Tesla Reports 4th Quarter Production

Investment Analysis Clubs Macro Economic Trends and Risks
21

Well, here’s a nice chart. I guess it’s easy to see why Tesla deliveries would be seen as a failure. :smile:

Anybody know why Honda is such a disaster?

Tesla’s predictions have always been way out there, and seemed not only vulnerable but absurd on their face. When, in 2014, Musk predicted 500,000 deliveries in 2020 he was laughed at and called delusional. Recently, Musk has said that Tesla will, despite any possible recession, continue to grow deliveries with all possible speed, and continue to meet their predicted 50% average compounded delivery growth from 2020-2030. Margins will take second place to growth. But since Tesla’s margins are huge compared to others in the mass market automobile business, they don’t have to worry about taking a hit there.

And Tesla has a massive amount of cash, so a recession won’t matter to the company in terms of financing their growth. However bad things get, it will hurt everyone else far more than Tesla.

The automotive business, except for Tesla, is nothing but an endless sea of red for the next several years. Bankruptcies, mergers, and bailouts.

-IGU-

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22

Can you go a bit into why? Your write up so far is very good. I am curious about the rest of your thinking.

23

And except for BYD, of course. It’s really just the established automakers showing declining U.S. sales.

Though they also have billions of dollars in cash on hand, so I’m not sure BK or bailouts are in the near future. Actually, most of them have had really profitable years - the supply chain problems that hindered their production also ended up driving up transaction prices and reducing discounts. Plus, most of the other automakers have seen growth rates return back to normal, as the supply chain issues that hampered their early-year production have eased. So there’s no real reason to think that the industry writ large is likely to have “an endless sea of red” for the next few years.

But BYD has been growing like gangbusters. They’ll pass Tesla for global EV production this year; they’ll likely pass Tesla for global BEV production next year. Not a threat to their US or European marketshare…but since China is such a large market for Tesla (what, close to 40% of their unit sales), and is the largest and fastest-growing EV market, what happens there is hugely important for Tesla.

Well, he also recently said that Tesla would likely produce 1.5 million cars in 2022:

"After a blockbuster first quarter for Tesla, with record revenues and car deliveries in Q1 2022, “it seems likely we’ll be able to produce over 1.5 million cars this year,” Tesla CEO Elon Musk said Wednesday during a conference call. "

In the past, when Musk has made “out there” and “absurd” predictions for production, he’s still managed to meet them. This time, he failed to do so. It’s entirely possible that Tsla won’t see any further degradation in its growth rates for the next 8 years (it can’t, if it’s going to hit that decadal annual growth average of 50%). The bear case on Tesla is predicated on them failing to do that.

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24

It is going to be ultra hard to meet that growth rate. The competition is only starting to heat up. GM, F, Honda, Toyota will be in their swinging. The German companies as well.

No one is going home empty handed. The 50% growth would necessitate that companies pack it in. That wont happen.

25

Well, in the past the entire industry hasn’t gone to hell. This time the Russia-Ukraine war, supply chain craziness, pandemic, and such have cratered the auto industry. So if you’re going to go with the bear case for Tesla, I think that puts most of the rest of the industry out of business entirely.

And, no, Musk hasn’t always met his shorter term predictions, especially those he presents as simply “likely”,. or “if everything goes well”. And “force majeure” caveats usually find their way in there too.

Furthermore, we were talking about US production and deliveries, so I’m not sure what BYD has to do with anything. The only ones who need to be worried about BYD are ICE manufacturers, especially those competing at the low end in China.

-IGU-

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26

That is not how finance, business or econ works.

All of the manufactures are beefing up their assembly lines to produce a lot of EV. Some of those cars and trucks may become very big winners. Considering there are some 10 or more major companies several winners will kill the 50% goal long before 2030.

Game theory says Tesla needs more than prior success to stay on top. What is it? I honestly have not studied to find out how Tesla will be a monopoly.

