Tesla Optimus Robot

Tesla started out as a car company and it has grown into a series of related fields most notably energy and AI. Stuart Kauffman, my favorite Complexity scientist, describes this kind of diversification or evolution as “The Adjacent Possible.” When Musk bailed out Solar City I though it was just nepotism and I wrote several negative pieces about it. I had previously written that Solar City’s business model was flawed and the buyout seemed to prove my point. Fast forward a decade or so and energy has become Tesla’s second largest segment. Maybe Musk is a better visionary than The Captain.

During last year’s AI Day Musk announced the Tesla Robot which came to be known as Optimus, another case of The Adjacent Possible – extending self driving AI which needs to understand the world around the car to GAI – General AI, which needs to understand much more of the human environment. As promised, Tesla will be showing a prototype of Optimus on September 30 during the upcoming AI Day.

Interesting as that might be for a SciFi fan my real interest is as a shareholder.

Optimus is supposed to weigh some 125 pounds. Its price has been bandied about at somewhere between five and ten thousand dollars.

An average Tesla weights a little over 4,000 pounds and is priced at around $46,000.

Why is this important? Gross Margin! Not only is Optimus more affordable, it should have a gross margin closer to a computer than to a car.


**Product  Weight     Price    Price**
 **per lb**
Average   4,336    46,000    10.61
Median    4,416    46,000    10.42
Optimus     125     5,000    40.00
Optimus     125    10 000    80.00

The Captain

Elon Musk REVEALS Tesla Bot (full presentation)
https://www.youtube.com/watch?v=HUP6Z5voiS8

Stuart Kauffman
https://en.wikipedia.org/wiki/Stuart_Kauffman

The Adjacent Possible
https://www.google.com/search?client=safari&rls=en&q…

How much does a Tesla weigh? Comparing each model

The first-generation Roadster weighs in at 2,723 lbs.
The dual-motor Long Range trim, weighs 4,561 lbs.
The tri-motor Plaid Model S will weigh in at 4,766 lbs.
The Model X Long Range weighs 5,185 lbs.
The Plaid Model X and its three motors will weigh 5,390 lbs.
The single motor Model 3 Standard Range Plus … at 3,582 lbs.
The other two dual-motor Model 3 trims, … weigh in at 4,065 lbs
The Tesla Model Y … weighs 4,416 lbs.
https://electrek.co/2021/08/02/how-much-does-a-tesla-weigh-c…

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Captain

I agree! Years ago I thought you were being bizarrely obtuse when you denounced Solar City and sniffed at Tesla, as you could not seem to realize that they were all part of a huge energy vision of the future that only incidentally involved transportation and home solar panels and batteries.

david fb

david

What do you think of the gross margin argument and how it justifies Tesla’s valuation?

The Captain

Captain

I think Tesla, like Apple, is going to continue to succeed and increasingly rapidly increase in value for quite some time to come. How that “ought” to translate into stock prices is, uhm, obscure. But if I were to liquidate my non securities investments and return to stocks both would be high on my buy lists.

And as much as I respect Musk, I do worry about his mental/social stability and reliability. Apples and Teslas spring from almost madmen, and that is inherently imponderable. I held and profited from Apple for a long time, but sold while Jobs was off doing Pixar. I should have bought back the moment he returned…

david fb

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Thank goodness for people like Jobs, Musk, and Bezos. They seem to have a vision of the future and they are willing to take risks to get there.

They also are able to get the best work out of their technical staff. They understand technology and know how to push the envelope of what is possible.

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And as much as I respect Musk, I do worry about his mental/social stability and reliability. Apples and Teslas spring from almost madmen, and that is inherently imponderable. I held and profited from Apple for a long time, but sold while Jobs was off doing Pixar. I should have bought back the moment he returned…

david fb,

“The reasonable man adapts himself to the world: the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.”
George Bernard Shaw, Man and Superman

“WHAT MAN CAN CONCEIVE, MAN CAN ACHIEVE.”

Anonymous (First quoted in 1906)

Later Napoleon Hill added the qualifier “ and believe it”

The Hebrew Rabbi was more wordy,
but he was first.

