He might be more concerned about the sales prospects instead of operational expenses. Automakers are getting hit really hard by this pandemic, and they need a healthy economy to sell cars.

Many economic forecasts are saying that a full recovery is 2-4 years away, although there are many different opinions.

Tesla relies on high volume to make money; the other automakers are pricing EVs based more on margin. An economic slow down hurts volume much more than it hurts margins.

Tesla also relies heavily on first-mover advantage to grow. With the virus stalling everything, all the more cash rich automakers get time to catch up on R&D, while Tesla is stalled from being unable to physically expand. Tesla also becomes more cash starved from falling stock prices than other automakers.

Then there's the drop in gasoline prices which naturally makes Tesla much less cost competitive vs ICE vehicles in its major markets (US/China). Added bonus of traditional automakers benefiting from low gasoline prices because historically consumers buy higher margin vehicles (truck/SUVs) when gas prices are low.

So it's multiple various disadvantages hitting Tesla all at once that's likely to continue for a couple of years.

I don’t really think that any other automaker has a 25.5% margin on their mass produced electric vehicles.

Maybe the Porsche Taycan. The Porsche 911 was the most profitable car in 2019 with a 47% margin:

https://europe.autonews.com/automakers/porsche-911-most-prof...

Porsche is Volkswagen's most profitable brand.

>Porsche is Volkswagen's most profitable brand.

Which is pretty ironic, given the whole mess involved with Porsche trying to buy Volkswagen a few years ago.

Tesla relies on high margins, other automakers rely on volume.

Ford is in a much worse position than Tesla.

Ford for their current ICE lineup does rely heavily on volume and does appear to be in a hard spot.

Ford doesn't sell EVs yet. They have the Mach-E starting at $44k for 230mi launching in 2021. That does seem to have higher margins than a $40k Model 3.

> Tesla relies on high volume to make money; the other automakers are pricing EVs based more on margin.

This is just wrong. Tesla relies on margin. The other automakers don't make money with their EVs for the most part. They make money with their ICE vehicles.

> all the more cash rich automakers get time to catch up on R&D

Actually all the other automakers are stripping their R&D programs and dropping new EV vehicles to survive.

Tesla was stripping its R&D even before this pandemic though. They've cut R&D YoY from 2018 to 2019 which is basically unthinkable as a growth company.

I think R&D budget are a bit BS. The old companies still spend huge amounts on improving their ICE technology. Tesla is doing innovative stuff in production vehicles. For every other company half the tech in a Cybertruck would be R&D for most companies. Tesla just sees it as product development.

Can you name another growth company slashing its R&D budget?

Isn't China restricting the sale of new gasoline cars like what EU is doing? I agree US market could be hit badly as CA is still under lockdown and tech companies are laying off.

Plus, the price of gas has gone down significantly, hurting one of the benefits of electric cars.

I don't believe the Tesla crowd bought theirs to save on gas anyway, so not sure if this is true.

I've always felt like the base Model 3 and base BMW 3 series were very comparable. Add in a couple of thousand, and the 3 looks like a bargain.

That becomes a harder sell when the Model 3 is actually more expensive to operate, as it is in some places now.

Its not that they are buying to save money vs the economical choices, but it does make a difference relative to their comps (RWD & AWD sport sedans).

Do customers really believe the current exceptionally low oil prices are going to be a permanent feature?

Last time the oil price went down this aggressively coincided with the massive uptick in people buying SUVs

Oil futures are under $40 all the way through the end of 2022: https://www.marketwatch.com/investing/future/clz22

I fully accept I may be wildly out of touch with the common man, but I tend to be thinking of 8-10 years product life when I'm considering the TCO of a new vehicle.

Oil futures don’t go that far out unfortunately

I personally don't, and I suspect a lot of others do not either.

Personally, I'd take an EV over even a high performance ICE car in terms of everyday driving fun. I used to drive a hardtop 335, and really loved that thing, but there's no throttle delay on the Model 3, let alone turbo lag.

Maybe not, but if gas had continued to go up in 2020 and 2021, you'd have to think that would help convince move people to shift over to electric.

I've somehow never believed that theory. There are tens of thousands who buy gas guzzlers, at whatever price of gas was/is. If only people were that rational, they'd stop buying them to save our planet.

