2017 Investor Roundtable:General Discussion

[Yggdrasill]

Thanks for this this. How did you arrive 10 million cumulative cars produced by 2025? Among other things, this makes up the largest portion of the difference between our estimates. Remember Tesla will likely have built 8-12 gigafactories by 2025, which would likely mean more than 10m cars produced per year by 2025.

Given that avg life of a new car is 8+ years, even if we assume cars on Tesla Network will get driven a lot more, 40-50m cumulative cars produced seems reasonable to me, to which I apply the participation rate of 30%.

I've explained this earlier - I really don't think they can build as many huge factories as you suggest.

My guess for what Tesla can bring online before 2025:

- Two solar gigafactories, maybe 25 GW each, Europe and Asia
- One Semi Gigafactory, maybe 25k Semis per year, USA
- Two vehicle Gigafactories, maybe 500k vehicles each, Europe and Asia.

The above may not be exactly accurate, but I think it's a hell of a lot more accurate than assuming 10 million vehicles being produced per year in 2025.

 

[jhm]

Here are some graphs from different sources showing taffic by hour of the day:

They're pretty similar across the board, and this can be expected to be pretty close to the demand curve for the Tesla Network. Say you then have Tesla Network capacity for covering 5% of daily miles per hour (total capacity on the Tesla Network is then 120%), except 7-8 pm and 5-6 pm, when many people are using their cars and the capacity drops to 2%. For 1-5 pm, the market would be completely saturated, under one fifth of Tesla Network cars will be moving. While at 7-8 pm and 5-6 pm, only a quarter of the demand can be met.

This is a challenge. If you have a sufficient capacity in the Tesla Network to meet peak demand, you would need to be able to meet something like 25% of daily demand per hour. That means total capacity is 600% of daily demand. And each car on the Tesla Network is likely to be standing still for ~20 hours per day.

Edit: This may be a bit conservative, though. You will get some self-selection of participants, where people who work nights or work at home are more likely to participate, due to higher payoff. Say the Tesla Network is scaled to 400% of daily demand. At that point, each car will be participating on the Tesla Network for 6 hours per day. Revenue might be something like 20 mph (average) x 6 hours x 0.25 USD/mile = 30 USD/day. Revenue per year might be 11,000 USD. If Tesla takes a 10% cut, and has 2 million participating vehicles, that's an income of 2.2 billion USD per year.

Thanks. This is really helpful. To my mind it reinforces the idea that billing should be by the minute rather than hour. Most of your revenue must come at the peaks, and that is also when the mph will be slowest.

 

[22522]

One of the main reasons so many live in Urban areas is because that's where the jobs are and it's too expensive to move just 20 miles away where prices for housing is actually lower. The other cost is time.

This is the "Travel will go up, as commuting costs go down and people move out a bit" view. Which supports Tesla valuation.

 

[DurandalAI]

Still don't know if the story is legit or not but the branding skill in their username selection tripped a FUD red flag for me.
UPDATE: My Tesla Model X 90D Driver side falcon door opened while driving on freeway with my 6 y.o. sitting next to it! • r/teslamotors

Here's my take. If I could afford a Model X, I could certainly afford to put 2 dashcams in my Model X to aim at the doors to capture video of said doors opening at speed. I mean, I have 2 dash cams already, but they're aimed forward and backward. I personally think the guy had buyer's remorse about the price or some other trivial aspect, and invented some bogus story to complete it all! Lastly, I hope Tesla pulls all the requisite logs and then sues him to shut his mouth.

Whether or not his story is true, he is a fool for at least not attempting to document the issue. You KNOW if he had caught it on camera that it would get MILLIONS of hits on Youtube, AND get Tesla to fix the issue.

 

[DurandalAI]

Is anyone considering the value of Tesla Network for delivery during non-peak hours? Uber is already delivering food & packages; w/out a driver, this seems like a far more attractive option.

Very interesting idea. Autonomous car plus maybe remote-control (and eventually autonomous) drone that delivers that package to the front door then goes back into the vehicle?

