2017 Investor Roundtable: TSLA Market Action

[Crowded Mind]

I think most of the estimates on how much a self driving car will earn are way, way off base. Elon seems to agree. My understanding of his position, which I agree with, is that very soon self driving cars will be the norm, and the cost of ride sharing will plummet due to competition between companies. Elon has mentioned that "Taking an autonomous ride share will be cheaper than the bus." "The income from the Tesla network will mostly offset purchase price of Model 3." (Paraphrase from memory of exact quotes)

I still think it will be a profitable business, and good self driving will be necessary to sell any cars in the future, as nobody will buy a car without it, but taking anything close to current ride share pricing and applying it to self driving cars 3 or more years out, is a huge mistake in my opinion. The upside to this is that as the prices crash, the addressable market will grow dramatically. This will be especially good for companies like Tesla, who's model has the customers paying for the cars, and won't have to invest 100's of billions of their own money in a fleet of cars, that will run on very thin profit margins. I believe that if they can set it up, so customers have a close to free car, if they put it in the network when they are not using it, they will have more demand than they can possibly build for years to come. My guess for the best case scenario over the medium to long term is that a customer buys a $40,000 Tesla which they put in the network, and over the next 5 years the car makes around $50,000. $40,000 goes back to the customer, and Tesla skims off the other $10,000. This sounds like a good business to me, but nowhere near the $1.25 per mile Morgan Stanley is talking about. If this scenario turns out to be close to how it play's out, Tesla's other huge advantage seems to be that the hardware for their self driving system appears to be much cheaper, and built with much larger scale than what Waymo, and others seem to be putting together.

Agreed. I believe this is why Elon has said (paraphrasing) that autonomous software will be their biggest advantage in the short term (2 years) and manufacturing will be their biggest advantage in the long term (10 years). Once the software is a commodity, price and availability are the most important factors. Manufacturing efficiency is the key to both of those. It's clear that Tesla sees this and is already very far along in planning for this. Competition is still focused on the software.

 

[anticitizen13.7]

I think most of the estimates on how much a self driving car will earn are way, way off base. Elon seems to agree. My understanding of his position, which I agree with, is that very soon self driving cars will be the norm, and the cost of ride sharing will plummet due to competition between companies. Elon has mentioned that "Taking an autonomous ride share will be cheaper than the bus." "The income from the Tesla network will mostly offset purchase price of Model 3." (Paraphrase from memory of exact quotes)

I still think it will be a profitable business, and good self driving will be necessary to sell any cars in the future, as nobody will buy a car without it, but taking anything close to current ride share pricing and applying it to self driving cars 3 or more years out, is a huge mistake in my opinion. The upside to this is that as the prices crash, the addressable market will grow dramatically. This will be especially good for companies like Tesla, who's model has the customers paying for the cars, and won't have to invest 100's of billions of their own money in a fleet of cars, that will run on very thin profit margins. I believe that if they can set it up, so customers have a close to free car, if they put it in the network when they are not using it, they will have more demand than they can possibly build for years to come. My guess for the best case scenario over the medium to long term is that a customer buys a $40,000 Tesla which they put in the network, and over the next 5 years the car makes around $50,000. $40,000 goes back to the customer, and Tesla skims off the other $10,000. This sounds like a good business to me, but nowhere near the $1.25 per mile Morgan Stanley is talking about. If this scenario turns out to be close to how it play's out, Tesla's other huge advantage seems to be that the hardware for their self driving system appears to be much cheaper, and built with much larger scale than what Waymo, and others seem to be putting together.

I am skeptical of ride sharing, and personally I would not loan out my car. There's no way to know what people would use the car for, and I don't want my vehicle impounded if some idiot decides to drag prostitutes into the back seat or sell heroin out of the frunk.

Many people consider their car to be a rolling home, and will never allow it to be used as an automated taxi for god knows what.

 

[Reciprocity]

Agreed. I believe this is why Elon has said (paraphrasing) that autonomous software will be their biggest advantage in the short term (2 years) and manufacturing will be their biggest advantage in the long term (10 years). Once the software is a commodity, price and availability are the most important factors. Manufacturing efficiency is the key to both of those. It's clear that Tesla sees this and is already very far along in planning for this. Competition is still focused on the software.

From this that someone recently posted:

https://static1.squarespace.com/sta...30c5/1494888038959/RethinkX+Report_051517.pdf

They are projecting the costs at under 20c a mile. Now way Waymo is going to be able to charge $1.40 a mile, when Tesla owners will charge 40c and split the profits with Tesla. I also agree with the previous poster that people are over estimating the value. I think it will make your payment, maintenance, insurance fees and give a few bucks for car washes and other things you will need to do to rent it.