You can tax cigarettes all you want, people are still gonna smoke.

Sure tens of thousands buy gas guzzlers because they can afford it / don't care. But there are also tens of thousands more that don't because they can't afford it.

It's always going to be a factor. Total cost of ownership is one of the biggest factors in car sales.

The other problem is chargers.

Before COVID-19 you were buying an EV knowing that there was a roadmap of chargers being rolled out. Now I would be wondering (a) are new ones going to be deployed at all and (b) are existing ones going to be maintained.

Everything non-essential is going to be deprioritised over the coming years.

This is mostly the US because the externalities aren't taxed. In EU the taxes on gas are much higher. With VAT and everything Sweden currently has $4.5 per gallon, down from $5.8 last autumn, this makes any electric car much more compelling.

Sweden also has numerous tax breaks for buying electric vehicles, and does not properly tax the externalities of producing electric cars (running/refueling EVs, however, has very minimal negative externalities)

True, haven't looked at the data in some time but the breakeven point in regards to LCA comes fairly early though when comparing against ICE cars.

It depends greatly on the ICE car and driving assumptions. For someone who generally only makes short trips, a plugin hybrid is going to be a more environmentally friendly choice long term, given the significant amount of emissions needed to create the batteries for large range BEVs.

Couple with this the massive glut of used cars thats about to get worse, the fact that many cities are seriously considering long term conversion of roadways to be pedestrian only and all the oil field pickups that are about to get repo'd (pertaining to the cyber truck).

What I'd really like to know is what will happen to Tesla's vehicles if the company goes under? Like will they get bricked essentially? I sincerely doubt Tesla will go under like that but, I'm curious none the less.

I wonder if cities will also start designating streets (or as a softer approach, significant amounts of parking) as EV-only.

A city that wants to electrify the vehicles driving there could do that very easily by converting a certain percentage of parking spots to EV-only every year. This will roughly ensure (at least) the same percentage of cars in the city being EVs (since if there's more, using a non-EV becomes extremely unattractive as you can't find parking).

Maybe but I doubt it, I feel like it would be all or nothing in regards to vehicles but who knows, would probably vary a lot. My understanding of the motivation is that it is only partially due to pollution and more to do with livability, comfort, health and that sort of thing.

BYD did just get the largest electric bus order in history from LA https://t.co/YaWN2ZKtBs?amp=1 as part of a green new deal, so you may not be far off in regards to cities moving towards focusing on accommodating electric vehicles.

Gov should require source-code escrow for certain technology and products...

Oil prices don't help the EV argument. However the main issue is that they have to deal with their products being priced high compared to the rest of the industry at a time when wages are likely to fall.

The EV argument != the Tesla argument.

Hasn't the Tesla argument always been that EVs are going to take over the entire auto industry? I don't see any version of Tesla's success without EV success.

I'm honestly surprised that Elon hasn't made some sort of tweet intimating that "Bioweapon Defense Mode" on Teslas may filter out covid-19.

He basically voiced this on the conference call, talking about how the Model S has HEPA filters and should filter out all COVID-19. Which was probably one of the more sane things he said on that conference call.

its not on 3 or Y

There's also a lot of questions on how much of that cash is tied into the China plant and Chinese relationship. Some analysts estimate that's about $2 billion of the $8B, so maybe a $1.5 billion buffer, and that's assuming some level of pre-covid demand.

Plus there's an argument to be made that a company isn't likely to actually run the cash all the way down to zero before waiving the desperation flag (I recall hearing GM had $1-$2 billion in cash when they filed bankruptcy in 2009).

Without knowing what the rest of 2020 demand looks like and the concerns above, the time horizon could easily be cut from your estimated 2 years down to 1. Only one year left to survive is a precarious situation.

Not saying that's guaranteed to happen, but the are plenty of valid concerns one would have as a common stock shareholder.

I think Tesla falls firmly in “luxury good” and with mass unemployment, Tesla might see much less demand for much longer than just the lockdown.

I’ve personally gone from “should I upgrade from a Mazda 3 to a Tesla 3” to “Should I just not get a car at all once this lease is up?” In a shockingly short period of time.

