1) It's clear now that the company is a sham and Musk is a snake-oil salesman. It's all smoke, mirrors, bubblegum and baling wire. After hitting 5000 cars per week one time, they never reached that level again. The company had to do a punishingly dilutive capital raise just to get 6 months more runway, and the company's market cap is now $6 billion (down 90% from 2018).
2) The company has continued to stumble from failure to failure with just enough successes to delay the day of reckoning. Musk is still sleeping in the factory trying to iron out kinks in the manufacturing process and automation. They're producing 3000 cars per week, but the quality is so poor that 30% of cars must be returned to the factory for rework. Competitors are likely to match Tesla's battery technology in the next 3 years, and the company's market cap is down by 50% from 2018.
3) After many delays and billions of dollars of cost overruns, Tesla has perfected the "machine that builds the machine". It's producing 40,000 cars per week in three factories in the US, Europe and China, and a fourth factory in South Korea opens next year. Tesla is cash-flow positive and the company's market cap is $600B (up 10x from 2018). In hindsight, all the delays people anguished about in 2018 proved to be nothing but amusing anecdotes in the company's history.
I assign probabilities of 10%, 50% and 40% to these scenarios, which equates to an expected market cap of $250B in two years. At $60B today, it looks like a bargain.
Future growth is already baked into Tesla's current valuation of 60B. They're not making any money today (in fact they're losing billions) but they have a high market cap because they might become profitable years from now. Once (if) they become a mature car manufacturer their valuation multiple will go way down. They'll be judged on their profit margin and FCF like any other car manufacturer.
Your best case scenario of Tesla growing their market cap by 550B in the next 2 years is completely unrealistic. Even Facebook didn't grow that quickly, and their profit margin is second to none.
After watching what Tesla is doing, they have chosen not to invest those resources even though if they did, they would beat Tesla at its own game quite easily because they eclipse it both in capital and experience.
Either their analysts are wrong and failing to see a winning strategy here, or there is no winning strategy. One of these two statements must be true. I've put my money on option #2, but I'm aware that large competitors aren't idiots and there is a risk here.
Elon Musk has also publicly stated that he wants the other big players to compete with Tesla. He doesn't actually care if Tesla is ever profitable or not, he just wants to force the world to transition off fossil fuels by dispelling the myths sown by the oil industry with concrete examples of success. It is stupid to ignore Musk's stance on this matter as an investor.
If you ever pitch your startup idea to a VC, you're expected to explain how you're going to deal with this risk.
Sure, and many don't.
>If you ever pitch your startup idea to a VC, you're expected to explain how you're going to deal with this risk.
And that is exactly my point. Tesla certainly has strategies to respond if GM/Toyota enter their markets. You and TAForObvReasons are responding as if those companies will easily beat Tesla as soon as they make that decision.
Elon Musk's stated purpose for Tesla is to kill the fossil fuel industry, not to create a profitable enterprise. And he is tracking well towards that stated purpose. He actually wants those much bigger companies to start doing what Tesla is doing at scales that they can achieve and Tesla can't. He said this very clearly in an interview with DiCaprio. I don't know why people keep thinking there's some master plan to be profitable when the guy steering the ship has repeatedly said the plan is orthogonal to profitability.
As an investor, I am well aware of this. I'm also well aware that the profits of SpaceX eclipse what Tesla could achieve even in its best case scenario, so he probably really doesn't give a shit about making profit via Tesla.
Simple as that really.
Somewhat answered your own question . It's if the market values Tesla as a mature company or a continues to value it as a growth company. When have we seen Elon rest with a successful product? Tesla is more than just cars. And Elon's answer to Gali (hyperchange YouTube channel) question during earnings about moats states his mindset clearly. He's about innovation. Innovate faster than competitor always. If Tesla can be cash positive, Elon will do what Bezos does. Demand that as much money as possible is reinvested. They're not going to be like Apple with tons of money sitting on the side.
I think Tesla won't be just a car company. Eventually, they will be a company with multiple branches in the same idea as Alphabet. But that's way in the future. First, they have to survive to profitability.
More and more Tesla is looking like a traditional car company. Especially as the traditional car makers are moving aggressively into EV.
I am not a car market place expert, $45K cars do not usually move in those numbers.
edit: For reference, check the number of cars moved. https://www.statista.com/statistics/276419/best-selling-cars...