27

There’s no evidence that any manufacturer other than Tesla can mass produce EVs at a profit. So they’re pretty much screwed, as there’s no way to transition. Every EV they sell is instead of selling a more profitable ICE vehicle. And if there are tough times to go along with the impossible transition…

-IGU-

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28

IGU,

You are clouding your thinking.

https://www.investors.com/news/us-auto-sales-q4-gm-ford-tesla-2023-outlook/

Full-year EV sales hit a record 61,575 units, making Ford the No. 2 EV maker in America behind Tesla, Thursday’s sales release said. Ford EV sales vaulted 223% in December and soared 126% in 2022, the release added. Ford touted a strong sales performance for the fully electric F-150 Lightning truck, Mustang Mach-E SUV and E-Transit vans.

29

see the table on F luxury trade ins for EV v Luxury trading in for same brand by F.

30

As you point out, Ford is selling ridiculously tiny numbers of EVs. And, of course, with such small numbers they are losing money on every one.

And, given that pretty much every F-150 Lightning sale replaces an F-150 sale, they’re actually losing more on every sale than it appears.

As I said, they’re so screwed.

Can’t see that it matters what they’re trading in.

You might want to restrict yourself to posting about things you know something about.

-IGU-

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31

The back and forth in this thread reminds me of the religious wars between Mac and the IBM PC decades ago.• :slightly_smiling_face:

Facts that I believe to be true are:

• That total vehicles sales have been decreasing for several years while EV sales have been growing.

• Tesla is way ahead of the competition in BEV sales by volume save for, maybe, BYD. BYD started out making batteries and has diversified aggressively. They make a whole range of vehicles including ICE, BEV, and hybrids. While their total vehicle sales are large, I wonder how many are BEVs, the rest don’t count for the purposes of this thread, they are the last surviving members of a dying species.

• Tesla is the only significant car maker with a 30% gross margin and this is a formidable weapon. There were some comments on the WWW about price elasticity of demand

What Is Price Elasticity of Demand?

Price elasticity of demand is a measurement of the change in the consumption of a product in relation to a change in its price. Expressed mathematically, it is:

Price Elasticity of Demand = Percentage Change in Quantity Demanded ÷ Percentage Change in Price

The takeaway is that Tesla is in a position to manage prices so as to keep their production lines at full capacity. When asked about the subject, Elon Musk said he preferred to grab market share over maintaining high profits provided the cash flow was favorable.

Apparently the recent price cuts in China have priced Teslas closer to BYD which has very thin margins. The commentary was that BYD with its heavy state ownership was less interested in profits than in pushing EV adoption. They do have a huge pollution problem in their mega cites.

The way I view Tesla’s future is a succession of “S” curves as it penetrates both related and emergent markets. I have no idea which will succeed or their timelines but they include solar, storage, self driving AI, general AI, Dojo, humanoid robots plus others that have yet to surface. Unless Tesla manages to implode, it is a continuing growth story for decades.

Feel free to consider the above religious dogma or long term investing strategy. All I can add is that I’ve put my money where my thoughts on the subject are.

The Captain

• A long time ago, at a computer show in a far away country, I was having a discussion with a former business partner, Alberto Herrera, then selling IBM PCs while I was an Apple reseller. It was the time of the PC religious wars. Alberto says, “You should be selling the best product in the market” to which I replied, “I’m selling the best product in the market!” Puzzled, he asks, “Apples?” “No, Denny Schlesinger!” :innocent:

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32

Brk continues to reduce our exposure to byd

X-post at Stocks A to Z, berkshire-hathaway

Denny Schlesinger

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33

Again, I don’t think there’s any support for that. Sure, annual production volumes are down - hampered by supply chain problems earlier in the year. But those same constraints gave automakers a lot of pricing power, enabling them to avoid typical discounts and incentives and boosting their margins. Most automakers have had steady earnings, are sitting on huge piles of cash, and were seeing production levels return closer to normal towards the end of the year.