I bought 2014 3 HB GT manual when it first came out. Even though I used to be a huge car guy, I just don't care to own nicer car. Maybe it's because I'm 40 and have owned nicer cars before.

Cars are so expensive these days, but a $25k compact car is so nice, why pay another $20k for incrementally nicer car?

Keep your Mazda 3 for 10 years. It's a good car.

I’d actually prefer to not own a car at all. Since I work from home now, and walked to work before, I’d rather just not have one.

But I agree, the marginal value of nicer cars is questionable at best. The benefit of a Model 3 was mostly going to be tax rebates and access to the car pool lane for my wife in crowded Los Angeles.

It seems pretty impossible to go completely carless in Los Angeles. In somewhere like New York/Chicago/DC you could do it, but LA seems way to spread out to not have a car.

I have gone carless in LA before. I could & would do it again. You just need to be willing/capable to pay enough to live near work.

My wife on the other hand would need a career change.

$10 oil doesn’t exactly help either.

You're forgetting about Battery Day next month! You will find out that Tesla hits $100/kWh, which means they'll be able to sell an electric car for the price of a gas one, without giving up range. You're also forgetting that what they're selling has no real competition, just like the iPhone didn't skip a beat through the 2008-2009 crisis. Also their full self-driving tech is ahead of everyone, including Alphabet.

I think ARKinvest's 2024 bull case of $24k/share is correct. And if you don't, I guess we'll just have to wait and see! :grin:

> You're also forgetting that what they're selling has no real competition

Europe is the world's second biggest car market after China. Volkswagen Group and the Renault-Nissan-Mitsubishi alliance have both sold more BEVs than Tesla in Europe so far this year:

https://twitter.com/auto_schmidt/status/1250880399137529864

Across the course of the next year or two Hyundai Group will also start to sell more BEVs in Europe than Tesla does.

So far in 2020, the Audi e-tron has sold 3 times more in Europe than the Model S and Model X combined and it has also outsold both models globally:

https://ev-sales.blogspot.com/2020/04/europe-march-2020.html

The coronavirus pandemic is going to put a dent in everyone's sales for a few years but BEV production will continue to ramp up. None of this is surprising. They're big car companies and they sell a lot of cars. The same pattern will play out in all markets eventually.

> their full self-driving tech is ahead of everyone, including Alphabet

This seems doubtful, I'd be really interested to read any source that advocates that :)

Ark's 24k/share translates to 4.4 Trillion. Would be worth more than most of the currently most valuable companies on earth now combined.

And how much of what the Fed is putting into the economy will end up in stocks? ;)

Of course, the Fed should just let bad companies fail! What they're doing will hurt the long-term prospects of the country as money is misallocated in zombie businesses, instead of in promising new companies with better technology.

This makes it even more important to invest in the few companies that are genuinely growing. It keeps you above inflation!

Those are all positive factors, but I would imagine that car sales in general (electric or not) are going to take a big hit.

When you've taken a 25% in income this year, I think many people are going to put a hold on big purchases.

The best part of ARK is when Cathie goes on CNBC to pump garbage like this, then she spends the next week selling off millions of $s of it (thousands of shares). Merited a mention in the FT this week after their latest disclosure, the 3rd time in 4 months

Would love to take the other side of any wager you offer

For the price of WHAT gas car?

1. Not all of that cash is accessible; much of it is tied up in other countries like China, so with certain bills they won't be able to access it.

2. Tesla still has a large number of debt payments to make in that time period

3. Cash at the end of quarter is not equivalent to cash during the quarter. Tesla generally optimizes its financials to display a high number for cash at the end of the quarter. If you look at the interest they are getting on savings throughout the quarter, you'll see that the average cash they have in the bank throughout the total quarter is much less than stated value.

Increasing capex for new products.

Plus there CapEx hasn't even met depreciation for years, indicating that they have been underinvesting in repairs and retooling.

For one, accounts payable is almost $4B.

Tesla's way of counting cash is . . . quite imaginative to say the least.

If you used conventional metrics their cash is more like $2 BB, and a bunch of that is stuck in China (as in their agreement for Tesla Shanghai stipulates that cash cannot leave the country).

There is a real liquidity problem in there, but the people buying Tesla shares are not exactly the sharpest knives, or they're investing on the Tesla story, not financials.