Tesla’s stock price is confusing if you compare them to a car company. But they are not just a car company. They are also a car manufacturing supply chain, having brought much of their component production in house. They are also an energy company, both generation and storage, but also distribution, like gas stations. Think Exxon, BP, Chevron, ARCO, etc.

They are probably a few other things, but this is the mystery of their valuation.

For the record, their market cap is also greater than "Australia's Woodside Petroleum, Chevron, Exxon Mobil, Imperial Oil, Royal Dutch Shell, Shell Energy North America, Canadian Natural Resources, ConocoPhillips and French group Total [combined]" [1], so they're also valued kind of crazy compared to energy companies...and that was in January 2021 before the most recent spike. Sure, part of that is faith in renewables. But in any fair comparison their stock price is still a little confusing.

[1] https://www.tesmanian.com/blogs/tesmanian-blog/teslas-market...

I might be a bit crazy, but you just mentioned a slate of companies that absolutely have no future at their current scale. Sure this won't happen overnight...

But my theory with petroleum is that it has so many HUGE economies of scale built into its production that a demand collapse will send it into a rapid tailspin.

A small version of this happened in the Dakotas when the Saudis started dumping oil to get it under a price, and the North Dakota oil industry collapsed. That was due to intentional oversupply, not necessarily due to collapsed demand.

But so much of the oil market is now pretty expensive extraction: tar sands, shale oil, fracking, deep offshore. The easy stuff is gone. That to me means that the industry rests on a certain price, and if it falls under that, the industry can't sustain it.

I think the big thing in this reverse economies of scale, where costs rise as the industry shrinks (and absorbs writeoffs) is that finance, already somewhat intimidated by the growing pressure to divest from fossil fuels, will rapidly abandon it once it becomes extremely risky due to collapsing demand and massive migrations of transportation modes to electric.

It's all vague decade-away prognostication, but you'll start hearing the violins playing for oil companies when some combination of this happens:

- charging infrastructure builds out (2 years to catch the current Tesla supercharger, probably another 5 years to get some semblance of every-50-miles availability)

- LFP chemistry hits a power density of somewhere around 200-250wh/kg (LFP is really cheap and has far less materials restrictions from cobalt) (probably in 1-2 years for mass production)

- various solid state technologies hit production (looks unlikely for 5 years)

- EV drivetrain cost (battery, motors, cooling, case, management systems, etc) drops to 2/3 of ICE (probably another 4 years)

- a carbon tax, a more substantial EV subsidy

The floor will rapidly fall.

I'm not saying Tesla isn't insanely valued. But the grim reaper is coming for all those oil companies.

We are so dependent on fossil fuels that I'm slightly more sceptical. Over 90% of global energy is created with fossil fuels. We often get fooled about the electricity sector which is something like 1/3 renewables. But electricity is only 30% of fossil fuel consumption. Even if the share of electricity increases to 40% because of ev's and we produce 80% with renewables, we still have ~70% that requires fossil fuel production. That 70% is not that easy to replace -- we are talking about manufacturing, logistics, agriculture, mining, etc. Getting rid of coal only increases oil and gas demand.

I'm not sure what is the percentage of consumer sales for any if those companies mentioned, but I suspect that even if it was 0 it would not drastically affect anything but profits. Oil will be less profitable -- yes, but it will be widely used as long as energy required to mine it is less than what is produced. It is unfortunate, but these companies are on a very good long term business (hard to say really because I don't know what are the global untapped oil reserves).

Manufacturing components to produce renewables require a lot of fossil fuels as well. We are not yet at the point where we can create new renewables without using fossil fuels.

I'm not saying the floor will not fall, but I'm afraid that if the floor falls we are in quite big trouble, and it is not because if the EV market.

That 90% is much easier to replace than you think because its mostly wasted as heat and inefficiency.

Once you factor in the fossil fuels used to extract fossil fuels it all topples pretty quickly.

The main source of trouble will be people ignoring the issue until it becomes urgent and not planning a smooth transition, global procrastination rather than the actual task itself.

I like your optimism. I just don't see how we can produce and transport food, electronics, and specifically windturbines, solar panels and batteries on a global scale without using massive amounts of fossil fuels.

Actually, I would love to see a the real "energy footprint" of a solar panel. Like, how much mining, transporting, manufacturing and installing the panels consumed energy, and how many days it takes for a panel to produce more energy than the entire operation used. If anyone has such a breakdown I would be really happy to see it. If the numbers are good, maybe the future is still bright.

You can find these online, they've been doing them for years. Though maybe note that "energy" isn't really the problem, it's the greenhouse gasses that have sparked this changeover. "Carbon payback time" is a common phrase. It's now getting into the "this is both cheaper and better regardless of carbon" phase, but it wouldn't have been pushed this hard if the numbers didn't stack up in theory.

Zooming out to a global level, geopolitics becomes important to consider as well. As soon as renewables are able to change the power dynamics between eg Russia and Ukraine (Ukraine is dependant on Russia for oil for heating in the winter) things get very interesting indeed. We are still decades away from that imo.

Surely Ukraine just needs to allow EDF to build few nuclear power stations on long term agreements to end their dependence on Russian heating oil?

Its surely just that easy... for a small and relatively powerless nation to product nuclear power under the watchful eye of a very powerful nation that doesn't want it.

Ukraine already has 15 reactors generating about half of its electricity. (Including one famous one).

Ukraine receives most of its nuclear services and nuclear fuel from Russia, but is reducing this dependence by buying fuel from Westinghouse in the USA.

Just do more of this. I doubt Russia will attack a US concession that's building a nuclear plant.

Oh yes! We won't care about the middle east, so none of that bizarre cowtowing to the Saudi king that the US Presidents always do (I think largely to get on the post-term massive slush money that flows from the Saudis to former presidents, which I have no direct knowledge up, but seems obvious)

The Navy will lose a huge reason for its existence: securing the seas for supertankers. There are so many countries we won't care about anymore. Iran. Iraq. Venezuela. Nigeria. Really, by extension, Israel, Egypt, Jordan, etc. Then again they'll just keep building up the China boogeyman to keep their money, regardless of its validity.

As you pointed out, Russia will face an existential crisis, I think oil revenue basically keeps Putin afloat. A total collapse of Russia is pretty risky due to the nukes, but we'll see.

I think you are too optimistic about Israel. These other countries can be dropped easily but Israel is a huge liability that I don't know how the US will get rid of. I do feel confident that the winds are starting to fly against them slowly but I don't have my hopes up. It will likely be a generational shift that finally does them in but IDK. What do you think?

If the US drops Israel someone else will pick them up (like Russia or China or India). The country is developed, produces tons of IP, and is armed to the teeth (and has nuclear weapons).

But this is lala-land thinking. As long as the United States remains on the UN Security Council (which is equivalent to saying as long as the UN continues to exist in any practical form), both Taiwan and Israel will remain our client states.

Israel is not a US client. The directive influence is the opposite of the direction that it would be were that the case, and the reason for that is exactly the thinking you articulate: “If the US drops Israel someone else will pick them up”.

If the US drops Israel, it paves the way for economic sanctions against the country for their dealings of Palestinians. This is why they got really triggered over BDS. They cannot be swayed militarily or via protest but economic is a whole different ballgame.

A lot of European/Asian countries would like to distance themselves from Israel but cannot due to US influence. Furthermore losing the US support loosens their investments into the country and siding with China or Russia would cut a lot of economic ties to the US for sure.

>But this is lala-land thinking. As long as the United States remains on the UN Security Council (which is equivalent to saying as long as the UN continues to exist in any practical form), both Taiwan and Israel will remain our client states.

Thats my point, if US leadership decides that Israel is no longer worth the liability, then that entails allowing the UN and its member states to start putting real pressure on Israel. Again, you might think this is lala-land but we are seeing small changes starting to happen as the internet has helped to expose Israel and act as a counterbalance to mainstream talking points.

With Millennials and Gen-Z starting to come into power we are seeing even more pushback. I don't realistically see meaningful reform until Boomers are pushed out. While all this is happening in the West, Israel has made a turn towards hard right wing and I feel this will be a strategic error long term as the pendulum is swinging back to hard left in the western countries.

The incredible thing is a calcified Russian system with access to way too many nukes collapsed within our lifetimes and the West adequately prevented nuclear disaster. We ended up with the current farce of a government as a byproduct, unfortunately.