 

[myusername]

Here's the Tesla Network portion of my DCF as it stands now:

View attachment 233377

Your DCF on Tesla is worthless... and so is everyone else's for that matter. I was told by tech analysts in the year 2007 that Linux was dead and IBM and Microsoft will rule the datacenter in "5 to 10 years"... at that time I told them they are morons and ran them out of our company.

what they were trying to do is what you're trying to do... predict GENERATIONS of technology innovation without even understanding the fundamentals of technology innovation... you think you KNOW how Tesla will rule a robot car future... and it's embarrassing to watch you put the details in your charts and banter them as evidence of something simply because your confidence has been artificially inflated by a ridiculous rise in a stock.

here's one thing I can guarantee you... there will not be millions of M3s working as autonomous fleet vehicles... why in the world would anyone think that's a good idea in the first place? $40k+ ASP? range of 250 miles?

how much are you going to charge again for your M3 taxi ride you give to strangers riding around in your car to make up for that $40k price you paid?... how far is the average distance going to be for each of these rides?

if fully autonomous "taxis" start taking over the roads and cities within the next decade... why do you think someone won't just make a cheap, 125 mile... small battery pack... simple looking car and then pump them out on the road undercutting your ridiculous cost per ride because their car cost a small fraction of what you paid retail for yours?

you rely on Elon for your vision... why don't you just try to imagine it yourself... with your OWN vision... then you will realize... your DCF is as accurate in predicting the number of M3 fleet vehicles Tesla will deliver on Jan 1, 2025 as what the temperature will be at 8:30 AM in Freemont that morning.

 

[ValueAnalyst]

Tesla Network - Tesla's cut

I noticed there's a wide variety of assumptions for this variable, which is an important one (i.e. its impact on intrinsic value is high).

I assume 25% because of low-variance precedent adjusted for one major factor:

• Uber/Lyft advertise that they take 25% cut; however this is misleading, because they also charge other fees per ride (safe ride fee, booking fee, etc). According to this article, the effective commission is more than 40% for lower fare rides and 35% for an average fare of $10. More importantly, for UberPOOL rides, for which the software plays an important role, Uber takes a higher cut.
• Currently Uber/Lyft need the drivers, which take more than 50% of the fare. The labor cost of being in and driving the car is likely more than the cost of providing the car. It is crucial to note that Tesla will be the driver for a Level 4/5 autonomous Tesla Network, so arguably, Tesla should take an even higher cut than the 35% avg that Uber/Lyft effectively charge.

Despite the two bullish factors I described above, I assume 25% cut for Tesla.

 

[DurandalAI]

After doing some more calculations, I think this is a fairly reasonable estimate for the potential for the Tesla Network for 2025:

- 10 million cumulative Tesla vehicle production
- 2.5 million participating vehicles on the Tesla Network
- 16 hours per day, 300 days per year, 2.5 rides per hour, 4 USD per ride, 10% cut for Tesla
- Average of 82 million rides per day total
- Total annual revenue of 120 billion, Tesla gets 12 billion
- Revenue per vehicle of 160 USD/day, 48k USD per year
- Daily mileage of 320 miles per vehicle, 96k miles per year

I don't think saturation will be an issue with 82 million rides per day, so I think the cost per ride will be lower than an Uber, but still high-ish.

Still, this all hinges one one critical point. Tesla needs to get that self driving tech working and approved!

Sorry for my flurry of replies all at once. Catching up from when I left yesterday.
I like the numbers you have posted there, I think you're likely onto something.

I'm going to just throw one mental tidbit out there for people to chew on. I'm not going to let someone ride in my brand new Tesla Model 3 that I just bought.. But I guarantee you that I will put my Tesla into Tesla Mobility once it's 3 years old and I use the $$ gained from the 3 year old car to subsidize my BRAND NEW P100D... Just a thought.. Dang.. I need to go ahead and put in another Model 3 reservation...

 

[EinSV]

Sorry for my flurry of replies all at once. Catching up from when I left yesterday.
I like the numbers you have posted there, I think you're likely onto something.