(a) Tesla aren't the leaders in the self driving car space. Waymo arguably is, (b) almost all of the car makers have self driving car programs and most importantly (c) why would the traditional car makers just sit back, do nothing and allow Tesla to eat up the entire market ?
There is a 4th or 5th scenario, where
4. other car makers trail behind Tesla more and more in terms of technology. Remember, all these car makers had DECADES of head start developing EVs before Tesla was even born. Tesla was supposed to trail them in tech, not the other way around.
It's easy to assume that because a company is bigger, and have more resources and manufacturing experience, that they can move fast in developing tech. It's easy to judge a book by it's cover. Incumbents move slow ALWAYS. If moving fast was so easy, they would of done it before Tesla was born.
5. solar panels from SolarCity come into play.
Tesla has already deployed Solar grids in Australia. It's not just "smoke and mirrors", it's actually in production.
While the competitors are still trying to "match Tesla", Tesla has already moved on to find other areas to grow in tech advancement.
Right now, solar panels are considered a "toy". It's not even on any of the car makers' radar. It's like how Tesla's first Roadster cars were not on any of the car maker's radars 5 years ago. It's a "toy" until one day, it becomes a reality, and you tout your ability to "catch up" with your "vast experience"
5 years from now, folks like you will write another article, about how GM will be able to produce solar panels to "catch up to Tesla in just one or 2 years"
> It's easy to assume that because a company is bigger, and have more resources and manufacturing experience, that they can move fast in developing tech. It's easy to judge a book by it's cover. Incumbents move slow ALWAYS. If moving fast was so easy, they would of done it before Tesla was born.
This isn't silicon valley. There is years of design and manufacturing experience that Tesla simply does not have. This isn't a software project where someone in a garage can make it and scale it. Tesla can build luxury cars because budget constraints are significantly less. Now they're struggling with the constraints like everyone else.
Other car makers are just as competitive now. The reality is the Chevy Bolt is a great start and will only be improved upon. Elon Musk has no monopoly on technology. There are competitors in almost every sector. Many great engineers are elsewhere.
And the reality is - most people don't care about EV right now. Sedans are struggling mightily. Americans are buying SUVs and crossovers right now. General car manufacturers are able to easily switch production when the market shifts. Tesla can't even make a budget friendly car. Their model 3 will be out of most of the market's price range. Meanwhile GM can still make a Sonic and Cruze or a pickup truck.
> Right now, solar panels are considered a "toy". It's not even on any of the car makers' radar. It's like how Tesla's first Roadster cars were not on any of the car maker's radars 5 years ago. It's a "toy" until one day, it becomes a reality, and you tout your ability to "catch up" with your "vast experience" 5 years from now, folks like you will write another article, about how GM will be able to produce solar panels to "catch up to Tesla in just one or 2 years"
Gee why didn't GM buy FirstEnergy or Duke Energy! They're so behind in the energy industry...This argument isn't even worth debating. GM is not a power company. They do not want to be.
It has nothing to do with Silicon Valley. The geography is meaningless. The only thing that matters is staying ahead of the curve. It's always going to be hard for GM to do that, because it's focus is always going to be on incremental improvements of the same way of doing things. The "years of design and manufacturing experience" you mention.
Look at their $1B acquisition in Cruise Automation. Like you said, GM is not a power company, its' a car company. Its' business is cars. GM should have developed self-driving tech internally, and not had to buy it. Cars is GM's job. But GM missed that boat entirely, because everyone in GM is focused on incremental improvements on manufacturing.
Even your comment mentions that "most people don't care about EV right now." EV is not a big focus for GM. Sure it has the Chevy Bolt, but that only began development 10 years after Tesla started. GM does not care about EVs right now. It's focus is still on manufacturing traditional cars, and will continue to be this way until someone else forces them to change.
This isn't true. They can continue to make their general automotive improvements while also upskilling in EV - the Bolt is a prime example of that. Frankly, they beat tesla to the punch there.
> Look at their $1B acquisition in Cruise Automation. Like you said, GM is not a power company, its' a car company. Its' business is cars. GM should have developed self-driving tech internally, and not had to buy it. Cars is GM's job. But GM missed that boat entirely, because everyone in GM is focused on incremental improvements on manufacturing.
Hmm, you mean like Tesla bought the solar manufacturer for Solar City? Is that not acceptable to you? You bring up an argument against your point. GM can easily purchase anyone. If they slightly miss something a purchase is all that's needed.
