here is true. Go ahead, try to support any of it. While some things are sort of true in isolation (yes, people have cancelled deposits, and Tesla has kept some people waiting for months), this is irrelevant unless it’s both unusual for the industry and actually matters to sales/margins in some way.

As you aren’t invested your lack of knowledge hardly matters, but it’s probably a good idea not to spread it around. And as TSLA isn’t an appropriate stock for this board, why discuss it here at all? Take it to the Tesla board.

-IGU-

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assume that at some point in the not too remote future, 80% of cars sold will be BEV. Assume that total global car production is the same as now (100 million/ year) If Tesla reaches 10% of the BEV market, (not impossible) that is 8 million cars per year.

The fly in the ointment here is total car sales. On the side of increasing sales is that less developed countries keep getting richer. The jump from moped to a car is a huge one especially in cold and/or rainy climates. Try riding a motorcycle in heavy rain and wind. Scary is the word.
On the side of decreasing car sales is fully automated cars. Full car automation will be very expensive for at least the first decade. Limiting it to expensive cars.

And it’s TBD how many people will give up having their own car. There is a model for this, boats. Despite being used only a few hours per year ,most people own their own boat despite the economic inefficiency.

Tesla is and isn’t just a “car maker” . Few who look at buying it even consider another car company.
I would buy more TSLA only at substantially lower prices.

I would buy more TSLA only at substantially lower prices.

Problem is, when the ‘substantially lower price’ event(s) happens, one is driven to look more closely at the ‘why’ it happened. Not infrequently due to really bad prognosis for a company’s future.

Picture might appear so bleak that one stands aside and rethinks the idea. Happens that way to me, anyway.

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