I'm going to just throw one mental tidbit out there for people to chew on. I'm not going to let someone ride in my brand new Tesla Model 3 that I just bought.. But I guarantee you that I will put my Tesla into Tesla Mobility once it's 3 years old and I use the $$ gained from the 3 year old car to subsidize my BRAND NEW P100D... Just a thought.. Dang.. I need to go ahead and put in another Model 3 reservation...

That's a great point.

Now for fun let's assume that due to financial constraints your choices are: (1) buy a Toyota Corolla or equivalent or (2) buy a Model 3 and put it in the Tesla Network.

Would you consider buying the Model 3 and putting it in the Tesla Network right away?

 

[Drumheller]

Thank you for this information. Could you please explain why grosss revenues for cars on Tesla network would be $30/day when an Uber driver today makes $200+ working 8 hours a day?

Where are you getting the figure that Uber drivers avg $200+ per day?

 

[ValueAnalyst]

Where are you getting the figure that Uber drivers avg $200+ per day?

I should have labeled that gross revenue (i.e. what Uber collects from customers before paying driver, expenses, etc). This is the applicable labeling for the number Yggdrasill estimated to be Tesla's gross revenue to which Yggdrasill then applied Tesla's cut.

Basically my point was: if Uber can achieve $200+ per day per car ($10 avg fare, 2.5 rd/hr, 8hr/d also some good info here), then why would an autonomous car (which doesn't get tired, doesn't need to take a lunch/bathroom/smoke break, can be more efficient in pooling riders which means higher avg fare per ride during which Tesla can sell services to riders) only collect $30/day of gross revenue? Unreasonably conservative.

 

[Snapdragon III]

Pl WORLD______MAY_________ YTD_________ %______ '16Pl
1 Tesla_________6.713________35.663________10 _______2
2 BMW________7.242_________33.035________ 9________3
3 BAIC_________6.530________25.004________7_________5
4 Nissan_______3.981_________23.915________7________4
5 BYD__________8.651________23.548________7________1
6 Toyota________7.579_________20.877________6_______30
7 Chevrolet_____4.448_________18.339_________5_______8
8 Renault_______ 2.582________14.850_________4______10
9 Zhidou________4.471________14.004_________4_______14
10 Volkswagen__3.502_________13.064_________4_______6

EV Sales: World Top 10 May

How does BMW sell so many electric cars? Are these all i3's? I sure don't see many of them around on the streets in Seattle. Nothing like Leaf's and Teslas. Maybe they are popular in Europe?

 

[kbM3]

+1

In addition, if there were a far lower number of cars but each operating 24/7, they would be quickly worn out and need to be far more frequently replaced by fresh production.

Agree. This is why autonomy alone will not reduce overall need for cars.

However, if electric vehicles can reach 1,000,000 miles lifetime, each fully utilized autonomous ride service vehicle can approximately replace maybe four gasoline engine cars? Maybe 200,000 miles annually with a five year lifetime?

 

[myusername]

I should have have labeled that gross revenue (i.e. what Uber collects from customers before paying driver, expenses, etc). This is the applicable labeling for the number Yggdrasill estimated to be Tesla's gross revenue to which Yggdrasill then applied Tesla's cut.

Basically my point was: if Uber can achieve $200+ per day per car ($10 avg fare, 2.5 rd/hr, 8hr/d also some good info here), then why would an autonomous car (which doesn't get tired, doesn't need to take a lunch/bathroom/smoke break, can be more efficient in pooling riders which means higher avg fare per ride during which Tesla can sell services to riders) only collect $30/day of gross revenue?

I don't know... maybe because at the same time you think Tesla will be selling 10m cars per day... you also think each of these cars will be an Uber like vehicle... HOW MANY UBER DRIVERS ARE THERE?

few hundred thousand?... one million?... why do you at the same time think that ALL CARS WILL BE REPLACED WITH TESLAS and that for some reason everyone of them will be an Uber?

I swear... the more you guys try to figure out what 2025 will look like, the more ridiculous you get.

 

[winfield100]

How does BMW sell so many electric cars? Are these all i3's? I sure don't see many of them around on the streets in Seattle. Nothing like Leaf's and Teslas. Maybe they are popular in Europe?