Yeah I'm not a domain expert on decarbonization or anything, but from what I've seen on the industrial manufacturing side of things in the US, electricity prices would have to be consistently very low for the cost of re-outfitting existing natural gas heating systems with electrical ones to make sense without fairly punitive carbon taxes, and even if you pass carbon taxes in first world countries to make it "worth it" to retrofit with electric heating, most of the domestic manufacturing will just go belly up without tariffs--good luck getting developing economies to enforce the environmental standards most of us would like to see on their own, and good luck getting the ruling body politik to think tariffs are a good idea. I ran the number on our facility and moving from natural gas boiler heating to electric would have been iirc something like 8-12x more expensive, even before buying the very expensive heaters, and I'm fairly certain that for higher temp operation(our steam system was low pressure) it would be even more expensive.

There are a couple other stand out problems I see with getting the industrial/manufacturing sector off fossil fuels. First, I don't think that we have the grid infrastructure to replace natural gas with electrification at the same time we do cars[1][2]. From what I understand its something of a problem already for electric car charging, and industrial use of gas for heat (and saying nothing of trying to replace the petrochemical industry, interesting read on all-electric ammonia production [4]) is pretty staggering as well; electric transmission is some substantial multiple less efficient then direct heating with Gas. I think this is kind of the opposite of electric cars which tend to be more efficient than ICE, but again I'm not an expert and am not at all sure that is true of cars, just my impression which seems reasonable intuitively, as turning fuel directly into heat has essentially 100% efficiency while turning fuel into motion can only be some fraction.

Second, super cheap electricity is extremely fungible, so it becomes a prime candidate for Jevon's Paradox[3]. I feel that there would have to be some "unfair" power rates for heating for electricity to supplant natural gas unless we implemented massive carbon taxes, in which case return to my first point about off-shoring.

I can see how it would theoretically make sense to put industry right next to large power generation sources, like dams, solar array/ battery installations, or nuclear power plants(lol), but a lot of these operations aren't exactly trivial to move, and our current climate of Environmental regulation makes moving these sorts of things that much more difficult. Also manufacturing requires a not insignificant amount of logistics/shipping so transplanting them to power generation sites has its own set of drawbacks.

All in all, I try to be a techno-optimist, but seriously worry that humanity's ad-hoc system of organization (that's rife with corruption) will be our downfall in this global climate crisis we've created. So far I can't see a way out of this without a breakthrough in power generation and a breakthrough in carbon capture or some other unforseen-by-me break through. Really I just don't see our current tech stack as being capable of getting us out of this mess. So here's hoping that high-temp super conductors bare fusion fruit, and this gallium catalyzed CO2 splitting is the real deal.

[1]https://www.pewtrusts.org/en/research-and-analysis/blogs/sta...

[2]https://www.nytimes.com/2021/01/29/climate/gm-electric-cars-... (has additional good links as well)

[3]https://en.wikipedia.org/wiki/Jevons_paradox (fun fact, I've used duckduckgo for many years now, and this required the rare !g to find without knowing what the paradox was called off the top of my head. my query was: "the cheaper something gets the more it is used", top hit on big G, nowhere to be seen in the DDG results)

[4]https://www.cleantech.com/green-ammonia-potential-as-an-ener...

Air source heat pumps are more efficient than gas boilers so total energy usage would decrease [1]. Running costs are also lower, but installations cost are currently higher.

You would need to generate more electricity, although this could be mitigated through improved insulation and smart control of heating systems (for example turning off the heating for 30 minutes during spikes in usage, assuming the temperature is above a certain level).

[1] https://www.edfenergy.com/heating/advice/air-source-heat-pum...

I'm not particularly thinking of domestic heat production, I agree that heat pumps (ground source, or a pool if you have it, works even better!) are the future of domestic HVAC. I'm thinking about heating for industrial processes, turning off the factory for 30+ minutes during a useage spike is a minor catastrophe if unplanned, you'd either have to design your shift around it (we had time-of-use power pricing and did this) or just close down. I won't rule out heat pumps as being part of the solution out of hand, but from your source:

>Lower output temperature than conventional boilers – you may need to update your insulation and invest in bigger radiators too

is a pretty big problem when you are trying to heat industrial quantities of things up to industrial process temps at industrial rates.

- People realize what a game changer it is to charge your car overnight and start every day with a full tank of "gas". It's a tiny detail, but a car that can only go 100 miles before needing to refill the gas tank is annoying. A car that starts every day with a 100 miles of range is terribly (for the oil companies) convenient.

That one is complicated a bit by housing situation - but if, if, cities and freeholders get serious about ensuring every possible parking spot (including unmarked ones) has a convenient electrical outlet nearby, that would be a game changer.

In a sense, this would be much cheaper and more convenient than supercharger stations - but what it trades in infrastructure saving, it costs in getting myriad of land owners and councils to make it happen.

You're totally right but again thinking globally, different cultures handle housing in a manner that supports that. I'm thinking of Japan, where they rebuild houses every few years because they're old. Which results in most houses having electric car plugs in them. I have no such hope for my SF condo that I'm writing you from. Maybe I can run an extension cord out of my window to my car parked on the street?

> I'm thinking of Japan, where they rebuild houses every few years because they're old.

This is myth. 35yr loan is pretty basic, most loan supports up to 50yr. We can see many houses built 35yr ago. Anyway, installing EV charger is easy task for own house. It just takes about from $200 if 200V line is available. I believe mostly available unless the house is very old.

More importantly, there are many condos and parking that's hard to install charger due to it need to be approved in condo committee.

I don't worry about a lot of the NIMBY with self-charging. It'll be like bike lanes, once people discover they increase property values, or at least keep them from sinking, it will be a done deal.

>But my theory with petroleum is that it has so many HUGE economies of scale built into its production that a demand collapse will send it into a rapid tailspin.

THIS! Thank you for bringing this up. Few people talk about this coming death spiral. This is really going to mess up a lot of countries incomes and may have severe worldwide political ramifications. In your opinion when do you think it will trigger? It feels like when it does actually happen, its going to happen quickly. From my vantage point in the US it still seems like the majority are not realizing what is coming. Hell Companies like Ford are still introducing new vehicle platforms in ICE configuration only (Ford Bronco for example) and people are buying them up without any consideration as to the future so I suspect it won't happen this decade.

I don't know enough about the economics of the fossil fuels supply chain to make a reasonable calculation.

In terms of your other calculations your targets seems very reasonable. Its amazing at how Tesla is iterating so fast on things like Battery and Motor design. Its super sexy to see the new stuff they keep pumping out(even if the founder seems like a jerk)

Anyone intentionally investing in fossil fuels today is delusional. These companies should have died years ago, but they've managed to delay the inevitable by lobbying to delay action and protect their massive subsidies.

Tesla has shown electric cars can be superior to gas cars in all but one metric (road trips) and they're closing in on that. Wind and solar are now cheaper than coal and in some markets cheaper than natural gas. At peak times electricity from renewables is so cheap its creating a gold rush to develop low cost energy storage to soak up all the dirt cheap electricity that's being produced.

Theres also companies who can produce synthetic liquid fuels with co2 from direct air capture using renewable energy. With a decent carbon tax they could compete directly with fossil fuel companies but eventually renewable energy should be cheap enough that they won't even need a carbon tax.

Fossil fuel companies are as good as dead. They just dont know it yet.

I think that’s definitely true for some of these, and I wouldn’t be as surprised by TSLA having a higher market cap then all of these companies. It’s the combined bit that’s weird. I think ExxonMobil would position itself more as an “energy company” than an “oil company” for instance, and I doubt it will just roll over and die.

I'd agree, but what's the oil company play for relevance? I believe algal biofuels are a failure. Even plastics are under assault, so they can't retreat to materials. Nukes are too far from their backyard. All their carbon capture is pump-into-the-ground and pray/lie to the regulators.

Honestly though, I think this is what they have going for themselves:

- a large amount of smart, if unprincipled, engineers.

- a huge apparatus for government lobbying

- maybe a lot of capital, or at least some window to invest in switchover?

- generator knowhow (turbines, etc)

- global logistics systems

The government lobbying is the key. If there is one industry that could get LFTR/NextGenNuclear off the ground it would be the oil/gas people. The legacy nuclear industry has no ability or desire to produce a nuclear power gen solution that is competitive not only with current day alt energy, but the alt energy that will be in ten years.