NASB 1995
“And he said to them, “Truly I say to you, if you have faith and do not doubt, you will not only do what was done to the fig tree, but even if you say to this mountain, ‘Be taken up and cast into the sea,’ it will happen.”

Now we move mountains all the time.

Mr. Tesla made modern electricity work. He died broke and alone. It doesn’t always work out for the unreasonable man. Didn’t for that Rabbi either.

Cheers
Qazulight

5 Likes

Tesla discovered it was in the battery business…oh and batteries go in things.

Qaz,

Some of my favorite quotes.

And I find the analysis of the dead Rabbi especially powerful but almost always misunderstood and misinterpreted. It isn’t abstract “faith” in prescribed mumbo jumbo that moves mountains (at least not to my knowledge), but rather a profoundly altered transformed vision that primes radical new understanding.

Yes yes.

david fb

1 Like

Optimus sure is taking some strange twists!

On September 30, meet Optimus!

The Captain

When Musk bailed out Solar City I though it was just nepotism and I wrote several negative pieces about it. I had previously written that Solar City’s business model was flawed and the buyout seemed to prove my point. Fast forward a decade or so and energy has become Tesla’s second largest segment. Maybe Musk is a better visionary than The Captain.

A couple of points of note regarding this segment.

First, Energy is Tesla’s 2nd largest segment out of two reported. “We have two operating and reportable segments: (i) automotive and (ii) energy generation and storage.” – 2022 Q2 , Note 14

Second, some historical data for the two segments.


Year                            2017    2018    2019    2020    2021    TTM (Q2 2022)
Automotive revenue* ($MM)      10,642  19,906  23,047  29,542  51,034  64,190
Percent of total                90.5%   92.8%   93.8%   93.7%   94.8%   95.6%
 
Energy revenue**                1,116   1,555   1,531   1,994   2,789   2,976
Percent of total                 9.5%    7.2%    6.2%    6.3%    5.2%    4.4%
 
 
Automotive gross profit*        2,209   3,852   3,879   6,612  13,735  18,224
Margin                          18.6%   19.4%   16.8%   22.4%   26.9%   28.4%
 
Energy gross profit**             241     190     190      18   (129)    (23)
Margin                          21.6%   12.2%   12.4%    0.9%     N/A     N/A
 
Solar storage installed (MW)      358    1040    1650    3020    3990    4250
Solar generation installed (MW)   523     326     N/A     205     345     322

*Includes everything automotive related, including service.
** Includes both the remnants of Solar City (solar generation) and the battery storage business.

This leads to a few conclusions.

  1. Tesla is an automotive company and is becoming more so over time (% of revenue).

  2. It’s Energy segment is growing decently, but that is solely due to the growth of solar storage, not solar generation.

  3. The Energy segment has been in a downward trend for several years (dropping gross profit) and lost money on a gross basis (just cost of goods) in 2021, though that seems to be recovering so far this year.

  4. What remains of Solar City is barely contributing anything to Tesla’s results.

  5. The Energy segment might be optionality, or “The Adjacent Possible,” but if so, it’s not contributing much to Tesla’s total business and has actually been contributing less over time on a relative basis. It’s certainly not anything like the optionality seen with (and exploited by) companies like Amazon – look at the growth of AWS, for an example.

Regards,
Jim Mueller (TMFTortoise)

Sources:
2017 10-K: https://www.sec.gov/Archives/edgar/data/1318605/000156459018…
2018 10-K: https://www.sec.gov/Archives/edgar/data/1318605/000156459019…
2019 10-K: https://www.sec.gov/ix?doc=/Archives/edgar/data/0001318605/0…
2020 10-K: https://www.sec.gov/ix?doc=/Archives/edgar/data/0001318605/0…
2021 10-K: https://www.sec.gov/ix?doc=/Archives/edgar/data/1318605/0000…
2022 Q2 10-Q: https://www.sec.gov/ix?doc=/Archives/edgar/data/1318605/0000…

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One might note that the increase in the percentage automotive is mostly caused by the dramatic growth of automotive. Solar would have to be growing at a similarly rapid pace in order to keep its percentage. Might be early for that.