WORLD June YTD
BMW i3 2.245 12.175 these are 100% electric BMW's
BMW 7.242 33.03
NOTE: ie only 37% are electric, 63% are PHEV (gas plus electric, extra complexity)

EV Sales: World Top 10 May

 

[jhm]

Sorry for my flurry of replies all at once. Catching up from when I left yesterday.
I like the numbers you have posted there, I think you're likely onto something.

I'm going to just throw one mental tidbit out there for people to chew on. I'm not going to let someone ride in my brand new Tesla Model 3 that I just bought.. But I guarantee you that I will put my Tesla into Tesla Mobility once it's 3 years old and I use the $$ gained from the 3 year old car to subsidize my BRAND NEW P100D... Just a thought.. Dang.. I need to go ahead and put in another Model 3 reservation...

What you're hitting on here is that renting out your car makes more sense after it has lost its new car premium. That is, renting out is seen as an alternative to selling a used car. The rental income in fact creates a floor price for a use Tesla. Someone will always be willing to buy the used Tesla at near the value of rental income.

If Tesla takes a 10% cut on the rental revenue, this directly decreases the value of rental income. Suppose fares are $80/d and operating costs of $40/. If Tesla takes 10% of fares, you net $32/d. Or if Tesla takes 0%, you net $40/d. So at 300d/yr, in the 10% case, this is $9600/yr gross profit. Suppose taxes take another 35%, so after tax $6240/yr. The car is good for say 5 year, and suppose investors are looking for a 10% rate of return. Thus, investors are willing to buy your car at about 4.2 times the annual income. So they offer you $26,206 for your car, if Tesla is taking 10%. But if Tesla takes 0%, their annual income is $7800 and they are willing to buy your car for $32,760. Thus, Tesla's take of 10% actually extracts about $6552 from the resale value of your car.

Now these numbers are totally made up. So I'm not going to defend any of them. But the point is to illustrate how Tesla's take actually depreciates the value of use Tesla. Do shareholders want to be that greedy? The value that is extracted from used Tesla's undermines the value of buying new Teslas. So if Tesla wants to maximize the sale of new vehicles in price, volume and growth in volume, taking any cut of the rental revenue stream is counterproductive. This is also why Tesla does not make service or charging a profit center. All of that leads to incremental depreciation, and depreciation undermines the value of a new vehicle, slowing down uptake of EVs.

Even if Tesla takes 0% of the fare revenue from customers, it can still participate by holding a fleet of used Teslas and renting them out. Indeed, to manage in inventory of used cars for sale, this is a smart way to cover the cost to carry while holding out for a sales price higher than the rental value of the car. Imagine the whole inventory of used cars for sale taking people for rides. While in the car, passengers get the pitch, "Like this car? It could be yours for $33,900!" So however long it may take for Tesla to sell the car, they are making $40/d and generating sales leads. Yes, it's the used car that sells itself. Tesla is in a very special position here, and I don't see why they would want to undermine the value of used cars just to extract some fare money from customers own cars.

 

[MitchJi]

For the last time, I am going to explain this very slowly for the benefit of those who don't understand Transportation Economics 101.

The reason cars will not be used more efficiently is that EVERYONE IS DRIVING FROM 8 AM TO 9 AM. To get to their JOBS. The only way to get the cars used more efficiently is to actually get the commuters out of their cars (onto bicycles or something).

In our area the commute lasts for three to four hours. Plenty of time for the cars to make an additional trip. And I think that ride sharing with the owners in the car will see substantial use as well.

Now, I am really sick of explaining these basics. If you can't figure out why this makes most of these "more efficient car use" fantasies into FANTASIES, I am done with you.

I'm getting a little bit tired of these aurguments between your excessively negative comments and VA's excessively optimistic projections.

 

[Drumheller]

I should have labeled that gross revenue (i.e. what Uber collects from customers before paying driver, expenses, etc). This is the applicable labeling for the number Yggdrasill estimated to be Tesla's gross revenue to which Yggdrasill then applied Tesla's cut.

