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Articles/Megaposts by FluxCap

Discussion in 'TSLA Investor Discussions' started by FluxCap, Feb 19, 2014.

  1. FluxCap

    FluxCap Active Member

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    #1 FluxCap, Feb 19, 2014
    Last edited: Feb 26, 2014
    Hi folks,

    I decided to start this thread after looking at how much text was in my recent reply to the short-term thread and deciding you all might like to browse that thread without undue interference. Nigel and moderators have approved.

    Cheers,
    Flux

    - - - Updated - - -

    FluxCap’s Tesla Market Strategy Update Pre-Q4 2013 Earnings

    Disruptive, Revolutionary Business Model Strategies Continue to Defy Wall Street’s Short-Term EPS Obsession/Addiction
    There are so many simultaneous revolutions happening under Elon Musk’s guidance of Tesla Motors that it’s hard not to see them as normal any longer for those on these forums. But to the rest of the world (including many analysts), the understanding of this has only begun.

    In particular, the shift to a direct, internet-enabled, high-end, Apple-style sales model, even if this was the only innovation that Tesla Motors brought to the transportation industry and in fact global transportation economy, would be huge on its own. Combined with the obvious creation of a premium, “most-desirable” product and the beginnings of a brand, this force has the potential to be unstoppable.

    Supporting and creating this sales channel and model takes long-term dedication, relentless focus, hard work and a refusal to focus on the “easy way” or short term. The keys are continued advocacy with legislators at the state as well as Federal level, growing goodwill and brand power of Tesla among consumers, and frankly, largely ignoring Wall Street analysts and naysayers along the road.

    Elon famously visited with over 150 members of Congress personally last year, but I believe this is not sustainable given his other responsibilities. He has a regulatory team, but he may need to beef this up going forward with talented people.

    On EPS -- I still think that EPS, at this stage in TSLA's evolution (revolution?) is so low on the list of things that should be used to analyze the future value of this company that I wish analysts would not focus so much on it, but they tend to be obsessed with it. As I believe sleepy said some time ago, for a truly disruptive growth company still in the beginning stages of its trajectory, a short term "spot check" of EPS is not the best indicator of future potential.

    Tesla is that rare company that literally can't seem to find a cap on the demand for its products at any price.

    So then, a focus on how management is handling the growth of the company from an engineering, supply chain, sales channel, and even PR standpoint becomes more important. Indicators like margins, future guidance and especially supply chain / production optimizations as the company scales are things I am focused on.

    EPS will be watched because the market is obsessed with it, but there is a bigger, better story to tell. And I think we will hear a lot of it from Elon and company tonight.

    Signs of Improvement in Handling of PR
    Since I wrote my Open Letter to Elon Musk last November, I have further written about my huge sense of relief at the deft and skilled handling of the latest potentially negative press situation already, but I want to re-emphasize it now. The simple paragraph produced in the Toronto fire issue belied how much work I’m sure went into creating it. It required trust and communication among engineering, marketing, sales, finance and operations teams to get that statement right. That kind of capability was not displayed in the negative press events of late last year, and this bodes very well.

    What impresses me most about the handling of this non-incident is:

    1) A clear, firm, concise response issued by Tesla about this BEFORE it became news. THAT is proper PR.
    2) The fact that a number of forum members here called Tesla directly, and not only were they given a response on this issue, they were given the right one by the call center reps, which means someone in PR funneled this clear and concise information down to them properly and RAPIDLY, and empowered them to communicate it. That is trusting your team.

    That is how you run a tight ship from a messaging point of view folks, and that is good business. It is clear that they have reinforced their PR team in some good places since I wrote about this last year and perhaps Elon has empowered some members of his team with a little more trust.

    I’d like to see more evidence of this improvement, and suspect we will.