I'm the guy that tells every pro-nuclear post on HN that its infeasible to chase whatever gee-whiz design is being discussed because of the ten year lead time and that storage/wind/solar are still on nonlinear cost improvement curves.

But the oil/gas industry DOES have the political juice to chase that at the multiple levels of federal/state/local/military/civilian that it would require to get a cost-effective small-scale nuclear reactor solution like a LFTR/MSR.

But that really is a pipe dream. That would require foresight from the executives, and executives in fading industries almost always just ride the companies into irrelevance, and most importantly for the executives, retirement/pension, and of course huge out-the-door "retention bonuses" in the dying days.

Turbines, nuclear, fusion, renewables is the play for relevance. That and squeeze every last drop out of the last century of fossil fuels. Many won't survive, but some of them will pivot in time/have enough burn to pivot later than they should have.

Exactly what Total did: they rebranded themselves few months ago as TotalEnergies...

With many developed countries passing laws to ban the sales of petrol and diesel passenger cars by 2030 or 2035, do all the companies you mention actually have a strong future of growth?

Do you want to buy stocks in companies that have a strong future of growth, or who have always made a lot of money doing one thing, and expect to keep making money doing that same old thing, even though it's clearly not going to last.

While they're not going to die overnight, I suspect they're not going to be worth all that much by 2050, and ~nothing by 2075.

So if they’re so big now, why can they throw more weight around than energy companies in terms of getting rid of the fossil fuel lobby?

Because market cap is just the crazy value investors have attributed to the company. It doesn't mean the company is any bigger or smaller.

But it means their cost of capital can be lower - for example, by issuing new shares to capture some of that high market cap. Then they can expand much easier than a competitor who cannot get such good rates for new share issuance.

They kind of can.

Example: the australian PM who repealed their carbon tax, is now working with his coal baron buddy on a green hydrogen plant. He's now calling for a ... brace for the irony ... carbon tax to help his new business.

edit: correcting myself, getting two PMs mixed up, Turnbull scrapped new Carbon Tax plans while PM, under pressure from Abbot (who he replaced as PM), who in turn had scrapped an existing carbon tax. Still demonstrates the slow shift of the well-connected politicians to follow the money.

One way to explain this is that “goodwill” is an intangible that shows up on the balance sheet, which must always be balanced. Assets = Liabilities + equity.

Goodwill is on the asset side of the equation.

Basically, Tesla stock owners consider the company to have ambiguous secret sauce of the right employees, IP, brand recognition/reputation that makes it more valuable than its current on-paper business activity.

Or, it’s just a stock that they believe they can find buyers for – a belief which has been proven to so far be true.

They are also an innovation engine. You have to value all of the things they havent created yet but will.

What part of their market cap is unrealized tech dreams and what part is substance, in the traditional value investor sense, in your opinion?

>unrealized tech dreams and what part is substance, in the traditional value investor sense

Companies like Tesla are not for traditional value investors. Bonds and boring stocks or ETFs serve that purpose.

That's just evading the question.

Tesla price to revenue is 20x - a pretty normal for a tech company.

Tech companies generally sell software or ad space with near-zero marginal costs. Tesla does not.

Not really. The modern tech companies, FAANG, and many doing SaaS, etc. consume highly expensive labor and consume it while not linear, yet still in some significant correlation to the revenue, thus one can see that they have kind of significant marginal costs. While Tesla's marginal costs will more and more will be dominated by the R&D.

I uhhh you are kidding right? Sounds like those metaverse crypto scams...

Well people can short Tesla. I heard this under evaluation among solo traders. But Tesla is having a lot of money in crypto afaik. So it often may seem, their profit in cryptos increases their total val.

Maybe what you're saying is true regarding the company itself, but it's a meme stock. You go down and talk to people, people will say that yet wouldn't actually invest in the basket of companies of those industries.

It's not a problem for Tesla or Elon per-se, but we shouldn't assign intelligence to people basically voting for their favs with their wallets.

Shouldn't also blame these people, because the stock market is as much prescriptive as it's predictive: if enough people "vote for their favs with their wallets", those favs may actually start (or keep) doing OK because of that, if they're not completely incompetent.

(Myself, if I had some funds that are not already earmarked for something more important, I'd dump some into TSLA just as an expression of support to Musk and electrification of transport. I'm sure many people did just that, with no expectations of return.)

People are generally shifting toward green investments in their long term portfolios in my little sphere of the world, but Tesla typically isn’t one of them because it’s considered too risky.

That risk is what made a lot of people rich of course, but investments in green energy companies in Denmark have seen a 15-35% increase in value, year by year, over the past decades without any real risk. It’s been safer than index funds here.

All energy companies have really, but you feel better when they are green.

Tesla may yet revolutionise batteries the same way the personal computer or the smartphone became something we all have, and thus be the best investment you could make right now, but it also might not.

The energy companies on the other hand aren’t going to stop selling a steady flow of energy to people. Why we let investors benefit from utilities is another discussion, but as long as we do, it’s going to be some of the safest investments you can get into.

Isn't Tesla one of the least capital efficient ways to invest in transport electrification? How much of that will end up in genuine R&D and furtherance of your aims, as against paying for transient meme interest and massive risk loading?

Tesla spends like 5x as much per car on R&D.

They literally developed a completely new battery manufacturing factory and cathode plant from the ground up. Plus of course their own batteries with their own chemistries. No other car company comes even close to that.

They are vertically integrating to the point where they themselves are building their own battery manufacturing equipment.

They are even slowly getting into mining themselves. And of course solar, stationary storage and so on.

Hard to see what company is doing considerable more. Tesla is doing a pretty large amount of innovation.

I don't know where your figures come from. I've seen Tesla's 2020 FY R&D expense was $1.5Bn, but that is dwarfed by the other players if the linked data is correct[1]. So apart from paying a massive premium, dollar for investment dollar you'd get much more R&D for your money buying a basket of non-Tesla automakers than tesla.

[1] https://www.statista.com/statistics/566060/automotve-firms-b...

Per car their investment is very high.

We will see if they sustain that, but it looks like that is their plan.

Every car manufacturer is a supply chain and and owns their own component production. Ford owns Motorcraft. General Motors owns AC Delco.

Tesla doesn't have nearly the size of the distribution network of any of the oil companies.

The fact is Tesla was trading at 1000x historic earnings, and 161x future earnings, or to put it another way, 10x any other car manufacturer, and this this was before this deal. [0]

This simply doesn't make any sense.

[0] https://www.tradestation.com/insights/2021/04/08/tesla-overv...

As long as Tesla can grow at or around 50% a year all those numbers you are using are useless. They will be halved every year from the current level. Yeah right now its seems crazy, and it is a unbelievably high valuation. But its more a sign of things to come.

The other OEMs are laden with debt, which Tesla doesn't have so any comparison there would be at the EV level which doesn't make Tesla look that out of line considering it is about to overtake in 3-4 years most of the companies it is compared with. Also that debt the other OEMs have, was used to build ICE factories and technologies which are quickly becoming outdated.

If and its a rather big IF I'll grant you that Tesla manages to achieve what they aim for which is 20 million cars in 2030, thats effectively 1/5 market share globally. Add into that the energy storage, charging network, solar roof tiles, AI and FSD.

However any signs of growth weakness or interest rate changes will wreak havoc for sure.

Even if Tesla falters, the other LICE OEMs are destined to fail, maybe 1-2 survives (GM/VW), the cat is out of the bag and what looked like a totally entrenched industry has been blown wide open by Tesla, and loads of other startups are following through.

Tesla needs to execute, and I’m not sure that’s their strong suit. Sure they identified that it was finally time for the electric car, and made an electric car that wasn’t ugly as sin (gdiaf CitiCar and EV-1), but theiyre plagued with manufacturing delays and poor workmanship. The other manufacturers simply are better at putting quality cars out the door.

Sure they were late to the game, and but it’s not a foregone conclusion that Tesla (or any startup) is going to dominate this market.

As for AI and FSD, I’ll put my flag in the sand. We will not have production fully autonomous self driving cars (ie cars without controls) on uncontrolled surface streets in 20 years. From what I understand, the technology has hit a plateau, and there’s just way too many edge cases. If this wasn’t the case, you wouldn’t have people like Andrew Ng going around telling people to redesign cities to make it easier for robot drivers.

If it does happen, it’s not going to be Tesla. I don’t think they’re the technology leader here. Last time I read something, Cruise and Waymo were leading, and Elon’s insistence on not having lidars was holding Tesla back.

