The short Thesis has very few legs left. 1) Competition. 2) Cash Flow/Cash on Hand. 3) Demand Fears
For number 1 above I am going to coin a new phrase based on a scientific theory:
The Competition Paradox, based on the Fermi Paradox which states that if Advanced civilization existed in the the galaxy, we would have seen some evidence, or they wiped themselves out long ago, which is scary because it could mean that civilization tend to grow to a certain point and destroy themselves. So my theory is the Competition Paradox.
The math math is simple:
If the Model 3 is arguably the best car on the road for the money. Meaning it's better then most if not all comparable cars at the same price point.
And If competitors could make a better EV, it would mean that the car they made would be better then every other ICE car they make.
Don't you see.. It's a paradox. If this happened, traditional autos would collapse in on themselves like a dying star collapsing into a black hole.
The real point that always gets lost on bears is that If BMW could make a dramatically better car for the price, they would have done so year ago to crush Daimler and vice versa.
Another way to look at this is compare Model S 2012 to Model X 2015 and Model 3 in 2017. Some basic metrics like range, rate of growth, AP features from none to today, sales from 0 to 50k and so on. Then take the same approach when looking BMW for example. I think a lot of people have a hard time understanding complex ideas like Tesla is better than everyone else. They just cant understand it if they have never driven a Tesla and did not experience a 2012 S vs a Model 3P today.
Your average BMW 3 or 5 or even 7 Series has not materially changed in the last 6 years. Small refinements and improvements to tech as well as some better fuel economy when not cheating. Now compare that to a Model S 60 from 2012 vs a Model 3P today. Similar price. Similar cabin space, though definitely a smaller package. Tesla does not have the luxury have having 10 different platforms yet, so they are now at 3, which covers a large portion of the market, but I still think its fair to map the improvements from model to model to show the progress even though there is not a direct correlation to BMW.
The 2012 Model S 60 had these specs, roughly:
210 mi range, 382 hp, 5.5 0-60 22KWh/100km
Production volume around 20k/year, eventually topping out around 60k/year
No AP. Single motor.
Tesla Model S - Wikipedia
The 2018 Model 3P specs:
310 mi range, 283+197hp or 480hp, 3.5 sec 0-60 18KWh/100km
Production volume around 300k/year pace at 6k/w and 500k sometime next year.
Tesla Model 3 - Wikipedia
This is not meant to directly compare cars, only the progress over the last 6 years.
For BMW, the cars are fairly indistinguishable over the last 6 years in terms of styling. The interior is a bit more refined with a larger screen in 2018:
BMW 5 Series (F10) - Wikipedia
BMW 5 Series 2010 - 2017
BMW 5 Series (G30) - Wikipedia
BMW 5 Series 2018
With the exception of the $100k+ M5 which is at 3.4s 0-60, the performance is mundane at best.
For 3 series it doesnt get much better:
BMW 3 Series (F30) - Wikipedia
BMW M3 - Wikipedia
- 248 kW; 338 PS (333 hp)
- Torque: 355 N⋅m (262 lb⋅ft)
- 0-60 mph (97 km/h) – 4.8 s for manual and SMG
However they do have some limited edition versions that perform in 3.9 0-60 range. The E92.
After all of that, do we think that BMW can come out with an EV that matches or surpasses their ICEv specs and do we think they would do that if they could? Would BMW come out with a Series 3ev and M3ev that had specs better than those listed above? If they dont, then they cannot compete with the Model 3. Since the model 3 is a mass produced product, it can consume the sales of the 3/4 series which in 2016 was:
WW: 411,844
Sold in the US: 106,221
Or even eat into the 5 series sales: (notice the drop in the US specifically but also WW:
2012
WW: 359,016
US: 56,798
2013
WW: 366,992
US: 56,863
2014
WW: 373,053
US: 52,704
2015
WW: 347,096
US: 44,162
2016
WW: 331,410
US: 32,408
I am sure there is more up to date sales data, but those numbers above were from the Wikipedia pages linked originally.
So there it is, the Competition Paradox. If they could compete, they would have done it long ago to spite each other. Why are they doing it now? They are being forced to by Tesla who is eating into their market share from the Top Margin down. 7 Series, S class first, X5, GLX and now 3 Series/C Class but also lower end 5 Series and E Class. Not to mention the Audi and Porsche that have been displaced.
I wont go into demand here, but needless to say, when you look at the market as a whole, the Demand for Tesla's is nearly infinite and the competition is lacking. Its lacking the will and the capability. They can make a lot of cars at very high quality, but they cannot make a better car, or they would have by now. Its a simple fact of nature. Tesla is forcing them to make hard decisions and eventually they will make progress and those that survive might even catch up. But by then, Tesla will be a 500B company with a dozen models and manufacturing world wide.
Lastly, the Cash on Hand/Cash Flow. I know there are those who disagree, but I think this is something that should be improving from July 1 going forward. I think Tesla has cut back dramatically on Capex and pulled all the deposits forward as a mini/interest free cap raise that will bridge them until Q4 when the real profitability and FCF occurs. Lastly, dont forget that most of the cars being delivered in the next 6 months will be in the US, this will create pent up demand world wide. While Tesla is delivering the $35k Version in the US, they will be delivering the $80k vs in the rest of the world and all with 10k/w efficiency. After that, I assume Tesla will duplicate Fremont and GF1 in China and Europe at the same time while piloting the Model Y production in the US. As soon as production for Europe and China is shifted to those countries, the Y can start rolling off the line in Fremont and a new East Coast factory can be built to focus on Model Y in the US. Once that vehicle is being produced in China, Europe and the East coast, then Tesla can pilot the Pickup in Fremont.