    Waking the Dragon – Tesla and the People of China
    It is hard to overestimate the significance of Elon’s decision to enter the Chinese market with commitment at this stage in the company’s evolution. He knows that demand is off the charts worldwide and supply constraints are all that are holding them back, but he also is bold when others would be timid here – laying the groundwork for success in China one victory at a time is crucial. Make no mistake, the next decade could as easily belong to China as it does to the US or EU from an economic power standpoint, and Elon is positioning himself well no matter what. China is important for so many reasons, and having lived there myself for a time, I know that to get actual, official Chinese government support of your business there is so huge of a victory that it’s almost impossible to quantify. Now the government is fickle, and changes their mind without warning, but the skies in China are black with soot, and as sleepyhead has said here, they no longer have an option, they are going huge into renewables, solar and electric power alternatives to combustion. This is very good for Tesla Motors:

    The Chinese Finance Ministry is going to extend a subsidy program for consumers that want to buy electric vehicles. The subsidy program for electric vehicle purchases is scheduled to happen in 2015.

    The Chinese government extended the program with the goal of hitting 500,000 hybrid or EV vehicles next year and 5 million by 2020. Tesla Motors is started accepting preorders for vehicles in China last August and is going to start delivering vehicles in China this month or next. Tesla has received positive feedback from customers in China and Europe. Shipments in China could hit the same number as U.S. shipments by next year. Tesla Motors may even build a facility in China eventually.
    "

    That's a significant committment to a lot of EV's in the world's most important emerging economy, and thus far, there is no credible competition to Tesla Motors for product desirability / customer satisfaction from any manufacturer. Traders are pricing in more sales for Tesla accordingly, but I think the full scope of this strategic move’s effect on Tesla’s valuation is only beginning.


    Infrastructure for Building an EV Empire
    The expansion of the completely proprietary and free to customers Tesla Supercharger network has only begun, and the market just has not yet realized how powerful this will be when the network is fully built out and public awareness is higher. Getting people to understand that the supercharger network is a supplemental charging solution for long-range travel, and not the “EV Gas Station” network that is unnecessary in cars that have over 200 miles of range and that charge at home, is a hurdle that will be crossed in the coming year. This may take some marketing effort, but it is coming. This will only propel the brand, the company and the stock further when it comes to fruition. I am eager to hear more about plans and expect we might on the Q4 Earnings call.

    On the CapEx / cost of building this network: it is so ridiculously cheap to buy a piece of real estate in the middle of nowhere, plop what amounts to a few electric outlets with fancy signs on them down, pour some concrete, and WALK AWAY. No gas refilling needs, no convenience stores unless already on site, no management, no real service. It’s just a free place for customers to power long-range transportation. That is unprecedented and revolutionary.


    Room to Grow / Building the Company Intelligently:
    Marketing –

    Despite Elon’s famous and mostly wise decision to have “no marketing budget” (largely meaning traditional advertising), I believe it’s time to relax that stance a bit, spend a little on some more good hires, and launch a few low-cost, high-return small marketing programs that could pay huge dividends in general public good-will and awareness, which contributes not only to demand but to political and policy advocacy – which remains a hugely important issue for Tesla.

    For example, take care in a more meaningful way of the owners who are already the company’s advocates so you can gain an exponential increase in their support for a fraction of time, staff and money invested. I’m not kidding, a free T-Shirt contest or program is cheap, and “fans” can live off a free t-shirt for months. I’m one of them.

    Management –

    I remain concerned, perhaps surprisingly, about the health and welfare of Elon Musk. He is, without a doubt, the Steve Jobs/Henry Ford of this generation. Yet, as much as I like to indulge the fantasy, he very much is not Iron Man. He cannot be everywhere at once and be all things to all people indefinitely, which is why you hire and retain key talent. So far he has done a TREMENDOUS job at this, though I do think he needs to place a bit more trust in some parts of his team, or beef them up accordingly.

    Elon Musk is the story of Tesla Motors. This is fun, and a great start to the brand, but over time, the story of Tesla Motors should become the story of all of us. It should become the story about how we reminisce about the days when we all drove around in fire-breathing combustion cars that wasted most of their stored energy to heat, polluted the planet our children live on, and were chained to one of the most destabilizing and harmful industries ever to grace our planet, the fossil fuel industry. Freedom from that, just like carrying an iPhone in every pocket, is the promise of Tesla Motors, and it is a promise that we all need to help Elon achieve. I’m confident he will rely on us to help him get there.