Well, the fog of 'war' is thick right now. I've chosen to place my capital and belief with Karpathy and Elon. Tesla seems like to best multivariate bet and it's priced like a winner in that respect.

With regards to execution, I don't think anyone has done a better job of scaling physical production faster than Tesla? And you don't have to like Elon but he sure does know a thing or two about this.

I've heard both the quality argument and the Tesla killer argument for so long that I no longer believe it to be true. If they could, they already would - I would suggest that you drive a Tesla for a couple of days, then go back to ICE. All the revving of the engine and performance hooplas seems so last century after that. A comparison kills the ICE alternative (except for long ranges atm).

The consumer will if given a choice (Tesla supply is restriced) choose the best offering at the lowest price and everything is lined up for Tesla to be just that.

The big joker from my perspective is what the EU / US / Japan / Korea will do to ensure strategic production capacity / industrial strength capacity, enormous subsidies are definitely on the table.

China is all in on electric so they have nothing to lose.

> With regards to execution, I don't think anyone has done a better job of scaling physical production faster than Tesla? And you don't have to like Elon but he sure does know a thing or two about this.

Does he though? Elon's hand can be traced directly to production and safety issues. Lest we forget his hubris in trying to do final assembly with robots, a task that was tried and dismissed by multiple "legacy" manufacturers, and directly resulted in defects and manufacturing slow downs. He's not even technically a founder of Tesla. He partially financed the A round, and then started telling everyone he founded the company. Even SpaceX widely seen as Gwynne Shotwell's baby. I will say that he he's enough money and a fan base to make a bunch of meme stocks. That's something.

As far as driving a Tesla, I have. I test drove a Model S several years ago. I thought the regenerative braking was weird, but something I would have to get used to. I liked the exterior of the Model S, but I did not like the interior. I thought it was ugly and empty (a personal preference), and the infotainment system a cruel joke that not only lacked features common on cheaper cars (CarPlay), but was filled with knockoffs (Slacker instead of Spotify or Pandora, and Google Maps without Google turn-by-turn in particular) and pointless gimmicks (Paint). Even with their v10 update that brought Spotify to the US (finally a win), also brought a bunch of video streaming services that only work when the car is in park. (Why bother? Just use your phone.)

I think you should compare a Model S to a Porsche Taycan. They're comparably priced plugin electrics, but the Porsche is well... a Porsche, a finely made automobile with attention to detail. A Model S is slapdashed together; but you're right, Tesla buyers don't seem to care. Also, for some reason Tesla owners purchase their cars instead of leasing them, the only electric car owners to do so. I can't explain either of these facts.

I also question the quality and flexibility of the supply chain Tesla has. During the start of COVID, Tesla GM and Ford said they'll manufacturer ventilators. 2 out of 3 reconfigured their assembly lines to mass produce ventillators. One bought CPAP machines from China that hospitals had no use for.

On the automotive side, they are also a worldwide dealership network, a nascent insurance company.

Name a mass market international car manufacturer that doesn't have a worldwide dealership network and an absolutely massive financial arm?

AFAIK, the major car manufacturers' dealership networks are franchises. Yes, they have massive financial arms but they are for financing the vehicles, not for insurance.

Car manufacturers aren't by an large allowed to own dealerships in the United States. The point is, the number of dealerships is a good proxy for demand and sales. Also, dealerships by and large don't make much money on the sale of cars (due to having to purchase the cars from the manufacturer), but rather they make their money on the service and repair of cars. Even then, they're not really rolling in the dough.

General Motors's old financial arm was GMAC, now Ally Bank. Under General Motors's ownership, they offered credit cards[+], mortgages, and were in the insurance market since 1939. This is not an innovation.

[+] This was the only credit card my parents had for over a decade.

> but rather they make their money on the service and repair of cars. Even then, they're not really rolling in the dough.

Car companies already make huge money on service. Plus in sum, all dealerships combined make huge money on service.

Once Tesla has an large aging fleet they will make an absurd amount of money. Something people don't yet consider is that Tesla has been losing massive amounts money building out their global service network and because of having no fleet, making little money from it.

Tesla has industry leading margin now, while having negative margin on the highest high margin business for traditional companies.

It's not a good proxy for comparing demand and sales between Tesla and, say, GM. GM has a network of franchisees and Tesla doesn't, because Tesla wants the profits (sales, service, whatever) for themselves, but state laws won't let them own dealerships.

So, if you want to compare GM and Tesla's market caps, you need to lump the appropriate fraction of GM's franchisees' market caps in with GM's in order to make them comparable.

I've already addressed sales. It was trading at 161x future earnings before this deal. That's an insane multiple.

As far as summing up dealerships, let's go!

Tesla has 438 stores worldwide. Toyota has 1500 dealerships in the United States alone. GM? 4500 in the United States.

Do you honestly think that if we summed up all the Toyota dealerships in the world, it would be worth $750 billion? I don't, but that's how much they'd have to be worth to give Toyota a market cap of 1 trillion dollars.

Or to flip it around, even if we spotted Tesla manufacturing 2x Toyota. (Toyota is the most valuable manufacturer by market cap at $240 billion.), that would mean those 438 stores have to be worth over a billion dollars EACH.

It's even worse for General Motors. Their market cap is only 84 billion. The entire worldwide network of dealerships would have to be 11x General Motors proper, or over $900 billion dollars.

https://finance.yahoo.com/quote/TM/

https://finance.yahoo.com/quote/GM/

Agreed about 161 years, though I'm not sure how you can say "161x future earnings"; we don't know what the future earnings are, because they're in the future. I presume you mean "161x current [annual] earnings".

Generally I'd expect service and repairs to be of the same order of magnitude as sales, because if you have to spend $5000 a year to service and repair a $20000 car, you'll probably junk it and buy a new car that breaks down less, while if it costs you $500 a year to keep it going you'll probably either keep it running or sell it as a used car. One revenue stream might be two or three times bigger than the other, of course, and the profit margins might differ, and the dealerships don't capture all the service and repair.

I'm not sure what the number of dealerships tells us about the relative earnings potential. B. Dalton had more dealerships than Amazon ten years ago. (Or do we count B. Dalton and Waldenbooks as "dealerships of Hachette and Penguin Random House"?)

We can probably do a reasonable Fermi estimate of total dealership profits, though; 1.3 million car salespeople in the US probably means about US$60 billion in car sales commissions per year, which is about US$250 billion in car sales per year and something like US$25 billion in dealership profits; at a reasonable P/E of 30 years, the capital stock of US auto dealers would be worth about US$750 billion in total. https://policyadvice.net/insurance/insights/us-auto-sales-st... says the number of new cars sold in the US is 17 million a year, which suggests that these figures are in the ballpark, since it would mean that the average car cost US$14700, which seems maybe a little low for the US but not absurd. However, used cars are an additional 40 million a year, so maybe US$1.5 trillion for the capital stock of US auto dealers. Adding in whatever they make on sales and service, say US$3 trillion.

The worldwide number is 74 million new cars per year, 4.4 times the US number, so if we just multiply the US number by 3 (probably the average car in the US costs more), we get US$6 trillion for the value of hypothetical worldwide car dealership capital stock.

So, yeah, it does seem plausible that all the Toyota dealerships in the world would be worth US$750 billion, with similar numbers for GM, Fiat, etc.

Another thing, though, is that Tesla's vertical integration goes both directions, and you're not counting companies like American Axle & Manufacturing, Mold Masters Co., Grand Traverse Plastics, and Bosch as part of GM's market cap either.

So, I think buying TSLA at a P/E of 161 years is a pretty daring bet, and there's a significant chance it won't pay off. But I don't think the comparison to other car companies makes it look nearly as crazy as you make it sound, even if TSLA doesn't end up running our power grid on its batteries.

There are 16,708 car dealerships in the US. You claim the total market cap of these dealerships is $1.5tn? For a value of $90M per dealership?

Autonation is a publicly traded network of car dealerships. Market cap of $7.9bn for 545 locations. That's $14.5M per location.

Most other OEMs don’t own much dealers. Tesla is more like Apple by owning their own retailers and controlling the whole value chain.

Exactly what so many people are missing. Unlike other car companies, Tesla run almost the whole value chain themselves, from software to hardware. In a way, they're an amalgamation of Blackberry and GM and Exxon and whatever in between. And they're also going into AI robots and home solar.