Basically my point was: if Uber can achieve $200+ per day per car ($10 avg fare, 2.5 rd/hr, 8hr/d also some good info here), then why would an autonomous car (which doesn't get tired, doesn't need to take a lunch/bathroom/smoke break, can be more efficient in pooling riders which means higher avg fare per ride during which Tesla can sell services to riders) only collect $30/day of gross revenue? Unreasonably conservative.

My, very brief, experience as an Uber driver was not great. The customers were fine, but I don't have a great opinion of Uber as a company. I drove my Model S, but was never paid the higher rate, and was on 'on the clock' a total of about 4 hours. I made $13. That was my brief experience in Phoenix.

 

[aubreymcfato]

In our area the commute lasts for three to four hours. Plenty of time for the cars to make an additional trip. And I think that ride sharing with the owners in the car will see substantial use as well.

In Europe car pooling is on the rise: companies like BlaBlaCar are widely used by young people (actually, sometimes, in direct competition with trains).
Here there are some numbers. Car pooling is good for the environment, as you just put more people inside cars that would have traveled almost empty, and I think is "true" sharing economy, as you are not just a fake taxi driver without a license and insurance (Uber, anyone?).

I'm getting a little bit tired of these aurguments between your excessively negative comments and VA's excessively optimistic projections.

FWIW, I always enjoyed neroden's insights, they are truly golden, and I'm learning a lot. At the same time, the snarky tone doesn't really help. People online don't think, they react emotionally, so anger actually makes the whole conversation worse.

 

[Snapdragon III]

Thoughts on Tesla network

- I am in the camp that thinks it seems promising, but, I also think there are so many totally unknown variables in play that putting even a range of discounted valuations to it seems a little silly. There is just way to much we don't know. I like to think of it more like an option, that has very small value currently, and will probably end up being worthless, but does have a chance of being very valuable.

-I think the problems of availability during rush hour are more easily overcome than some think, for a few reasons.
1. Good, cheap, autonomous networks in the suburbs will make existing mass transit much more convenient. Being able to easily get a ride 2-10 miles to the nearest major suburban transit hub, and not having to face a totally packed park and ride lot when you get there, will make using transit much more convenient. Since these will be short trips in the suburbs, cars could make a number of trips per rush hour. If ridership on transit increases, it would be relatively easy to add capacity by adding more buses or trains.

2. I Think that commuting to work is the one time that people are actually likely to embrace carpooling. With some good software that made it super convenient, cheap, and assured that you didn't have to ride with any creeps, I think people would carpool. When I used to work in downtown Seattle parking used to cost me $20 a day, on top of the costs to run my car. I tried taking the bus, but it sucked, and added about 30-45 minutes each way to my commute time. I would have jumped on an autonomous, door to door carpool.
-People commuting are typically by themselves and don't have car seats for kid's, groceries etc. to worry about.
- I am worried that autonomous cars are going to create a traffic nightmare, with a bunch of empty cars cruising around adding to the volumes. This could be headed off by building the network with dynamic pricing based on traffic, and availability. They could use punitively high prices for being alone in a car during times of heavy traffic to encourage people to carpool. If they did this, I believe it would be a huge political win, that would make it much easier to get approval on the political side of things. Imagine if the pitch was. "Let us institute our program, and we will save everybody money, be much safer, and reduce congestion."


- Over all, once autonomous ride sharing becomes common, this is how I imagine car ownership playing out, at least for the next couple decades. Urban people will generally not own a car, and will use ride sharing. This will mostly be due to the expense and hassle of parking. Suburban people will have fewer cars. Maybe going from 2-3 to 1 family car. Commuting will be done by ride share, but they will still have a car for moving kids around, family trips etc. (Ride sharing would work better if autonomous cars were so much safer, we decided we don't need car seats for the kids.) In rural areas, I think autonomous networks will be more popular than most people think. It will take a little longer to get picked up, due to the greater distances, but I think the generally lower incomes in rural areas will make the savings attractive. I suspect rural areas is where the older, ragtag autonomous cars will go to die, for miles 500,000-1,000,000.