    Thanks all for reading, and please excuse errors/omissions. I was rushing to get this out so folks would have a chance to read it if desired in advance of the call.

    Cheers,
    FluxCap (Adam)
     
  2. kenliles

    kenliles Active Member

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    Excellent post more targeted to mid-long term. I liked it a lot when you originally posted it. good idea
     
  3. FluxCap

    FluxCap Active Member

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    Recording my thoughts on the day after the massive MS / Adam Jonas $320 price target raise here:

    Scenarios I'm currently playing out in my head for this week's remaining price action include:

    Upward Price Movement:
    -announcement of the Giga-Factory conference call (setting the time creates excitement)
    -possible NHTSA clearance
    -further analyst upgrades following the MS / Adam Jonas upgrade

    Downward Price Movement:
    -random economic bad news + flat trading + short FUD articles (normal stuff)
    -analyst downgrades (though this seems unlikely)
    -profit-taking / new large short positions

    The actual giga-factory announcement / capital raise will probably set a new "floor" for the stock price as Causalien pointed out in the short-term thread. I suspect Elon is in final discussions with selected bank/banks now.

    As for movement after the announcement, who knows. It could rocket up as the details emerge and become concrete, or it could dip on minor dilution, or both. Very hard to predict.
     
  4. FluxCap

    FluxCap Active Member

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    #4 FluxCap, Apr 21, 2014
    Last edited: Apr 21, 2014
    Been awhile since I have posted here, and decided to muse a bit on what I would call Paid-For-Journalism as a Tool for Marketing Insurgency On the Internet.

    To begin, let's recap the made-up stories-du-jour that have been manufactured to damage Tesla in recent weeks with no basis in fact:

    -Tesla's demand is peaking
    -Tesla is going to fail in China because of...something
    -Tesla's factory plans are completely dependent on Panasonic, and Panasonic doesn't want to play
    -Tesla is a momentum stock like Facebook, a tech bubble company that doesn't make anything people want, and should be devalued
    -Other carmakers are not building competitive EVs because there's no demand for them / market for them, people like gasoline cars too much
    -Tesla is going to be banned because dealerships are awesome and people love going to car dealerships

    It's time for Elon to hire people who can get political at the ground level, and get on the case debunking these myths with some counter-insurgency tactics, IMO. Exxon employs hundreds of private companies who exist to spread fear, uncertainty and doubt on the internet about climate change. When a penny a click makes a Seeking Mediocrity article with 500,000 views generate $500 for some unscrupulous author somewhere, it's easy to see how cheaply articles can be bought and paid for. Part of me wishes to start a Defense Fund to combat these claims, part of me wants to enjoy the buying opportunity to get TSLA at a discount. But at some point, the FUD has to be stopped. And if Elon goes somewhere to speak in public but no press covers it in any meaningful way, that is a failing of Tesla's PR department that needs to be corrected.

    Hoping that Elon pays more attention to Tesla now that the SpaceX rocket launch is done and gets tough on these rumors and lies that the mainstream media has bought hook line and sinker.

    If you don't show up to counter negative attacks by a political opponent, you forfeit the debate before it even started and the opponent gets to completely define you anyway they want.

    Letting Exxon Mobil and its partners in global crime buy off the debate for pennies on the dollar, unchecked, is just tragic. I realize Tesla does not have the means to employ traditional mass-market advertising strategies yet, but darn if I don't wish there was more effort to fight the FUD at its source, in the dark corners of the internet, where stocks are manipulated for a few hundred dollars per article.

    I've come close to starting a nonprofit dedicated to electric transportation via renewable technologies that could directly engage in counterattacks against the power of oil. Only thing missing is funding, but am working on that.

    Thoughts welcome, here or elsewhere.
     
  5. roblab

    roblab Active Member

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    Good on you, mate!

