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ARK Invest: $40,000 in net cash flow per fully autonomous Model 3

Discussion in 'TSLA Investor Discussions' started by strangecosmos, Aug 15, 2018.

  1. strangecosmos

    strangecosmos Non-Member

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    ARK Invest analyst Tasha Keeney estimates $40,000 in net cash flow per fully autonomous Model 3 deployed on the Tesla Network. That’s over 5 years and 500,000 miles, and a price of $1 per mile (lower than Uber or Lyft).

    Source: Tesla’s Autonomous Opportunity is Severely Underappreciated
     
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  2. strangecosmos

    strangecosmos Non-Member

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    Some back of the envelope math:

    • to be valued at $1 trillion on a price-to-cash-flow (P/CF) ratio of 10.64 (the long-term historical average), Tesla would need to generate $93.98 billion in annual operating cash flow
    • with each fully autonomous Model 3 generating $8,000 per year in operating cash flow over 5 years ($8,000 = $40,000 / 5), Tesla would need 11.75 million Model 3s on the Tesla Network
    • that means it would have to produce and deploy 2.35 million Model 3s per year for 5 years, and continue to produce 2.35 million per year to replace the 2.35 million that reach the end of their 5-year lifetime each year
    Model 3 and Model Y are probably roughly interchangeable (although we don’t know for sure). So the Tesla Network fleet could be a mix of both, and these numbers would be roughly the same.

    Suppose it takes until 2023 for Tesla to reach a combined global production of 2.35 million Model 3s and Model Ys. If it maintained that production level for 5 years and 100% we’re deployed on the Tesla Network, it would reach the 11.75 million fleet size by 2028 (at the latest). That fleet would generate $93.98 billion+ in operating cash flow and, it stands to reason, lead to a $1 trillion+ valuation.

    The economics would change long before then, though. Cheaper electric vehicles, increasing supply of fully autonomous cars, economies of scale, and competition would push prices down from $1 per mile to ARK Invest’s estimated equilibrium price of 35 cents per mile. So, this math doesn’t remain valid through to 2028.
     
  3. strangecosmos

    strangecosmos Non-Member

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    I’ll try the math a different way.

    • Bloomberg estimates that ~68,000 Model 3s have been produced so far
    • I’ll assume an average of 6,000 per week will be produced for the remaining 20 weeks of 2018: that’s 187,000 total by the end of 2018
    • I’ll assume an average of 8,500 per week for 2019: that’s 630,000 total by 2020
    • and an average of 10,000 per week in 2020: that’s 1.15 million by 2021
    • let’s say the Tesla Network launches in early January 2021
    • in 2021, the existing fleet will generate $9.2 billion in operating cash flow
    • I’ll say that 2021 production will be 750,000 and generate another $6 billion in cash flow
    • that’s $15.2 billion total
    • $15.2 billion in cash flow * 10.64 P/CF ratio = $161.73 billion valuation
    This excludes Model S and X, and energy.
     
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