I agree, only auto manufactures will be able to do this and it wont be something they make a lot of money on, but the margins will be almost 100% because someone else is buying the car and Tesla is just going to get a couple cents a mile off the top. There wont be any place where Uber can add value and there wont be any margin for none manufactures to get involved, This includes Waymo, unless they partner with Chrysler to build their EVs for them and then they will be splitting profits 2 ways or Chrysler will have to pay to license the solution from Waymo, which might include some per mile fees?

On a side note, I hope they double the size of that Pacific batter of the next couple of years. Thats my perfect wife mobile and cheaper then a model X. Unless Model Y has 7 seats.

 

[DragonWatch]

I am skeptical of ride sharing, and personally I would not loan out my car. There's no way to know what people would use the car for, and I don't want my vehicle impounded if some idiot decides to drag prostitutes into the back seat or sell heroin out of the frunk.

Many people consider their car to be a rolling home, and will never allow it to be used as an automated taxi for god knows what.

I would not close the door here so fast. Significant changes are shifting within our social structure below the radar. I have no tangible facts, but will keep on the lookout. I am seeing more and more people choosing not to buy cars, let alone new ones. Almost every other car around here is a Prius or a leaf. One of our renters uses the bus or zipcar. Just saying

 

[erthquake]

I would not close the door here so fast. Significant changes are shifting within our social structure below the radar. I have no tangible facts, but will keep on the lookout. I am seeing more and more people choosing not to buy cars, let alone new ones. Almost every other car around here is a Prius or a leaf. One of our renters uses the bus or zipcar. Just saying

Agreed. Teenagers will see it as a huge boon to their independence from parents. Why go through all the hassle of begging your parents to pay for driver's ed and they can't even drive alone with their friends until they're eighteen. They can just cheaply hail a car to go to the movies or a concert. Parents can track them and feel safe that they're not on a bus or subway with "undesirables." That will immediately reduce or even eliminate that generation's interest in owning a car when they're off on their own.

 

[FredTMC]

All I see are arguments with clueless ghosts. You could all have the same experience, and the board would improve.

Ya. It's better without them.

 

[anticitizen13.7]

I would not close the door here so fast. Significant changes are shifting within our social structure below the radar. I have no tangible facts, but will keep on the lookout. I am seeing more and more people choosing not to buy cars, let alone new ones. Almost every other car around here is a Prius or a leaf. One of our renters uses the bus or zipcar. Just saying

There's a difference between buying a car and being a member of a ride sharing service. I have friends in urban areas who choose not to own a car because it is inconvenient and expensive. For them, public transport and zip cars work well. Their cost is minimal.

In the suburbs and rural areas this doesn't work. If I pay 40k for a car I don't want random people using it. Period. It's not like a zip car that I pay $20 to use for a few hours, and I don't care if the next person to drive it decides to go buy a hit of meth or sell some stolen prescription meds. If the zip car gets impounded or civilly forfeited I don't care. If my 40k car is lost to civil forfeiture Im screwed.

 

[mmd]

^^^looking in the wrong place and in the wrong context for TSLA valuation---

Alphabet’s self-driving Waymo unit could be worth $70 billion, more than GM, Morgan Stanley says
Map that assessment to TSLA and the entire preceding discussion would be looking in the wrong space entirely,
and a waste of conversable bandwidth IMO.

Recommend clearer thinking for disruptive investments -
analogous comparatives with spaces occupied in the past, yield exactly the wrong investment decisions---
my 2 pennies

Waymo builds its own hardware and Tesla does not. Tesla uses Nvidia's platform.
In fact, it is Nvidia that is in the self driving core technology. Tesla is mostly a buyer and system integrator of Nvidia system. Soon Toyota will be too.

Nvidia And Waymo Grab Early Lead In First Lap Of Self-Driving Car Race

 

[racer26]

Waymo builds its own hardware and Tesla does not. Tesla uses Nvidia's platform.
In fact, it is Nvidia that is in the self driving core technology. Tesla is mostly a buyer and system integrator of Nvidia system. Soon Toyota will be too.

Nvidia And Waymo Grab Early Lead In First Lap Of Self-Driving Car Race

The hardware is literally just a computer. Tesla is running their own custom software on NVidia's architecture. The software is the important bit.

 

[22522]

Bingo! This is exactly the point! Those who own and drive a Ford are NOT enthusiasts and do not become advocates and investors, they do not love the car, they put up with it as a cheap solution that is (barely) acceptable to them and complain a lot about it.

I bought the car in 2014, then became an investor. If I have to drive an ICE car for a day (e.g. a rental on trip) I feel extremely uncomfortable and HATE the experience, can't wait to get back into my Tesla. I would never buy another ICE car in my life, would not even accept one to drive if it was given to me for free.