While these may be hits or misses, they underline the immense market penetration of Tesla. They're not just cars, which is why many investors project a much higher valuation for them in the coming years.

That’s true. But also, presumably, these companies outsourced their supply chains etc because it was (or seemed) profitable.

There is still a disconnect for me. First everyone outsources, apparently successfully for automotive, and that’s great, all these joint ventures between car makers etc. Then Tesl comes along, integrates everything, and poof that’s also good..?

I'm guessing the automotive industry benefited more from outsourcing because they were heavily unionized. Outsourcing parts allowed them to get the parts from sub-contractors that didn't have to pay union wages.

Tesla started much later and didn't have this problem.

So is Tesla another labour rights arbitrage at heart? That would make me sad.

It feels to me that even taking the company at face value, this valuation is just silly. And I thought that for years, so clearly as a short-seller I’d be toast. But the more the price levitates, the more unreal it feels.

No it isn't. The difference between union and non union is far smaller then people have in the idealistic fantasies.

Tesla employees are payed just as well, and with stock options they actually historically have been paid WAY, WAY better.

The thing about Tesla is that its forward looking for a long time since they have a stable leadership with a clear long term plan. This leadership has been leading the company for more then a decade and all their plans have worked out.

Tesla now certainty is worth now what they were valued at a few years ago.

For myself, I would already consider electric flight as part of their future revenue. Its a logical next step but it will take 10 years. Of course I can understand that other people think this is crazy. But flat out, for me, I see them growing 50% a year for many more years with no end in sight.

> For myself, I would already consider electric flight as part of their future revenue. Its a logical next step but it will take 10 years. Of course I can understand that other people think this is crazy

That's extremely unrealistic. The aeroplane industry is extremely complex, and there are heavy regulations where (hopefully) Tesla's "move fast and break things" + use commercial grade stuff and refuse warranty ( was it the chips in their screens or the screens themselves in some models that were not made for constant use in a car) approach won't fly. 10 years is a decent development time for a plane, if you skip the parts that Tesla have no experience with it and there'd be plenty of R&D to make them work. For reference, Bombardier, a company with decades of aeronautics experience and an established supply chain, started work on the C-Series in 2004. First flight was in 2014, first commercial service in 2016, and it nearly banrkupted them. Unless Tesla are already currently working on an electric airplane, i call bullshit on them having one in 10 years. Considering they already have the truck and semi which are oversold and underdelivered/delayed, do you think they have the capacity to tackle such a huge undertaking any time soon?

As to your other comment that Airbus won't do it - they've been on it since 2010:

https://www.airbus.com/innovation/zero-emission/electric-fli...

If one of the biggest companies in aviation has been working on it for a decade and doesn't have anything commercially viable yet to show for it, and estimate it will take them another decade for this, what makes you think a company with no aeronautics experience and history of overpromising and underdelivering can do it all in a decade?

> That's extremely unrealistic. The aeroplane industry is extremely complex, and there are heavy regulations where (hopefully) Tesla's "move fast and break things" + use commercial grade stuff and refuse warranty ( was it the chips in their screens or the screens themselves in some models that were not made for constant use in a car) approach won't fly.

People said the same about SpaceX. And yet they beat everybody. Tesla already works with SpaceX in a number of ways.

Do you think Musk or Tesla are not able to adjust to different industry? Are they so bull headed that they will say 'we make cars like this therefore we make planes like this'.

Tesla and SpaceX working together have the technologies required and the financials to do it, and just as important, the will to do it.

> was it the chips in their screens or the screens themselves in some models that were not made for constant use in a car

That this is still the example of 'look at this terrible company' is just embracing. A relatively young company on its first mass produced car made a mistake. Therefore for the rest of history they can never accomplish anything and they will forever be known as 'the company that selected the wrong screen'.

> it nearly banrkupted them

Tesla has better finances and ability to raise money.

> Unless Tesla are already currently working on an electric airplane, i call bullshit on them having one in 10 years.

Maybe that is the case, I don't have a fixed timeline. What I care more about is who will have it first, who makes the best and at what price can they produce them.

I don't think the existing companies will push hard enough.

I do think they are already working on battery chemistry needed for the airplanes. That is very much most difficult and unknown part about electric flight.

> Considering they already have the truck and semi which are oversold and underdelivered/delayed

The primary issue is battery supply. More products with a fixed amount of battery-supply does not mean you make more money. Overcoming battery supply and improving battery quality is the primary task right now.

> As to your other comment that Airbus won't do it - they've been on it since 2010:

Just as existing car manufactures had been working on EV since the 1970s. I think they are adopting some wrong strategies and they have very little intensive to kill their existing business.

The German car manufactures were still committing Disel gate when Tesla was producing EVs.

> estimate it will take them another decade for this, what makes you think a company with no aeronautics experience and

Maybe my estimate is wrong, but the earnings potential is there even if it takes longer. And Musk and SpaceX have lots experience.

How much experience did Tesla have in battery design and battery manufacturing 10 years ago? Almost non. 10 years later they literally have the highest output and fastest battery manufacturing line in human history producing their own cells with their own chemistries.

How much experience did SpaceX have with space capsule designs? Non in 2009 and in 2020 they launched humans. Lets consider relanding rockets, in 2011 they started working on it, they did it in 2016 and its totally routine now.

You can do amazing things if you have the will, the financials and the people to put behind an effort.

> history of overpromising and underdelivering can do it all in a decade?

People are so obsessed with that. They under-deliver because the promise insanely ambitious things. And even when the underdeliver, the results are still great. Should I be mad that they didn't deliver the Semi yet when instead the manage 50% YoY growth without it?

Why is nobody impressed that they are hitting their buissness targets WITHOUT interducing new products. That seem to be totally ignored, specially when 'lack of demand' was the main criticism of Tesla for a long time.

As it was with the Model 3, first people believe it want happen. Then when it does people say it wont scale. And then it will come on big. The Semi when it comes out will be just as demand constraint as rest of Tesla cars. Tesla will be a huge part of the global Semi market, I have little question about that. Its not like the other players in that space are rolling out massive amounts of electric semis yet either.

And anyways everybody will be battery constraint so for everybody Semi in large rollout will be tricky for everybody.

Again, I don't care if people don't agree with any of this. I don't give investing advice. Don't gamble with money I can't lose. There is a big chance this wont happen.

youre right that at least one person thinks thats crazy. Strange how we all see what we want to see in the end. Myself included.

My thing is that I invested where the stock was way lower, so even if it goes down a large amount I am in the black.

I simply believe in leadership, no company with Elon as a CEO has really failed to grow. The closest is maybe Solarcity but he was not CEO.

Tesla threw Elon has strong connection with SpaceX. They already share material science. SpaceX uses Tesla battery technology. The connection is strong. Electric flight (not flying taxis) is a clear next step for both companies and Elon has been wanting to do it for a decade. It will take another 3-5 years before this is a serious project, but I don't think any other company is really up to it. Boeing and Airbus are not gone do it.

Until then I see continue 50% growth for a long while based on EV and Storage.

If Self-Driving works out, its massive. I am not counting on that. Even just as a advanced level 2 system its a great asset. But if it works out, the potential value is huge.

> Tesla’s stock price is confusing if you compare them to a car company. But they are not just a car company.

Tesla's stock price is confusing because it cannot be explained, let alone justified, by any market analysis, results, or market price calculation. It's purely willingness to pay driven by meme stock speculation.

> They are also a car manufacturing supply chain, having brought much of their component production in house.

This assertion makes absolutely no sense given that Tesla's market value is currently greater than Volkswagen's market value, and by no means is Tesla even comparable with Volkswagen in terms of any of the criteria you've brought up.

Stock prices are more about growth potential than existing size. Tesla is valued more than Volkswagen because it is expected to be bigger in the future (or VW is expected to be smaller in the future, or a mix of both). We’ve been through this before with tech stocks, and the enthusiasm for future growth has shown to be often correct, and also often incorrect. Playing the market is a bit crazy like that.

If your business model is an affine combination of other business models your valuation should also be an affine combination of the valuation functions of these business models. This is not the case for Tesla.

Do we actually have a detailed document explaining how much of their component production is actually in house? It seems like there are A LOT of common components between Tesla and others while at the same time they are clearly doing a lot of in house things that others dropped decades ago. (eg. Seat Production, having metallurgy department to come up with better alloys etc.) These are things other OEMs tossed to the curb decades ago.

> They are also a car manufacturing supply chain, having brought much of their component production in house. They are also an energy company, both generation and storage, but also distribution, like gas stations.