    Do you accept small change donations?
     
  6. kenliles

    kenliles Active Member

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    I think Elon will rotate to Tesla some - that SpaceX launch was huge and challenge to the extreme (talking about the 1st stage controlled return here). I had noticed from some other tidbit comments that he was very focused on it and rightly saw it as a pivotal moment for the SpaceX future direction- mission accomplished by all accounts. I like the the non-profit org idea- hope you can get that off the ground. I don't think Tesla will ever actively target that stuff- even while making some recent improvements in PR- just not in their DNA.
     
  7. FluxCap

    FluxCap Active Member

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    Thanks for the thoughts, guys. Was glad to see the stock tick up five bucks after I posted my musings. Maybe I need to start my nonprofit after all. :)
     
  8. austinEV

    austinEV Active Member

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    lol. Obviously everyone loves dealerships.

    I have started to become aware of how ridiculous dealers are. Open your eyes and really watch car dealership commercials. It is so easy to take them as given (growing up in the USA anyway) that you don't realize how awful they are. They are middlemen guaranteed a markup between you and the car makers. All they have to do is out-shout their competition to get that $500 for a camry while making your experience worse. These businesses only exist because they are mandated to exist which is amazing. We will all look back at this in 20 years and wonder what we were collectively thinking. (I assume this fight with TSLA will end up backfiring and removing said legal protection by making people reevaluate it)
     
  9. DaveT

    DaveT Searcher of green pastures

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    Not sure if a nonprofit is the best approach. I prefer if a for-profit method is available.

    I look at it as an information battle/war and currently folks like us don't have a big enough audience and influence to affect public perception and correct FUD.
     
  10. FluxCap

    FluxCap Active Member

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    Thanks, Dave.

    In the past I have considered forming a PAC, SuperPAC, or a trade organization. Tax-exempt status would be pretty essential from a fundraising and operations standpoint if I decided to get serious about this, and this is regulated under section 501 of IRS code pretty tightly. I would feel uncomfortable soliciting donations to a for-profit enterprise even if this was feasible.

    But if you mean you're worried about a non-profit organization not having enough resources to take meaningful action, well I hear you on that, which is why I would want it to be funded sufficiently.

    This is all just conjecture right now though. :)
     
  11. austinEV

    austinEV Active Member

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    Just go all the way and make it a religion. They are tax exempt too :)
     
  12. FluxCap

    FluxCap Active Member

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    Hahaha, nice one man. I needed that chuckle today!

    Edit: And the internet delivers:

    vz0V8WN.jpg
     
  13. kenliles

    kenliles Active Member

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    Ha! Dragon-slayer on earth, while parking them at the ISS in space
     
  14. techmaven

    techmaven Active Member

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    I spend an unhealthy amount of time examining the bear positions as posted on sites like Seeking Alpha. It is clear to me that many of those bears do not care for facts. I have debunked issues on battery production, energy mix, VIN assignments, charging, and so forth on numerous occasions just to have the exact same people continue to spread the same specious arguments and in some cases, outright fabrications. There are plenty of people that purely do not care to know more facts as they exist as they have decided on an investment strategy and/or narrative and they are content to spread it, irregardless of the facts. Matter of fact, the main branded media outlets are some of the worst. Not only do they really not care to get their facts straight, they are perfectly content to be shills for any number of interests. It is far more profitable for them to be inflammatory than to be correct. Correct is boring, boring is not profitable.

    Therefore, I think the best thing Tesla can do is to continue to execute and for owners to do grass roots evangelizing at least until Tesla is big enough need to do effective advertising. I have talked to my Tesla salesperson on several occasions on trying to get Tesla to do more events and community outreach. Even having better merchandizing (like Ferrari) would help. There is already a lot of excitement around Tesla at the grass roots level. The car turns people's heads and if I receive a reaction, it's usually a wow! Tesla moment and not a negative reaction. Encouraging real prospective Model S purchasers or Model X purchasers is probably the best we can do. The rest will work itself out in time.

    Imagine the reservation queue for Gen 3. It will be amazing.
     