Your post focused on US production - my post (that you were responding to) was about Tesla generally. China’s an enormously important market for Tesla, and has been the source of a lot of its growth. Tesla can’t possibly meet its growth targets without having strong growth in the China market - and probably can’t keep up its margin levels if it has to cut prices in China to achieve such growth. So yes, BYD is critical to Tesla the company, even if it has little impact on U.S. sales, because China is one of Tesla’s more important global markets.

Focusing only on the U.S. market can give a distorted picture of the relative strength of other automakers in this area. This is something that we’ve talked a lot about on the boards over the years. Tesla absolutely dominates the U.S. market - but globally, most EV’s aren’t produced by Tesla. The global automakers simply concentrated their efforts on Europe and (through their Chinese JV’s) the Chinese market, where more generous government policy and higher fuel prices made EV’s more attractive than in the U.S. market. So while Tesla has posted ~75%+ marketshare in the U.S. for years, their global marketshare in EV’s is “only” about 13% - and about 18% in BEV’s alone. In faster growing and more competitive markets like China and Europe - where they have to compete with a large variety of EV and BEV offerings in a wide range of models and prices at volume, their market share is much lower. About 8% in both.

They’re definitely the leader in BEV’s (until BYD passes them later this year), but they’re no longer running the table. The overwhelming majority of EV’s and BEV’s produced globally aren’t Teslas.

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34

Which growth exactly? Growth of unit volumes, perhaps. But growth of gross profit, probably not.

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About 800K, from January-November of this year. For comparison, Tesla sold about 1,150K over that period:

In terms of market share, Tesla has about 18% of the global BEV market, while BYD has about 13%.

However, BYD is growing faster than Tesla - even in BEV production. It is anticipated that they will exceed Tesla in global BEV production in 2023 (they already lead in total EV production).

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36

Do you mean growth of profits or profit margins? I’d be surprised if Tesla were selling cars in China at a loss, but maybe that’s the case.

DB2

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37

Certainly units. And also revenues - we’ll know more after they release full year earnings, but their last statement (Q3 22 10-Q) shows faster revenue growth in China (65%) than in the U.S. (60%) or the company overall (56%). Which makes it pretty likely that China is also contributing to earnings growth.

https://www.sec.gov/Archives/edgar/data/1318605/000095017022019867/tsla-20220930.htm

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38

That is not how tomorrow works in selling anything.

Dont bother telling people to post on what they know. The reason being Tesla stock is down considerably while you wont listen or see what is going on. The market is not in your corner. The participants know better.

Tesla’s growth forecast is way off.

You can lay that off as perceptions that will clear up in Tesla’s favor but you’d be completely wrong.

The Lightening is just one line that will take market share. The Mustang is another. These are becoming popular vehicles. People rave about the Mustang.

I am in no way saying Tesla will fail. I am saying plenty of others will succeed.

I asked you how Tesla has a monopoly. You do not seem to know what it means to have a monopoly.

39

To be expected though. Not only are volumes low right now but they have a lot of R&D costs still to recoup. This will change as volumes go up. And right now their volumes are going up pretty fast.

The Big Three have two main problems though.
1). They have a dealer network that is reliant on the service department to survive. They do not make (much, any?) money on new car sales. It is on service, parts, and used car sales. The EV takes away a big part of the service and parts sales.

2). They have historically had a problem selling cars and can only really sell trucks and SUVs. There are a multitude of reasons for this, mostly self-inflicted. Closely related to this is an inability to profitably sell ANYTHING that does not have a high MSRP (read that as: they can’t sell cheap trucks either at a profit).

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40

Ford was considered a monopoly in the auto business.

Turns out F was not a monopoly.

Tesla is not a monopoly. It was priced and still is priced as a monopoly. No one is buying that.

Roughing up the market share numbers, very rough. If Tesla has 4% of the market… 0.04 then multiply that by 1.5 or 50% growth rates for 8 years. That makes for 68% market share? Do I have that right?

NUTS!!

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