So basically a car company. GM makes their cars in-house. They own their own parts supplier (acdelco) and charging/distribution network (Ultium Charge 360). Ford and Stellantis are working on the same.

Like other car companies, also their own finance arm.

Tesla is an amazing company, however, still hasn't reached the peak of inflated expectations. As a seasoned equity investor put it:

"Tesla the stock isn't being valued by any metrics that make sense and today investors are paying too much for their future growth which is dangerous."

I am very happy with the Tesla company, CEO, marketing, and cars, but I can't believe that it should be worth 1 trillion dollars. A trillion is one with 12 zeros.

I know you can't compare valuation and production of a company, but still. If Tesla were making 10,000 dollar profit per car - and they don't - they would have to produce 100 million cars just to make a trillion. They produce less than 1 million per year. I know they also sell batteries etc. but it's still mainly a car company.

Their yearly profits might be a few billion. So their value is more than 100 times their yearly profits. This is insane for a manufacturing company. Currently their P/E ratio stands at more than 330. VW, a very well run auto manufacturer has a P/E ratio of less than 6, Ford 17, Mercedes-Benz 7, BMW 5, Hyundai 15.

These are all companies with electric cars on the road and a future that is totally committed to electric vehicles. These are all companies that already have production facilities, etc.

I like Tesla and their business model. I just think the stock is hyped way beyond what is sustainable.

Stock is usually valued at 10x profits, so they just have to 10x production to be quite resonable (given your assumption).

Note, the EV revolution and Tesla being the winner of the EV revolution are different outcomes. They're certainly winning the EV race now, but it's possible that some of the other car companies can overtake them.

The bear thesis for Tesla has been something like, "Tesla might have an innovative EV-first design, but when the major manufacturers with a century of manufacturing know-how wake up to EVs, they will drown Tesla in vehicles."

I think part of what's driving the increase in Tesla's value is the realization that this thesis was wrong.

Tesla is now beating all the established manufacturers at gross automotive margins, and it's really not close. Toyota is around 18%, Ford and GM around 15%. Tesla is up at 27%.

Part of that might be demand-driven higher prices. But Tesla continues to reduce their cost of goods, and Tesla has emerged as the most innovative manufacturer, which we already see in teardowns of the Model Y, with huge sections cast as one piece, but particularly in the design of Cybertruck, and Gigafactory.

Tesla is far out in the lead on software. They appear to be rapidly improving on manufacturing. Tesla has paid down its debt with stock issuances, the company has $16 billion cash on hand, and the ability to go get a lot more nearly for free.

If the major manufacturers aren't going to catch Tesla with manufacturing prowess, or capital, what are they going to catch them with?

The major manufacturers still might catch up - once they really start caring. I agree with the posters elsewhere in the thread that predict the fossil fuel industries will collapse rapidly, rather than gradually - and the way I see it, major car manufacturers are still mostly trying to extract as much value now as possible from the ICE market.

But once the floor falls off? They won't go gentle into that good night. I expect a wave of bailouts, consolidation and rapid retooling (and playing every dirty trick in the MBA book there is). I wouldn't discount the possibility that some of the survivors will have enough infrastructure and engineering competence remaining to quickly become a serious competitor for Tesla. In parallel, Tesla itself may fall prey to one of many ways companies decay over time. And then, of course, there's China.

But all in all, as long as Tesla's current performance pushes EVs over the threshold of market acceptability (which I believe it did a few years ago) and gives it some serious momentum, it's "mission fucking accomplished", regardless of who's the market leader in 10 or 20 years.

The new all electrics from all the big auto companies are pretty good. As long as they do well enough to keep producing them, it will be incremental improvement year after year. I think Tesla has a good lead, but there is not going to be much value difference in a car that can go 600 miles on a single charge vs 300 miles. Or 0-60 even faster than 2.5 seconds. Once the big makers get within spitting distance of a Tesla EV (and I think they already are there). They will be able to really start eating into that market as their ICE market starts to fade.

Yeah I sometimes think the rhetoric doesn't map onto reality:

https://www.auto123.com/en/news/best-selling-electric-cars-w...

https://www.torquenews.com/1083/these-evs-declined-sales-ame...

Tesla clearly deserves a lot of credit but I think the EV space is a lot more fluid than some Tesla proponents would have you believe.

As EV adoption increases into more markets, buyers are going to be more price conscious, and plenty of makers (most of the big companies?) already have a foot in this space. Add missteps with safety or reliability in the long term (see: defrauding the Dutch government and the public about safety) and I think things might change quickly. Tesla isn't going anywhere but the idea that Tesla is the future EV market seems dishonest, naive, or both.

It's only a start for them when they'll start caring. Arguably, Volkswagen has been caring for a few years and they are just starting to produce decent EVs, somewhat comparable to Tesla.

It took VW so long because they developed a platform rather than individual cars for their dozen brands.

> If the major manufacturers aren't going to catch Tesla with manufacturing prowess, or capital, what are they going to catch them with?

Brand loyalty or aspiration that predates EVs; cheaper entry price (already happening); build quality; better UI (the giant touchscreen is a negative for a lot of people).

There are lots of reasons to buy a non-Tesla EV. I know people who, being told that the Mach-E wasn't going to be available for a while bought another ICE to drive until it was ready. I know people who bought Hyundais instead of Teslas. Heck, one person even opted for a plugin hybrid because only the Tesla had the range he needed for work and he didn't want one.

A good chunk of people I know are already opting for not-Tesla EVs. It's a brand that seems popular with a subset of the population, but doesn't have the widespread love that people on HN seem to assume.

I also think it's weird that people are comparing margins on ICE vs EV cars. Obviously, those will different. You want to focus on their margins in the EV space.

Further to this, Ford are only able/planning to make 80,000 electric F-150 pickups in 2024.

So clearly the major manufacturers are not going to beat them on sheer volume either.

It would be interesting to revisit these numbers after including warranty claims. Toyota is someone that puts big emphasis on that part, so the difference when looking at something like a 3yr ownership might be a lot smaller, if not maybe even in Toyota's favor.

OTOH everybody is in a bit of an uncharted territory with the EVs and SW heavy cars. VW's new Golf has been riddled with SW bugs, and their EV line has not avoided it as well. But the body panels, interior materials... And Tesla (Musk) has said they need to improve the build quality and lower warranty claims.

So like I said- would be interesting to revisit these numbers, maybe not now, but in a year...

What about China? They really want to win that race, is there a reason they wont be a serious competitor?

China's internal EV market is enormous, and by any reasonable metric Chinese manufacturers are already "winning that race". Several major cities have fully electrified their bus and taxi fleets for example, and most of those vehicles are made by BYD Auto, which was delivering more cars per year in 2012 than Tesla does now. But there's plenty of EV market to go around, both in China and elsewhere. BYD doesn't currently ship private cars outside China, only taxis and commercial vehicles like vans, buses, delivery vehicles, utility service vehicles, but this can change rapidly. The main reason this isn't currently happening is that they don't want to deal with consumer support outside their core market, and are more comfortable with institutional customers. However, I don't see it as a race. The main thing holding back EVs in both the Chinese and non-Chinese markets is infrastructure and obstructionism by fossil interests. I see that changing quicker in China than in the West (but I still have hope) so it's more likely Chinese EV manufacturers will expand more in China than internationally, until they see a more valuable market. Tesla is much more aggressively expanding in the West, and building out their own infrastructure to do so, and are the primary focus of the hate by western fossil interests.

If and when the landscape on the western markets changes to be regulatorily more favorable and provide sufficient charging infrastructure, I fully expect Chinese manufacturers to entirely own the lower half of that market, because even the cheapest Tesla can produce is way way more expensive than your average petrol car, whereas Chinese-made EVs are competitive with petrol on the Chinese market already now, and prices keep dropping. A new BYD e2 with extended (253 mile) battery sells for the equivalent of $25k. The Tesla model 3 sells for twice that on the same market. On the lower end, with smaller batteries, you have cars like the Levdeo i3 with 100 mile range which sells for the equivalent of $10k, and the phenomenally cute Wuling Hongguang Mini EV (75 mile range) which sells for the equivalent of $5k. Tesla still owns the luxury EV market everywhere, including in China, but there's simply nothing they offer in those price ranges, and that's where the big volumes are going to be in the future as infrastructure catches up. Still, because luxury cars have higher profit margins, I can see Tesla surviving and holding a large part of that segment.

