2017 Investor Roundtable:General Discussion

[Sparky]

I think there is some ancient law (in the US) that carmakers cannot manufacture tires? But I doubt they would actually make them, but specify them like every other automaker....

Actually, I think it's just because tire makers pre-date auto-makers in this country (bicycles). But on the subject of disruption (Kodak, etc), the U.S. tire industry is kind of interesting. From my college Econ class: Massive U.S. market share in the 60's began to diminish when radials became the rage. Some saw the future and tried to get Detroit on-board to expand supply and finance new manufacturing plants (hard to convert bias-ply plants IIRC). Detroit wanted nothing to do with the radial because it required suspension mods so no help financing the new tech. Then radials became a "must have" performance feature and all the imports already supplied them. U.S. Tire companies were left holding the bias-ply bag and merged or got bought by mostly foreign entities. Then out-sourced. At least that's how I recall it. Probably not that simple.

 

[22522]

There are 2 factors: the cost of oil can impact the sale of EV, and the sale of EV can impact oil consumption.

When EV costs much more than ICE (not counting gas savings), the 1st factor is more dominant, there are not many EV to impact oil consumption.

When EV costs equal or less than ICE, the 1st factor is not longer dominant, and as more EV get on the road, the 2nd factor becomes more dominant.

If I read Elon's tweet right, an EV in the $35K price range is a lot less expensive to make than an ICE car in that range. So demand for oil is going down, and an electric vehicle makes better economic sense on first cost.

The auto companies capitalize R&D rather than expense it... somehow. So the cost comparison might have some scatter on it.

 

[everman]

I seem to remember seeing a link posted here from a site like goodcar or something that showed the massive market share taken by Tesla in the premium sedan market. Does anyone remember / have that link? I need it to refute a Twitterbear. Thanks.

 

[Starno]

I couldn't agree more. My DCF projects out all products and services including TA & TE.

Keep in mind, however, that service revenue will depend on the fleet.

Totally agree, Tesla will sell more vehicles than any other car manufacturers have ever achieved in the entire history.
But everything is interdependent : the number of cars sold will be tightly dependent of the autonomous driving tech, and of the manufacturing power.
Self fulfilling cycle.

 

[MitchJi]

Those who call you optimistic are operating from the old economy paradigm.

1T won't come from selling X amount of cars, most of it will come from TE, autonomous driving, and using AI to manufacture at light speed.
------
Valuing Tesla based on the number of cars it is selling is like back in the days valuing Amazon from the number of books it was selling.

But he is valuing TSLA based on how many cars and TE he projects that they will sell. The problem is that he uses wildly optimistic projections to get to those estimates.

 

[austinEV]

I seem to remember seeing a link posted here from a site like goodcar or something that showed the massive market share taken by Tesla in the premium sedan market. Does anyone remember / have that link? I need it to refute a Twitterbear. Thanks.

 

[SteveG3]

Its really the ultimate problem in industries on the verge of disruption.

Even if the management of the incumbents has the wisdom and foresight to see the impending problem and attempt to position for it, their shareholders will demand they continue to push the highly profitable incumbent product to the bitter end, rather than spend money on the initially low-returning new product.

Its exactly what happened to Kodak. Kodak is credited with developing the first digital camera in the 80s. Then they buried it, because film was super profitable and they basically owned the market. Once other groups started coming out with digital cameras, Kodak was too far behind and clinging to the last bastion of film until their death.

Its a remarkably similar story to GM - the EV1 was widely heralded as an excellent EV for its time. GM tried to bury it, and now they're playing catch up trying to keep up with Tesla.

Yup.

And given that an automobile is a couple of orders of magnitude the price of a mass market camera, and several orders of magnitude the mass of one, this disruption will be far far slower than that one.

I referred to the camera disruption you mentioned, but this is true in comparison to virtually all consumer products, reasoning by analogy with this disruption does not work. It's extraordinarily unlikely to happen over a year or two. Among other things, way too much capital, and the construction of about 100 factories as large as any other made in human history are needed for this disruption. Nothing of the sort was needed for the switch to digital cameras, laptops, smart phones, etc. ICEs will dramatically outsell EVs 2 years from now, even if people come to prefer a long range EV about as quickly as they came to prefer a digital camera.