> Even your comment mentions that "most people don't care about EV right now." EV is not a big focus for GM. Sure it has the Chevy Bolt, but that only began development 10 years after Tesla started. GM does not care about EVs right now. It's focus is still on manufacturing traditional cars, and will continue to be this way until someone else forces them to change.
EV is a big deal to GM because they know where the future is heading. They also are not hemorrhaging money and burning runway because they also have a sustainable business now. So they can do both.
Meanwhile Tesla can't even scale a 35K car. They're a luxury brand. period.
Tesla is building SUV EVs. Other makers are planning to.
Tell me when they make one people can actually afford.
> Seems like a poor time to drop your sedan production in favor of SUVs with oil prices climbing,
GM can do this. They can change production so quickly that when oil is cheap and people want SUVs (aka now) they can do that. And when it is not, they can change production back to sedans and EV. Much more flexibility.
https://www.nytimes.com/2018/03/03/climate/suv-sales-global-...
And yet Tesla will not be able to deliver the cheap model 3 and GM has been doing it.
That's a substantial claim - without any evidence. No surprise though - it's easy to be pulled into the Musk hype.
The Bolt has been selling at between 1.5 and 1k per month while the production of the supply-limited model 3 is approaching 5k per week.
I guess I'm crazy and got pulled into the Musk hype.
> Tesla will not be able to deliver the cheap model 3 and GM has been doing it.
I'm guessing they will. Right now though, you have a point there, the model 3 is more expensive than the Bolt.
An "SUV" is a luxury good anyway and many of them are absurdly priced (imagine what that'd get you in a real car!).
GE is.. why are they separate companies?
Well, the devil is in the details. Where did these numbers come from?
But, the case can certainly be made that he is prone to hyperbole and "exuberant optimism".
Panasonic takes those and makes battery cells. Think AA battery. That part is done as a joint venture between Panasonic and Tesla which means Tesla contributes to the design e.g. Tesla employs people doing research into battery chemistry i.e. cell level R&D. (and so does Panasonic, to be clear).
Tesla takes those battery cells and packages them into a battery modules, which they also design. That part is all Tesla.
That description doesn't adequately describes how much technology and work goes into making battery modules. Cells are an important component but it's also inverters, multiple electronics boards, software to control it all.
You can see e.g. https://www.youtube.com/watch?v=bNd-yJtRPhk
TL;DR: it would be grossly misleading to say that "battery tech is Panasonic". Battery cells are important but battery packs are designed and manufactured by Tesla.
Overall it's pretty classic Tesla/Musk. Predict the absolutely impossible, get 97% of the way there, and regardless of how you slice it the only thing that's not impressive is the facxt that they didn't meet the arbitrary guideline. They still crushed everything that anyone else thought was possible, so IMO it's a victory just a hollow one.
Will they be able to repeat this sustainably? Probably not unless they figure some other things out, but the point is that it's within striking distance. The company has a shot at profitability in the near future, and I see Teslas everywhere now.
In the past they missed it drastically; the number is important because if they can figure out a way to get to that level of production they have the chance to become cashflow positive relatively quickly.
Except, I might say, you said you could do it with two indoor assembly lines but you needed a third outdoor line at full capacity, so you didn't show anything. We have no time to build more indoor space and we can't just keep building assembly lines in tents out of spare parts, man, they break down, it has to work with two indoor assembly lines so they will work long-term. You still need a 50% improvement in your assembly speed before you can take down that tent!
Plus, even though you had an third rocket when you assured us 2 was plenty, one of the rockets was 5 hours late. A whole extra rocket and still late?
But the reality is that they eventually deliver and Musk can keep investors engaged which keeps the company going with more cash. Even reaching 4850 is a big deal.
The real stretch goal is reaching profitability. I hope that happens soon.
Meaning you live in one of 4 coastal cities. Teslas are exceedingly rare everywhere but the wealthiest cities.
Anyway I live near Philly. I've seen a few dozen Model S in my life, one X and no 3s yet.
...recent trip to Paris.
Yeah... a notably wealthy city.