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This leads to a few conclusions…

Batteries determine everything. There haven’t been enough batteries, so automotive has been prioritized. That has now changed (see https://insideevs.com/news/610030/tesla-battery-supply-satis…).

And Tesla has built a factory in Lathrop, CA for the energy side of the business and it’s ramping up now. So there’s going to be some explosive growth on the energy side of things. Much faster than automotive since it’s starting from a smaller base.

Whether that includes solar panels and/or solar roofs I don’t know. I still see only a little movement in those specific areas. Not sure what the issues are.

-IGU-

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Just like the last AI day, this one is primarily a recruiting event. That means it will be very exciting to AI nerds and mechanical engineers and mostly incomprehensible to the press, analysts, and the general public. It will also mean that its focus will be on the interesting work to be done over the next several years.

So expect a cool demo, which won’t be understood because its coolness will mostly be apparent only to the highly technical. And expect technical presentations you won’t understand more than a small fraction of. And expect Musk to blather about amazing things that nobody will see for many years.

Don’t expect anything that looks like a product anybody will see before 2026. I’m sure the first few years worth of experiments will be used only in Tesla factories anyway.

That’s my prediction.

-IGU-

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Thanks for the feedback!

5) The Energy segment might be optionality, or “The Adjacent Possible,” but if so, it’s not contributing much to Tesla’s total business and has actually been contributing less over time on a relative basis. It’s certainly not anything like the optionality seen with (and exploited by) companies like Amazon – look at the growth of AWS, for an example.

One minor point, there is a battery shortage. AWS never had a storage or bandwidth shortage. :wink:

4) What remains of Solar City is barely contributing anything to Tesla’s results.

Solar City had a flawed business model and Musk has done away with it. Nepotism still could be the driver of the acquisition.

If you look at the larger picture, the paradigm shift from fossil fuels to renewables, then Tesla’s energy sector makes sense (notwithstanding the Solar City acquisition). Batteries and storage are commodity businesses. I think of them as loss leaders for high profit services like VPP where Tesla uses the PowerWalls paid for by customers as the power plant. That’s the exact opposite of Solar City financing solar installations.

1) Tesla is an automotive company and is becoming more so over time (% of revenue).

That’s the current situation, no doubt. I’m convinced that personal robots will overtake the automotive sector in profitability in less than a decade. These robots are impossible without AI. Apple’s secret sauce is not the hardware they sell, it’s the software that makes them run, the User Interface that Apple got from Xerox and has perfected over they years. Yet no one calls Apple a software company.

In summary, it’s a mistake to view growth companies through value spectacles – they will invariably look expensive. It’s like looking at growth on linear charts which invariably look like impossible Moon shots to Infinity. Wrong tools!

You brought up Amazon. Here are two views:

Linear: https://bigcharts.marketwatch.com/advchart/frames/frames.asp…

Semi-log*: https://bigcharts.marketwatch.com/advchart/frames/frames.asp…

Which one represents reality more faithfully?

The Captain

  • The Amazon chart is a good example of the Gartner Hype Cycle

https://www.google.com/search?q=hype+cycle&newwindow=1&a…

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Don’t expect anything that looks like a product anybody will see before 2026. I’m sure the first few years worth of experiments will be used only in Tesla factories anyway.

That’s my prediction.

Sounds reasonable but the thing about robots is that the mechanical aspects have pretty much been solved, the imponderables are GAI – General Artificial Intelligence and Permitology.

The Captain

1 Like

Qaz,

Some of my favorite quotes.

And I find the analysis of the dead Rabbi especially powerful but almost always misunderstood and misinterpreted. It isn’t abstract “faith” in prescribed mumbo jumbo that moves mountains (at least not to my knowledge), but rather a profoundly altered transformed vision that primes radical new understanding.

Yes yes.

david fb,

After studying Psychedelics and being exposed to some of the first peoples’s religion I do not dismiss out of hand the teachings of this individual or any others. I will point out that I still need a boat to cross St. Andrew bay.

I am guessing the folks in Minnesota have more faith as they can walk across lakes 4 months out of the year.

Cheers
Qazulight

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