  15. FluxCap

    FluxCap Active Member

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    Recording here my post-Q1 2014 Earnings Report thoughts from after the letter and conference call:

    I got what I wanted from an information perspective from this call:

    1) Firm confirmation that Panasonic is in it to win it with Tesla Motors, letter of intent signed and capacity ramping up on schedule. MASSIVE de-risking there.
    2) DEMAND IS RISING EVERYWHERE ON THE PLANET
    3) Breaking ground NEXT MONTH on two possible GigaFactory locations. Folks, in the construction industry it normally takes YEARS to properly site, permit, survey and lobby for small projects, let alone huge factories, before construction begins. This is execution way better than I expected.
    4) Firing up second production line in July to meet global demand and optimize production
    5) Model X is being perfected and PRODUCTION deliveries could commence in April 2015. That is very very fast.
    6) Average Selling Prices are up
    7) The Chinese love Tesla and demand is very high
    8) Elon expects to EXCEED 30% battery cost savings / efficiencies on time, ready for global domination by the Model E/GenIII car.

    I don't think we will stay in 180's for long, and I see a lot of de-risking in this execution on schedule for Tesla Motors. The bears will find new holes to poke, but a lot of them have been closed today.
     
  16. Mitthrawnuruodo

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    I did not get this feeling from the call. From what I heard, ASP's are up from what they expected, but lower than past quarters. I was not there for the whole call so maybe they more explicitly answered this at a time that I missed but I would check the transcript/archive.

    I just checked the shareholder PDF and it states only that "The average selling price of Model S remained strong"


    I loved the fact that he reiterated demand is growing in NA. There were several articles on the net in the past week that wanted to convince readers demand was dwindling so this was quite satisfying.
     
  17. FluxCap

    FluxCap Active Member

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    Perceptions of Morgan Stanley / Adam Jonas Note 9-15-2014

    I am a Morgan Stanley client. I read the entire Adam Jonas note, and it is objectively, patently odd. Most of the article reads like a super bullish believer trying as hard as they can to spin anything they said in the last year negatively without any meaningful facts or citations, and without saying anything substantially negative about the company. I simply cannot believe that he himself believes some of the wild-swing claims he is making.

    For an individual who has spent his entire career covering the automotive industry to suddenly say this is bizarre:

    Really? No one will buy or want to drive cars anymore in 15 years? Disappearing steering wheels? In the USA? Double-u Tee Eff?

    Now, I am about the most bullish person I have ever heard of about autonomous driving. I believe it is inevitable, essential and of huge benefit, and most of my neighbors and friends here on the East Coast think I'm crazy. But if you think Americans in particular will EVER part with buying individual transportation and the freedom that it literally buys, you *are* crazy. It just isn't logical that this would come to pass unless the entire planet was already as densely populated as Manhattan and we were dying by the millions due to transportation-related issues alone. It's not, and we're not. Humans outside a select few in 10 metro areas or so planet-wide have/love/want cars.

    This note reads like AJ either:
    A) Went "temporarily crazy" over the weekend with some designer chemicals at a party
    B) Is being extorted
    C) Is working an inside "dump and pump" trade or
    D) Thinks he needs to throw out an overly negative fluff piece to preserve perceptions of his "objectivity" as a professional equities analyst.

    I suspect D) is the answer, but even if this is his intent, I don't think he has done himself any favors with this piece. Calling Tesla a "niche player"? Really? At this point, after your 50-page essay on how if only Tesla could build a GigaFactory, they could change the world on a massive scale, suddenly has reverted to "niche player?"

    It smells odd, and I don't believe that Mr. Jonas even believes much of what he published today.

    I'm going to take this opportunity to accumulate shares in the greatest company of the next few decades. I would of course caution everyone to be careful and not do what I do without your own due diligence and research.
     
  18. SteveG3

    SteveG3 Active Member

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    Flux, thanks for posting this!

    30 minutes ago, I'd just looked at the stock, read one short article with Jonas remarks, and came to your post... I had the same exact reaction you did, the comment you quoted in your post makes no sense to me either, for all the reasons you stated.