I can't understand the people that think he's a charlatan. They have sold approaching 200k electric vehicles. They are great cars, I have one. But separate from that, they always had a plan to increase production and sell more of cheaper cars, ramping up from first selling expensive ones. The latest ones are going to need a lot more volume before they can make them cheap enough to sell at 35k, such as higher battery production. They will lose money until they make them at high volume. It's not crazy to say they'll have a lot more money coming in as they raise production, that's like any business. The open question is will they actually make a profit. We can't know what the numbers are until they come out. Based on history, I think they'll get close to profitable but won't quite make it, but they'll clearly be headed in that direction as the early hurdles of increasing production are met. Again - it won't matter exactly when they are profitable if they are close. Just like the 5k/week number.
Building 5000/w is nothing if you're just willing to throw more and more money at it. The point of the original goal was that it was actually going to be a sustainable, profitable approach.
A company's true function is to benefit society. Tesla has done that, so he gets a win from me. He's done it by taking chances and thinking outside the box. The tent is an example. Most companies would have given up but they did not.
20 years from now Tesla might not be alive but we will see its impact on the car industry. Very cool, Musk.
Could you elaborate on how did you come to said conclusion?
Sure there are ways to manipulate needs but at its basics companies are supposed to benefit society by filling those needs.
We are fed the idea that companies are created to profit the investors but profits are a side effect of meeting needs.
Profits are also a side effect of meeting needs today. It does not necessarily follow that meeting needs today benefits society in a meaningful way in the longer term.
For what it's worth, I think your implication is true. Clearly most companies create wealth and deliver benefit to society, it's that aggregate effect that makes capitalism the most successful system we know of under which to run a society.
But the reality is that it's entirely the other way around: companies do exist to profit their investors and it's the benefit to society that's the (usual, aggregate) side effect. It's not good, or bad, it's just a fact.
It's the other way around.
Their revenue isn't supply driven anyway, it is demand driven. Two weeks of delay will not result in 273M in lost sales. It will just result in delayed sales.
I know two people who withdrew their Tesla Model 3 reservations due to them failing to meet a deadline. Their reasoning was that they'd like to buy a Tesla, but if they need to wait years for it, they prefer to get a nice car to drive in the meantime. The longer the delays are, the more people will give up.
Anyway, Teslas are overpriced and of questionable quality.
If I am 100,000 in queue, then car should have originally taken 20 weeks at 5000 cars per week. Now it will take 20.62 weeks at 4850 per week.
That is a delay of few days.
You're quibbling over a rounding error.
Also recall that band //width// can be increased for a cost while latency has hard upper bounds.
For anyone complaining about profit margins, think per unit profits rather than hitting some round base10 number.
I'm a software guy. Can somebody explain to me how you can build a high-tech auto production line from "scrap"?
That fits with my analysis from a few days ago: https://news.ycombinator.com/item?id=17397505
> A tent, about 50 feet high, its taut grey canvas membrane supported by aluminum columns.
I don't think it was a joke. The tweet was specifically in the context of trying to convince investors that the cost of that tent production wasn't substantial and by "scrap" he meant equipment they had discarded from their main production lines because they are constantly upgrading them. You can't have it both ways. It was either discarded "scrap" machines they had lying around and he was not joking or machines they bought and he was lying (a.k.a "joking") about it. I'm giving him the benefit of the doubt that they really had all that equipment in a warehouse because its been reported they have re-tooled the line several times.
Repeating false statements doesn't make them true.
[1] http://www.sprung.com/building-components/performance-archit...
Why should we trust you on that fact? Do you have all the documents required to prove that all the previous car models of all manufacturers in the world were built and sell on time? In my experience (not about car manufacturing), several projects didn't meet the deadlines, and still succeed at the end.
https://www.dailykos.com/stories/2018/5/29/1767826/-The-War-...
Is this thread being linked to by some Tesla short seller blog of what?
Surely this kind of misinformation isn’t organic to HN.
No, they missed the deadline, twice now. Lot of Muskites in these comments, remember, Tesla failed to meet the same deadline in January and pushed it to June. (EDIT: I've been told they missed this 3 times now, the 5K/wk figure was originally Dec '17, then Jan '18 then Jun '18).
When it was clear they would miss again, they put up a third production line in a canvas tent, which the NYT quoted as "never heard anything like this ever" using what Musk tweeted as "scrap we had in warehouses" to build the cars. And even then, and running all three lines 24/7 striving to hit that goal for just 7 consecutive days with the whole world watching... they still came up 150 cars short.
(5k/wk / 168 hrs/week = 30/hr * missing the deadline by 5 hours = 150 cars short)