Even with Tesla Network ramping up very slowly and eventually capturing a small portion of ridesharing and Autopilot declining in price quickly over the next five years, my financial model estimates Tesla is worth a lot more than what Ron's estimates would suggest in the next three years.
Mostly because you value Tesla Energy and you also assume that Model 3 will develop more or less as planned by Tesla IIRC. Oddly, most of us largely agree. You also assume some glitches, so not perfection. For all of us who are bulls, the largest single question is probably execution risk for Tesla with two major issues; supplier problems and factory problems. Both of those are logically assigned probabilities of somewhere around 40%, but potential severity of either one is devilishly difficult to estimate.
Assuming those two issues are the most serious ones it is fascinating that most bearish analysts see lack of demand and competition as the largest issues, with a substantial subset seeing subsidies as the largest driver.
For those who think subsidies are the primary issues the case of the US State of Georgia is instructive. Bloomberg points out Tesla sales kept on after a minor blip but Leaf sales plummeted.
The Electric Car Revolution Now Faces Its Biggest Test
As they point out a truly competitive product survives and thrives regardless of subsidies. That said, with which I mostly agree, cases such as Norway can change that dynamic, if the subsidies are sufficiently dramatic. For those countries that exempt BEV's from motor vehicle taxation which is half or more the total new vehicle price, of course subsidies do matter.
The US Federal $7500 tax credit and the former Georgia $5000 credit will certainly move the bar on cheap cars. The impact such fixed monetary value subsidies have is a very high percentage of the cheapest and not much at the top end. IMHO, that is quite sensible tax policy. Anybody who buys a >US$100,000 vehicle needs no tax subsidy. For that matter, such vehicles will only sell when they are demonstrably competitive and desirable.
That brings us to the Model 3. Many here and elsewhere argue that the "entry-level luxury" market is extremely price-competitive. Were that so, the BMW 3-Series would not be such a stellar example of that category, because it is
never the cheapest and is often not even the best performer. In fact, a quick look at consumer products in general shows that the best dispassionate value is rarely the best seller, in anything at all. Most of us argue that we're logical, but human beings are not logical in all ways. I'll skip all the examples but for anybody who doubts the thesis I'll refer them to:
Amazon.com: Memoirs of Extraordinary Popular Delusions and the Madness of Crowds eBook: Charles Mackay: Books
This, written in 1840's, really is the fundamental text. I made it required reading when I taught marketing 101
Amazon.com: Marketing Management (14th Edition) (9780132102926): Philip T. Kotler, Kevin Lane Keller: Books
Kotler has been the go-to basic Marketing text for decades. I had an early edition when I sudied the subject and taught with several later editions. It still is the standard.
If, after studying these two books anyone really thinks price competition is the driving force, I am prepared to offer Yugos, Chevys, Chevrolet Sparks and much else.
Tesla products are not primarily price competitive. We all make such arguments, especially with industrial products like PowerPack and Solar Roof. Integration, reliability and simplicity rank high for public utility speakers, even, with price ranking importantly but not ultimately.
Nationalism and technological bias even drive gigantic commercial decisions such as A350 vs B787. Honestly, almost everyone actually knows there is not much operational difference, but that knowledge is denied by those who hold near-religious preference fro one vs the other. Price often is used as a justification even though costs end out not being much different. It is always easy to manipulate price to say what one wants to present.
So, Tesla sells directly, does not overtly negotiate, does not conventionally advertise and uses social media to generate continuing enthusiasm even for industrial projects. Price competition, no! Promote an officially low base and upset, sure! Package leases to ensure that the advantages of operating lease definitions can accrue to reduce payment, yes! We all need to understand that Tesla has highly advanced marketing, enough so that traditionalists cannot even see it happening.
A quick read of 1841 Mackay might help remind us about human social influences. Maybe we'll see ourselves as Kool-Aid drinkers too.
