Tesla are also vertically integrated - they are geared to catch more revenue than just the car sales. They're in a prime position to take the running costs - fuel cost (superchargers), insurance (software edge) and eventually repairs and finance.
Traditional companies have that too - VW have insurance, Volvo have finance and all dealers have repairs. However Tesla have a serious information edge in all of those areas, they look like a real next generation company there.
That's a forward looking statement. To make it even more interesting is that CPI just clocked in at the highest rate in 30 years. That's not to say that battery prices will correlate 1:1 with CPI, but accelerating CPI does not bode well for any supplies getting cheaper in the future.
They are young and blinded by the optimism which the cult leader...ehm the CEO feeds them.
If they studied history they'd know that even Microsoft, AKA the undefeated company in IT/SaaS (US Govt. defeated them but that's another story) had to surrender to the S-curve phenomenon.
Most of the really big scope vision that Microsoft outlined in the 80s and 90s actually became true in the 2000s.
The problem was that people were really in love with Microsoft's stock and everybody and their brother was betting that the vision would happen exactly as planned.
The best case scenario at that point was that the stock would stay flat . And flat it stayed, and those who bought at the peak of the bubble blamed Ballmer.
I can't imagine how would they react when the same happens to Tesla and the insults which would fly in Musk direction given that he has a history of not delivering , exxagerating and also his company is not exactly in IT/SaaS.
He is now in Ballmer's position, but Steve delivered on what was promised in the 80s and 90s , nevertheless he was insulted and belittled.
For Tesla to have a justified valuation of 1T you'd need it to be ubiquitous, literally not being able to turn your head without seeing a Tesla logo, as it happens with the legacy trillion dollar companies (the FAAMGs/MAAMGs/MAMAAs)
* Overcome their poor reputation for both interior & exterior quality. If the luxury car price starts coming with luxury car fit & finish they will widen their market
* Overcome people's concerns about electric car range, by expanding charging networks, increasing charging speeds, or making cars with greater range.
It's that the global market for vehicles in the $30,000+ range is not rapidly expanding. It's never going to be rapidly expand. Tesla is taking market share from other auto makers to do what they're doing right now. They have to kill a BMW to become a BMW.
There's nothing particularly special about being an EV maker vs an ICE maker, when it comes to margins or total addressable market, such that they should be valued so differently. Tesla isn't going to magically produce $80 billion in operating income on $200 billion in sales, that margin doesn't exist in the EV market.
Tesla also isn't going to own the global auto market, which is what their present valuation suggests (it suggests they need to end up as equivalent to four Toyotas). If they're lucky they end up the size of one Toyota, that's just about the best case scenario. ~$30 billion in profit, if everything goes extraordinarily well for the next two decades.
Why should anyone pay 30-40 times for future earnings that are so far away? Obviously it's nothing more than speculation on the part of some investors, betting that TSLA will just go higher yet, it has little to do with being rational about the long-term. The future best-case outcome is already very far over-priced into Tesla's stock.
Why? They are vertically integrating the manufacturing including batteries exactly because they are going higher volume lower price.
> Tesla is not apple, they’re not good at making and maintaining products at low cost in massive volume
They have been doing a great job scaling and driving margin for the last couple years and that trend looks to continue, not stopping.
Model Y will likely be the most sold car in the world within 2 years and it will have industry leading margins. Next generation manufacturing in Texan and Berlin will significantly improve margin over current generation.
> and they don’t really seem to be getting better at it
This is just flat out false.
To hit their volume targets, either they'll need to cut prices again in the near future, or the price of all other cars in the market need to rise in lockstep.
The backlog gets cleared by these new factories which can try to take up the excess demand.
What competitor is overtaking them? My understanding is that you can get any electric car you want, except a Tesla. That means people aren't buying the competitors vehicles. The competitors don't have demand, Tesla does. https://insideevs.com/news/530606/us-ford-mache-sales-august...
The company this story is about, Rivian, only started deliveries in the past few weeks and has delivered a negligible amount so far (a few hundred). They obviously intend to scale quickly, and they are hardly Tesla's only relatively new competition. It'll probably take a few years to see how the market shakes out.
The way I see it people are buying the competitors vehicles but those competitors are better at manufacturing as well as each having a smaller chunk of the market and therefore can meet demand. Tesla can’t meet demand in part because they are not as good at manufacturing as they need to be.
If tesla was worth their valuation they would need to dominate the EV market with 80+% marketshare, because that way when the EV market grows they will dominate the overall car market. But they’re not that large of a chunk of the EV market and they can’t ramp up volume or drive down prices fast enough to be on a trajectory to own EV. When all is said and done they will be a single digit player in the total car market, mostly catering to the luxury segment, and they will not realize enough revenue to get the profits that the stock price assumes.
Which is not to say the stock will fall any time soon. As long as people believe Tesla can do it, it will stay high.
The Model 3 was a significantly higher volume and lower cost car than the Model S that came before it.
Eventually they hit a wall in terms of the cost of the raw materials and labor to build the battery and drive train, but I'm not convinced they are there yet.
Also, TSLA could very well find a Tim Cook to Elon Musk's Steve Jobs: someone familiar with logistics to take over the vision and mass produce it.
Their market cap was less than $5 billion. There were less than 100 million shares outstanding. Buying some shares was a big risk - it was either going to 0 or going to the moon. But when you bought shares, you weren't super diluted. It seemed like a reasonable bet for a small amount of my portfolio.
At >$100B market cap, I am having a hard time making that same value judgement on Rivian. Their factory has a capacity of 150,000 vehicles; they say it can be increased to 200,000 and in less than 10 years they can be running at 1 million vehicles per year. If they make it, they will be a very valuable company!!! Is it worth taking that bet, right now? Wouldn't I be better off waiting for more confirmation?
They have a huge backlog on every vehicle and they have huge new factories including integrated comming online very soon.
They have further invested vertically integrating not just batteries but cathode and anode manufacturing as well.
What exactly is Musk doing wrong in terms of scaling and logistics?
1. Elon Musk
2. TSLA apes (people who use the term "Daddy Musk" on /r/wallstreebets)
3. CNBC, MSNBC, and other financial media outlets
Do we see more public, established investment firms parroting this? Not AFAIK.
I was investing during the Dot-Com boom. Same thing was happening. Some will try to argue that the dot-com boom was based on vaporware and Tesla makes cars. Well, to that I say, every company was overhyped during that boom, from IBM to Lucent to Intel to Pets.com. Just because TSLA sales are strong doesn't mean the stock isn't overhyped even looking ahead 5-10 years.
lol
However, in the history of modern corporate America going back a century, how many times has an upstart dominated a multi-decade established industry?
Give up?
Exactly once: Amazon disrupted publishing.
So TSLA could very well dominate the car industry in 5 years, but history is has much better odds. If you disagree, please provide some examples, I'd like to learn.
EDIT: WalMart has higher e-commerce revenues than Amazon according to this by almost 30%:
https://www.nasdaq.com/articles/amazon-vs.-walmart%3A-which-...
But again, help me out with some facts if I'm so wrong.
What? Here's a quote from the same article:
> Our global eCommerce sales are on track to reach $75 billion by the end of the year.
This has to be the annual sales figure right? Amazon surpassed this number several years ago.
That doesn't make sense. Without checking the link I'm sure you're looking at total commerce revenue, not only e-commerce.