Apple, Google, and/or Samsung, would have been large enough to change this, but, the mass market ICE manufacturers (GM, Toyota, Ford, Hyundai,...) have a near oligopoly. As long as they see the others kicking the disruption down the road, they can get a way with quite a few years of doing the same. Tesla is enough of a force to compress the time that "kicking disruption down the road" is an option for the luxury makers. That's why, with the exception of VW (which is trying to get past the diesel scandal) it's the luxury makers that are making at least some EV move beyond compliance cars. The other place things will move faster is China, and apparently India. We may well see the likes of GM and Toyota, going EV in China long before they dismantle their ICE business by doing so in the rest of the world.

That's kind of a summary of a far more detailed post I wrote to start this thread...

The Fractured Tipping Point Moat

 

[mmd]

How does the new 2018 Camry hybrid compare to Model 3 in operating costs? Gas in my area is < $3 a gallon.
With 52 mpg, the Camry fuel cost is ~6cents per mile.
2018 Toyota Camry Hybrid first drive

 

[Reciprocity]

I seem to remember seeing a link posted here from a site like goodcar or something that showed the massive market share taken by Tesla in the premium sedan market. Does anyone remember / have that link? I need it to refute a Twitterbear. Thanks.

I think electrek most recently showed that Tesla had something like 40% market share in the large luxury sadan, I definite saw it but don't really recall which site. A quick search for "40 precent Tesla" should get it because there article focused on that fact. To put this into context, the average of the other cars listed was like 9%... Meaning Tesla 40% vs random competitor 9%. All the usual suspects where there, BMW, MB, Lexus, Audi and more. There was another article a while back that showed 30% and that was like less then a year ago. 40% is nuts. To put that into context, iPhone has 34% market share and 90+% of the profits.

Tesla is cheating a bit because the appeal of the model S pulls customers up from lower levels. Meaning, someone was looking at a Camry hybrid and saved up for the model S 60. That's a bit unfair as no one would ever do that for an S class but it happens alot for Tesla. Cheating is probably too harsh because what they are really doing is making a new market, which is extremely difficult. That is another thing that makes me think about iPhone when taking about Tesla. Apple forced a new market upon the world and it bent to Apple's will. That doesn't happen often, usually a company bends to the will if the market. The market is you and I and Tesla is changing the way people perceive the car and what's great in a car.

 

[Reciprocity]

How does the new 2018 Camry hybrid compare to Model 3 operating costs? Gas in my area is < $3 a gallon.
With 52 mpg, the Camry fuel cost is ~6cents per mile.
2018 Toyota Camry Hybrid first drive

Model 3 compared favorably all the way down to a carolla if you consider TCO, residual value and you have solar. Model 3 + solar, even without tax incentives, is less expensive to own then a $19,000 carolla after about 6 years of ownership.

Hybrids are half assed. Not ice and not EV, worst of both worlds. No power, ugly but you still have to put gas in and massive expenses to maintain them compared to EV.

But good FUD bro, keep up the good work. Need more shorts in there stat.

 

[anticitizen13.7]

How does the new 2018 Camry hybrid compare to Model 3 operating costs?

Who cares?

Toyota actually did do a good job with the '18 Camry's suspension, but the styling is still awful and overwrought, much like the Prius.

 

[Reciprocity]

Who cares?

Toyota actually did do a good job with the '18 Camry's suspension, but the styling is still awful and overwrought, much like the Prius.

It's almost like they don't want them to sell, it's really odd. Is it really that hard to put an atheist skin on the car instead of draping then in a fresh coat of fugly.

 

[ItsNotAboutTheMoney]

Tesla is breaking the paradigm that electric cars are only for saving money during times of high oil prices. Gas prices no longer significantly effect Tesla sales. People are catching on that a Tesla is a better car, ICE or otherwise.

Low oil prices are good for the global economy. Tesla makes expensive cars. More wealth means more expensive cars are purchased.

But more than that, there are interrelated virtuous cycles in batteries, BEVs and renewable energy and Tesla's in all 3 of them and there are already good signs for all of those areas.

 

[tander]

I think electrek most recently showed that Tesla had something like 40% market share in the large luxury sadan, I definite saw it but don't really recall which site. A quick search for "40 precent Tesla" should get it because there article focused on that fact. To put this into context, the average of the other cars listed was like 9%... Meaning Tesla 40% vs random competitor 9%. All the usual suspects where there, BMW, MB, Lexus, Audi and more. There was another article a while back that showed 30% and that was like less then a year ago. 40% is nuts. To put that into context, iPhone has 34% market share and 90+% of the profits.