There's also a huge market for EVs in the global South, where infrastructure is currently abysmal but there is extreme sensitivity to fuel prices. The market there can move very rapidly in response to even minor infrastructure improvements, and small cheap EVs would be the primary seller in those markets. Tesla has no chance there, but the Chinese EV vendors do.

If there's anyone losing the "race" it's traditional Western and Japanese car vendors. They fucked up time after time, and are the tail-end of the current EV industry. I don't see a path where they get their shit together fast enough to not be overrun by Tesla and a bunch of Chinese EV vendors, so they can only win by creating regulatory roadblocks.

It’s not really fair to be comparing Chinese domestic market EVs to US market EVs on price and range alone.

We can compare price and range alone among US market vehicles because they all meet relatively high standards of quality, performance, and regulatory compliance. Developing nations have buyers and regulators willing to accept lower standards in exchange for accessibility, but the US market doesn’t.

BYD isn’t absent from the US market for any reason other than that they have chosen not to, because they’ve determined they wouldn’t be able to compete in that market.

I wonder how much of the margin is made up of the $10,000 FSD option?

Very little. First of all, a lot of cars are sold without this option, but most importantly, a large part the money isn't recognized as revenue yet, as the FSD isn't ready yet. A part of it is recognized due features like "summon" and "navigate on autopilot". But the large part of that money is still unrecognized revenue. There will be a boost to the revenue, when they can recognize the remaining part of the FSD payments in the future, but this will be a one-time effect.

This is interesting. You're claiming that the FSD money they collect isn't recognized yet? Can I ask you what leads to you thinking that? I'm sure it's in one of their financial disclosures, but you may be able to narrow it down for me.

There were statements made when they recognized parts of the FSD money.

I'm sure they were. I don't disbelieve you. I just don't quite get what to search for (or where) to find out how that policy works and what percentage of income they've already recognized.

Here is one link I found: https://www.tesmanian.com/blogs/tesmanian-blog/tesla-autopil...

The take rate was somewhat recently estimated at 11%.

This line of reasoning reminds me the time when Android came out and people were predicting the imminent death of then-newborn iOS. Tesla is Apple of car manufacturing. That much is pretty obvious if you drive one of their cars. They seemingly deliberately depart from what everyone else is doing. And my bet would be that they'll continue to do so, and continue building out technological capabilities that no other manufacturer would even be able to imagine, let alone build, such as e.g. their own AI training silicon, new battery tech, material science stuff, deeper automation of manufacturing, etc, etc.

That said, I don't understand their stock price either, even in the light of all that, so I don't own any of their stock.

But my next car will be a Cybertruck. Once you go electric there's really no going back. And that's how it ought to be in general: green options _must_ be better all around (perhaps with the exception of price, though I'm sure price differential will go down over time), not a fucking "tofurky" style garbage that no one would buy if it wasn't "green". Because you can make people tolerate things "for the greater good", but you can't make them like things that suck, at least not for long.

> Tesla is Apple of car manufacturing.

Can you explain what on earth that means? Apple makes good use of their device ecosystem, purchased app lockin and network effects to maintain an excellent position. Tesla has none of those benefits, other than their US (not EU etc. which is required to be open) supercharger network (which they promised to open to all EVs).

When I read your post (e.g. it's obvious as soon as you drive one, once you go electric you never go back) and both of those sound like arguments for EVs, not Tesla. Tesla may have made those two synonymous for a while, but I cannot believe it will last.

I will ask, are their departures from traditional manufacturing good? Even people I know with a Tesla that mostly has sat in a garage for its life (no need to commute during WFH because of COVID) say it's already showing extreme wear.

It means they bet on vertical integration, and they make product decisions no other manufacturer has the balls to make, and win because of it. Observe how _nobody_ can make a laptop that's better than MBP in spite of having several _decades_ to observe what Apple does. The same is the case here. Tesla has insurmountable avantage in this regard simply because they are not a "traditional" car manufacturer and have no "legacy" they have to maintain.

But the best explanation is to just go to a Tesla dealership and take one of their cars for a spin. It _feels_ like iPhone.

> Observe how _nobody_ can make a laptop that's better than MBP in spite of having several _decades_ to observe what Apple does.

I have noticed it in few other industries, I just find it amazing that some companies just dont want to change when you can clearly see that your competitor has a better product.

Norway is the most mature EV market in the world and it's not clear from the sales statistics that Tesla is winning. They sell a lot of vehicles, but not the most (might be winning in profits though).

Isn’t this due to supply constraints, at least in part? There simply are not enough teslas available to meet current demand, so they end up buying other brands to avoid waiting a few months.

Isn't it applied for most EVs?

On the other hand, if you want the EV revolution for its own sake, investing in Tesla as a generator of hype can make instrumental sense.

I mean, if "Make the richest man on earth richer, so a few more news stories will be written about him, because that might lead people to look into EVs" is how you want to spend your hard-earned dollars, I'm not going to stop you. I'd suggest there are far more efficient ways to bring about social change, both in terms of fewer negative side effects and more bang for your buck.

I mean, phrasing aside, it seems to be working?

Recommend some of those better ways to promote EV?

The thing to understand about stock price is that it is based on perception and not necessarily on potential. Ultimately it boils down to whether you think someone will be willing to pay a higher price for this at a future point in time more than whether you think the company has potential.

Retail investors, and particularly first time investors, in the market have been growing rapidly. These kinds of investors tend to be less careful with where they invest, relying primarily on the media, word of mouth and hype than on fundamentals. With enough people you have a critical mass, creating a chain reaction that's impossible to stop. This is literally free investment for a company. As a serious investor, you would be foolish to ignore this. Even if the company was not positioned to do well earlier, this new found cash flow gives them a huge edge. And thus this creates a sort of a self fulfilling prophecy where more and more people invest, because they believe everyone else is investing, and because everyone else is investing the company will surely become #1 irrespective of where they are today, and inadvertently propelling the company to become #1 in the process.

Not to throw any pebbles in the garden, but if you compare to how religions work (the self-fulfilling prophecy side), I would not be surprised if that's how the humanity will proceed. Semi-religious leaders speaking of hypothetical progress collecting money to do anything they want with them from a bunch of retail investors.

Tesla's stock price has become a self-fulfilling prophecy.

It seems like Tesla's success combination of a genuinely good product, the Musk hype (and troll) machine, early mover advantage, and most importantly access to cheap capital to build vertically integrated manufacturing and distribution operations that are unheard of in this industry.

Tesla's playbook is also unusual and contrarian to traditional wisdom on a number of things - unlike most tech companies, they outsource very little of their core manufacturing, making it an extremely capital intensive operation; they rely on their CEO trolling on Twitter for building hype for their products; they make promises which they almost always underdeliver and frustrate early adopters with quality issues; they make unsubstantiated claims about their self driving tech and yet are still making progress that skeptics are ignoring.

This is what keeps short sellers, stock analysts, economists and B-school profs on their toes when it comes to their predictions on Tesla. Reminds me of the early days of the iPhone era where a lot of folks were convinced it is going to fail.

Lucky they have cheap equity capital because their debt is junk status. And some of the self-fulfilling prophecy is the cycle of good old WS analysts overrating an asset, Tesla, and their simple endorsement creates an inflationary cycle that generates a huge bubble and more me-too analysts - where have we heard that before? And we know how those end up despite all the transient commentaries that 'its different this time'. I doubt the Fed will be eager to bail TSLA investors out the way they did the banks in 2009 though.

Their rating just got upgraded.

Tesla as a company has basically retired all debt, they have 16 billion in cash and no debt. Their position is far better then other car companies.

> I doubt the Fed will be eager to bail TSLA investors out the way they did the banks in 2009 though.

Even if the Tesla stock dropped by 90%, Tesla would be perfectly fine. They do not really on raising money anymore. They create large amounts of free cashflow and enough profit to finance considerable future investment.

I've always been optimistic about the EV (and solar and battery) revolution, but I still don't understand the Tesla share price.

If there genuinely is going to be a revolution, then Tesla can't own it all.

Revolution is years from now, the stock will surely readjust, especially once competing players enter the field (and people actually believe these players are playing in Tesla's league wrt. EVs).

It's "melting up" due to Fed QE injecting money into markets. It's NOT REAL. Just money that is increasingly becoming Monopoly money.