Have you ever driven a 2011 BMW 328i with a naturally aspirated straight six?

 

[Reciprocity]

Waymo builds its own hardware and Tesla does not. Tesla uses Nvidia's platform.
In fact, it is Nvidia that is in the self driving core technology. Tesla is mostly a buyer and system integrator of Nvidia system. Soon Toyota will be too.

Nvidia And Waymo Grab Early Lead In First Lap Of Self-Driving Car Race

shrug...
Tesla to make its own custom SoC (System on Chip) for self-driving cars built by Samsung, report says

 

[Garlan Garner]

Hmmmm..... where is Tesla's stock price right now?

 

[mmd]

shrug...
Tesla to make its own custom SoC (System on Chip) for self-driving cars built by Samsung, report says

Shrug...
Future tense. Selling 2025 dreams? Let's talk again when they already HAVE a system working well,and are willing to sell it to others.
By that time, many others may also have it. Actually, many others do already have it. Like Delphi.

"Tesla has been rumored to be working on its own SoC (System on Chip) optimized for self-driving cars since we reported that the c..."

 

[Sudre]

The only problem I have with bears in this thread is the complete lack of any market info.
All their posts should be moved to the general thread.
They make us assume what their value for TSLA is.

Bear TSLA market value break down.
Auto : 15Billion
Autopilot/software advantage : 0
Solar : 0
Battery packs : 0
Dealship value : 0
Total Bear TSLA value : 5 billion. (Yup because GM, Ford, Tooth Fairy is going to take their market)

True investors know you can apply some value to all those other areas. Bears have no clue how to value a company.
They also have no clue that the market is forward looking and giant companies that making nothing new (GM, Ford) do not get valued for anything in the future.

 

[anticitizen13.7]

Waymo builds its own hardware and Tesla does not. Tesla uses Nvidia's platform.
In fact, it is Nvidia that is in the self driving core technology. Tesla is mostly a buyer and system integrator of Nvidia system. Soon Toyota will be too.

Nvidia And Waymo Grab Early Lead In First Lap Of Self-Driving Car Race

For now that is true. Don't forget that Tesla hired Jim Keller, who was instrumental in architecting AMD's K7 and Zen, as well as Apple's A4 and A5.

I fully expect Tesla to have its own custom microprocessor hardware at some point in the future.

 

[ZsoZso]

Have you ever driven a 2011 BMW 328i with a naturally aspirated straight six?

No, I have not. But I have left some behind at the traffic lights
Is it silent ?
Does it not spew any toxic fumes ?
Can I have it operate in a closed garage without suffocating me ?
Does it give me the convenience of plugging in at home to "refuel" instead of driving to a gas stations and standing in the -20C degree winter holding a stinky hose ?

 

[1kEE]

Hmmmm..... where is Tesla's stock price right now?

Flapping in the wind...

 

[Garlan Garner]

View attachment 228131

Flapping in the wind...:

I can't believe someone made that thing.

 

[ValueAnalyst]

I'll be adding shares below $305.

 

[Waiting4M3]

This sounds like a good business to me, but nowhere near the $1.25 per mile Morgan Stanley is talking about. If this scenario turns out to be close to how it play's out, Tesla's other huge advantage seems to be that the hardware for their self driving system appears to be much cheaper, and built with much larger scale than what Waymo, and others seem to be putting together.

I would not count economy of scale as an advantage, if Waymo works, companies like GM may license their solution to put into their cars. Morgan Stanley is estimating millions of cars with Waymo in them. The revenue per mile vs HW cost seems the most critical.

At $1.25/mil, assuming 200K lifetime miles and 80% of those in ride sharing, that generates $200K of revenue over the lifetime of a car, which dwarfs any auto-driving hardware, and running cost (electricity/fuel/maintenance), so plenty of margin.

But if as you said the revenue/mile is driven down significantly, say $0.25/mile, now the lifetime revenue is now $40K. If it's an EV running at $0.05/mile, that's $10K for electricity, leaving $30K for maintenance and auto-driving HW, still OK even if lidar costs several thousand $, but it's no longer wildly profitable. If the car is an ICE and runs at $0.10/mile, then you lose another $10K in the lifetime margin.

If the ride sharing revenue gets further compressed to say around $0.10/mile ($16K life time revenue), then no one can make any money with an ICE car since the gas cost of $0.10/mile. And in the EV case, if lidar still costs several $K, it now becomes a serious drag on the margin. If Tesla Network can drive the ride sharing cost down that low, it'll be game over for any ICE makers, and anyone using lidar.