Tesla is cheating a bit because the appeal of the model S pulls customers up from lower levels. Meaning, someone was looking at a Camry hybrid and saved up for the model S 60. That's a bit unfair as no one would ever do that for an S class but it happens alot for Tesla. Cheating is probably too harsh because what they are really doing is making a new market, which is extremely difficult. That is another thing that makes me think about iPhone when taking about Tesla. Apple forced a new market upon the world and it bent to Apple's will. That doesn't happen often, usually a company bends to the will if the market. The market is you and I and Tesla is changing the way people perceive the car and what's great in a car.

Great post, makes me wonder if one of the incumbents is a Blackberry.

 

[racer26]

Yup.

And given that an automobile is a couple of orders of magnitude the price of a mass market camera, and several orders of magnitude the mass of one, this disruption will be far far slower than that one.

I referred to the camera disruption you mentioned, but this is true in comparison to virtually all consumer products, reasoning by analogy with this disruption does not work. It's extraordinarily unlikely to happen over a year or two. Among other things, way too much capital, and the construction of about 100 factories as large as any other made in human history are needed for this disruption. Nothing of the sort was needed for the switch to digital cameras, laptops, smart phones, etc. ICEs will dramatically outsell EVs 2 years from now, even if people come to prefer a long range EV about as quickly as they came to prefer a digital camera.

Apple, Google, and/or Samsung, would have been large enough to change this, but, the mass market ICE manufacturers (GM, Toyota, Ford, Hyundai,...) have a near oligopoly. As long as they see the others kicking the disruption down the road, they can get a way with quite a few years of doing the same. Tesla is enough of a force to compress the time that "kicking disruption down the road" is an option for the luxury makers. That's why, with the exception of VW (which is trying to get past the diesel scandal) it's the luxury makers that are making at least some EV move beyond compliance cars. The other place things will move faster is China, and apparently India. We may well see the likes of GM and Toyota, going EV in China long before they dismantle their ICE business by doing so in the rest of the world.

That's kind of a summary of a far more detailed post I wrote to start this thread...

The Fractured Tipping Point Moat

I think I disagree with you.

The price of the product is mostly irrelevant - people expect to pay $x for a car, as long as your product is compelling at its price point, the sales will move just as fast as a lower priced item. People said that Apple couldn't convince people to spend nearly twice as much as they had been on a phone. I don't think the switch to EVs being the majority of sales is going to happen in a year or two, but it didn't with digital cameras wiping out film either.

Once people decide that they want an EV, they're unlikely to buy an ICEV (instead preferring to hold onto their current car a bit longer), and that's going to put a serious pinch on the ICE makers. They almost died in 2008 when there was a ~10% pullback in demand. Making ICE cars is a capital intensive low-margin business that depends on volume to make it work. It does not take 100 gigafactories to make the disruption happen - you just have to steal enough of their market share that they don't have the volumes they need anymore, and their empire will collapse by itself. GF1 is already going to seriously disrupt things. Maybe not enough to cause the avalanche, but GF3/4/5 might.

 

[adiggs]

I think electrek most recently showed that Tesla had something like 40% market share in the large luxury sadan, I definite saw it but don't really recall which site. A quick search for "40 precent Tesla" should get it because there article focused on that fact. To put this into context, the average of the other cars listed was like 9%... Meaning Tesla 40% vs random competitor 9%. All the usual suspects where there, BMW, MB, Lexus, Audi and more. There was another article a while back that showed 30% and that was like less then a year ago. 40% is nuts. To put that into context, iPhone has 34% market share and 90+% of the profits.

Tesla is cheating a bit because the appeal of the model S pulls customers up from lower levels. Meaning, someone was looking at a Camry hybrid and saved up for the model S 60. That's a bit unfair as no one would ever do that for an S class but it happens alot for Tesla. Cheating is probably too harsh because what they are really doing is making a new market, which is extremely difficult. That is another thing that makes me think about iPhone when taking about Tesla. Apple forced a new market upon the world and it bent to Apple's will. That doesn't happen often, usually a company bends to the will if the market. The market is you and I and Tesla is changing the way people perceive the car and what's great in a car.

There's a lot of money in creating a new market / creating such a compelling product that markets bend to fit your product in (as opposed to the other way around).