I give them full credit for their EV technology, but I'm still pessimistic about FSD. How much of the current stock price is hinged on the assumption that FSD is 'right around the corner'? What happens if Elon pushes FSD out and it turns out to be a fiasco, possibly with catastrophic consequences?

Don't forgot the potential conflict of interest between the investors that saved the company and the statement of Hertz.

We don't know if this was a decision after thorough analysis or just a quick money grab.

They are worthmore than every car company combined. If they start making as many cars as Toyota will they be worth 10x as much as all companies combined?

It's not going to be a revolution despite all the EV bull market folks say, it will be an orderly transition, people are slow to change and adapt and STEM people should accept that. Electric cars are not in any way an order of magnitude upgrade in tech, which is a necessary trait for any technology that claims to be disruptive. Sure from a green perspective it is but not from a pragmatic one. I of course welcome the change. :)

I'd claim it's pragmatic too - but only if you have ability to charge at home AND you have an ICE car as well (maybe). Halving the cost of commute is highly pragmatic!

This applies to something like half the population right now (in the US). And we're on the path to alleviate issues for the other half of the population in the next few to several years.

The other major issue (which is probably the bigger one) is that car manufacturers other than Tesla can't seem to actually get out enough cars to do anything other than supply California and maybe NY. Teslas are expensive and have a litany of quality issues that push "regulars" away from them. Once Hyundai has an electric that has inventory nationwide at a reasonable price, then we have a revolutionary orderly transition on our hands.

> It's not going to be a revolution despite all the EV bull market folks say

https://www.drive.com.au/news/norway-to-hit-100-per-cent-ele...

I'd call that a revolution on a small country scale.

Yeah this is kind of a big deal, like inflection-point big deal. Teslas are still for the well-to-do, but making infrastructure available may encourage even more investment in non-upper-end EVs.

Thank you for the honest feedbacks. Respect.

Tesla might be "...doing it...", but that doesn't mean the stock price isn't confusing.

Their price is fine if you look at the Apple analog. Not even knows they want a Tesla like not everyone knew they wanted an iPhone. It's not that they even want one, you basically have to have a smartphone nowdays. EVs will be similar in many many respects. And once someone tries one, that is it. There is no going back.

Of coarse there are other brands of smartphones, but not thing comes close to iPhone in terms of the brand, just like Tesla. There will always be metrics other brands can beat Tesla in, but the overall brand and product is unrivaled and will probably be so for the next 10 years. After that though, it's anyone's guess.

Except apple is like louis vutton. Most people can actually afford an iphone or a louis vutton bag.

Most people cannot afford to drop 50k on a tesla.

Investors are betting on Tesla cars getting cheap enough that average people can afford them.

Yeah, but plugin electrics are already cheap enough. They're just not made by Tesla.

Nissan Leaf $28,375

Mazda MX-30 $34,645

Hyundai Ioniq $34,650

https://www.cars.com/articles/here-are-the-11-cheapest-elect...

They don't seem equivalent:

1. Nissan Leaf $28,375 - 150 Mile range for this price. (It is not advisable to drive this car long distances because the battery overheats and will reduce charging)

2. Mazda MX-30 $34,645 - ~100 mile range (ideal conditions)

3. Hyundai Ioniq $34,650 - 170 miles

Model 3 starts at 262 Miles and has the superchargers + most of the stuff Tesla is known for included (sentry mode, good UI software, games, etc). I don't know about you but it seems like a second gen car whereas the others are all on first gen.

All of this true, but none of it is relevant.

All of the cars I listed are real street legal cars (no NEVs), available for purchase today (no concepts), that are plugin electrics (no hybrids) with a range in excess of 100 miles, with a price less than $40,000. These are viable inexpensive cars. That was the criteria. Arguing that these don't count because they're not comparable to one that costs 50% more, isn't fair.

The state with longest average commute distance is New Hampshire at 46 miles.[0] Even if that’s one way, that’s only 100 miles a day. Assuming you can only charge overnight, you’ll never use that extra range. You'll never even go below 50% if you can charge at work.

The software you’re citing for Tesla is gimmicks and cruel jokes. Why does someone need a game that only works when your car is parked and the screen faces the driver? When would someone use this? And even if you find the situation where you want to play a game in parked car, why would chose this rather than any of the games on your phone?

Tesla navigation last time I checked was Google Maps, but not Google turn-by-turn. That's odd. When I test drove a Model S, the salesman pitched some unknown streaming service as “like Pandora”. I’m sorry, but what? The car doesn’t even come with Android or Apple CarPlay.

I’ve used CarPlay, it’s heads and shoulders above any OEM infotainment system I’ve ever used. It’s so good, it’s a requirement for my next car. Assuming AndroidPlay (or whatever it's called) is just as good, why would anyone want anything else?

[0] Yes this is four years ago, and commutes have lengthened, but most articles I found expressed commute is minutes, not miles. Congestion and distance increase commute times. https://www.answerfinancial.com/insurance-center/which-state...

>All of the cars I listed are real street legal cars (no NEVs), available for purchase today (no concepts), that are plugin electrics (no hybrids) with a range in excess of 100 miles, with a price less than $40,000. These are viable inexpensive cars. That was the criteria. Arguing that these don't count because they're not comparable to one that costs 50% more, isn't fair.

My argument is that the cars are priced the same as Tesla. You are paying less but getting a compromised car in many respects(range, charge time, reduced interior quality/size). You are basically buying Gen 1 tech at standard price.

>The software you’re citing for Tesla is gimmicks and cruel jokes.

I think we are not going to agree on this but these days they have an excellent UI experience. You haven't actually spent an extended amount of time in a modern Tesla have you? These other cars you cite have gimped infotainment compared to Tesla so they have to be augmented with Carplay. Some people would prefer to use their iPhone as it can be upgraded, fair enough. Tesla decided to go in another direction.

But Tesla also throws in nice to haves such as Sentry mode, games etc. These are non-existant on the other platforms even as an option. Why would you value something like Sentry mode at 0$? It is a value add for some even if you don't want to use it.

>The state with longest average commute distance is New Hampshire at 46 miles.[0] Even if that’s one way, that’s only 100 miles a day. Assuming you can only charge overnight, you’ll never use that extra range. You'll never even go below 50% if you can charge at work.

This is Gen 1 EV mindset. You are paying ~35K for a car that can't go long distances/cannot fast charge? The Mazda cannot even match the 2012 Nissan Leaf. I was researching the Mazda as a potential vehicle since I really like their cars but this is not something I could fathom paying for and not feel ripped off. It is not fast, not really luxurious, has short range. It has no redeeming qualities other than it is Mazda's first EV.

[1]:https://insideevs.com/news/452551/mazda-mx30-dc-charging-tes...

At that point you are not getting 35K worth of value out of these cars. A basic gas car is more competitive at this price range. The collection of people who would pay 35K for a 100-150 mile EV but not buy a gas car or pay more for a viable EV has got to be quite small. In fact I'd wager that the car shortage + Carpool lane access in some states + aggressive incentives is whats driving any sales of these cars. In the case of the Mazda they are only selling in CA from what I understand.

The 2022 Chevrolet Bolt has a range of 259 miles and starts at $31,995. It has the "Super Cruise" that Consumer Reports rates as the #1 Assisted Driver tech.

Tesla MSRP Price is $42k...

https://www.caranddriver.com/news/a35494747/2022-chevrolet-b...

https://www.consumerreports.org/car-safety/cadillac-super-cr...

Seems promising although I don't know if consumers will like the compromised storage space and the design. GM had an opportunity to really outshine after the v1 Bolt but it seems like they took an incremental approach to the v2 Bolt. It is a potentially competitive vehicle assuming they didn't cut corners like they did with the first Bolt such as using the worst seats in the GM parts bin. I guess many will ignore these issues but I wonder how many potential sales are lost due to the LG battery fires in the Gen v1 Bolt.

It's nearly there already. The average new car in the U.S. costs $41K, and the Tesla Model 3 is $45K.

The lowest spec model 3 is 45k. No one buys the lowest spec car except rental car companies.

Check out the specs of a Model 3. Unlike most other cars, where the lowest spec means that most of the comfort equipment you want to have is missing, there are almost no differences between the tiers. The most significant difference is the size of the battery and that it only has RWD, otherwise it is mostly identical to the higher specs. Buying the lowest spec of the Model 3 is quite common as a result.

Apple has 50% gross margins. Tesla will never have anything close to 50% gross margins unless they stop making cars.