 

[mmd]

Speaking of South Australia's power problems we were all discussing a while ago, and battery storage projects:

Lyon plans battery tender for AU$1.88bn solar plus storage projects

The highly ambitious solar and battery storage developer Lyon Group has unveiled yet another big project, this time a AU$660 million solar plus storage project in Victoria, adding to its growing portfolio in South Australia and Queensland.

The latest plan for a 250 MW large-scale solar plant, paired with 80 MW/160 MWh of battery storage at Nowingi in north-western Victoria, takes its total pipeline to more than 1,700 MW of solar and 1,000 MW of storage.

..
Lyon says all three projects, totalling nearly $2 billion, will be 100 per cent equity financed, and Green said that the results of the tender would help decide the final design and configuration of the projects. It is using battery systems integrator AES.

 

[mmd]

Bjorn Nyland has recently posted a video on Model X P90D battery degradation in 130k kms. Actual mileage is 80k kms; but because of excessive towing, he thinks it is equivalent to 130k kms.
The degradation isn't too bad (~5%). But what surprises me is Tesla always choosing to replace the battery packs for these highly visible high mileage cars . Recall the Tesloop battery replacement? I am pretty sure Bjorn was aware of eventual battery range degradation for his second Tesla, that he got for free anyway through the referral program.

I wonder if Tesla is going to do that for all customers when they hit high mileages. Otherwise, it doesn't seem quite fair.
What better way to show long life/viability of battery packs than to let these highly visible cars keep on driving on the original packs?

As a comp, here are the highest mileage Volt owners in US.
Volt Stats! Tracking real world usage of Chevy Volts in the wild...

 

[SteveG3]

I think I disagree with you.

The price of the product is mostly irrelevant - people expect to pay $x for a car, as long as your product is compelling at its price point, the sales will move just as fast as a lower priced item. People said that Apple couldn't convince people to spend nearly twice as much as they had been on a phone. I don't think the switch to EVs being the majority of sales is going to happen in a year or two, but it didn't with digital cameras wiping out film either.

Once people decide that they want an EV, they're unlikely to buy an ICEV (instead preferring to hold onto their current car a bit longer), and that's going to put a serious pinch on the ICE makers. They almost died in 2008 when there was a ~10% pullback in demand. Making ICE cars is a capital intensive low-margin business that depends on volume to make it work. It does not take 100 gigafactories to make the disruption happen - you just have to steal enough of their market share that they don't have the volumes they need anymore, and their empire will collapse by itself. GF1 is already going to seriously disrupt things. Maybe not enough to cause the avalanche, but GF3/4/5 might.

I was referring to the price for supliers, the price of building production capacity, not the cost to consumers.

Agree it doesn't take 100 GFs, or 100% market share to end the "kick disruption down the road" game. I'm all but certain it will take more than 4.

Re a 10% pullback in demand... I don't know how reflective this is of the automakers, but GM executives have publicly said that they have positioned themselves to withstand over a 40% drop and still be at breakeven. I can post a link if you like when I'm back at my laptop rather than commenting from a phone.

 

[ggies07]

Yup.

And given that an automobile is a couple of orders of magnitude the price of a mass market camera, and several orders of magnitude the mass of one, this disruption will be far far slower than that one.

I referred to the camera disruption you mentioned, but this is true in comparison to virtually all consumer products, reasoning by analogy with this disruption does not work. It's extraordinarily unlikely to happen over a year or two. Among other things, way too much capital, and the construction of about 100 factories as large as any other made in human history are needed for this disruption. Nothing of the sort was needed for the switch to digital cameras, laptops, smart phones, etc. ICEs will dramatically outsell EVs 2 years from now, even if people come to prefer a long range EV about as quickly as they came to prefer a digital camera.

Apple, Google, and/or Samsung, would have been large enough to change this, but, the mass market ICE manufacturers (GM, Toyota, Ford, Hyundai,...) have a near oligopoly. As long as they see the others kicking the disruption down the road, they can get a way with quite a few years of doing the same. Tesla is enough of a force to compress the time that "kicking disruption down the road" is an option for the luxury makers. That's why, with the exception of VW (which is trying to get past the diesel scandal) it's the luxury makers that are making at least some EV move beyond compliance cars. The other place things will move faster is China, and apparently India. We may well see the likes of GM and Toyota, going EV in China long before they dismantle their ICE business by doing so in the rest of the world.

That's kind of a summary of a far more detailed post I wrote to start this thread...

The Fractured Tipping Point Moat

Well if Elon has his way with Model Y, they will need less space for more output....so if that happens, the disruption will be quicker than you think....