    Glad to hear your description of the whole report ("super bullish believer trying as hard as they can to spin anything they said in the last year negatively without any meaningful facts or citations, and without saying anything substantially negative about the company.")

    As to reasons, it's definitely odd, could be something fishy, but I don't see A-C as likely. Perhaps some D is going on. It might simply do with a bit of "ego." Jonas called Tesla's potential super early and had something like a $100 price target in 2011. Since last year he and Andrea James have consistently been putting price targets up far ahead of everyone else. All that proved right, and that probably felt great to Adam J. Now there's a bit of a crowd with targets as high or higher than either AJ. Jonas, not wanting to top the $400 target another analyst put out, may have seen sounding a note of caution and getting ahead of (and/or creating) a pullback as a better way of maintaining his standing as among the very top of the heap for getting Tesla right.

    I also wonder if Elon's "bit high" comment was meant to keep the stock from racing through $300 with momentum... could Jonas have been supporting that effort (not to say this was overtly coordinated. who knows).
     
  19. FluxCap

    FluxCap Active Member

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    Ready for Buzzfeed/Seeking Mediocrity/Business Insider/Linkbait/Clickfarms:

    Top 5 Reasons GM's Bolt is Nothing but Smoke and Mirrors - And Tesla Looks Stronger Than Ever


    GM's announcement of plans to sometime, 4 years from now or more, build a car that might have up to 200 miles of range "theoretically" seems like a good development for EV enthusiasts at first glance. But is it? Here are some key reasons why GM's announcement may be nothing more than a combustion engine smoke-and-mirrors play:

    1) Unlike Tesla, GM has no battery factory, no viable battery technology, and no ability to build batteries at a scale necessary to sell more than a couple hundred "demonstration vehicles" that give the appearance of "a green future" while distracting from the millions of combustion engines they sell every year. They have announced no investments in battery factories, which would be mandatory for volume production of an EV that was made as anything other than a showpiece / one-off "compliance car."

    2) GM knows how to build traditional engines pretty well, but they outsource nearly all their other core technology and car manufacturing pieces, especially the pieces necessary to build high volumes of market-leading electric vehicles. Electronics, electrics, software, hardware engineering -- they have not hired significant engineering or production talent at all. So despite the press releases, GM does not appear to be committed to electric vehicle sales at all. GM's dealer networks actively downsell EV's and push customers to traditional combustion engine vehicles, and GM continues to spend millions lobbying against Electric Vehicles. Why would they do that if they wanted to sell a legitimate mass-market EV?

    3) Tesla's Elon Musk has stated that his goal is not to build the best electric vehicles in the world, but the best car in the world, period. The GM Volt won no significant awards, has a spotty safety record, a poor reliability record, questionable resale value, and poor utility. It's reasonable to assume the "Bolt" will not win any awards and will be much less in-demand than Tesla's products. Their Model X SUV has a 20,000+ pre-order list, which no other car manufacturer can remotely match.

    4) Tesla has a nationwide / worldwide network of Tesla-only fast chargers that enable free long-distance travel coast to coast in the US and beyond. GM has no such network, and no plans to build one.

    5) The Model III has a battery factory behind it, proven technology and cost structures, the best engineering talent in the world, and a huge groundswell of demand. The Tesla Model III will be a game-changer, and massive amounts of people are saving all their pennies to get on the waitlist for the car as soon as it is available. GM wants to deflect attention as much as possible from this amazing car -- so consumers are confused and think EV's have to be built as "sacrifice cars." The Tesla Model S has the highest Consumer Reports customer satisfaction of any car ever built, because people that own one and experience how much better they are than any other car never want to own anything other than a premium EV again. They are too convenient, too powerful, too fun, too compelling and too satisfying to give up.

    So, will GM succeed with making the Bolt a desirable EV that is produced in more than small "demonstration" quantities?

    Answer: Probably not, because they don't want to and don't have the capacity or talent.

    What does Elon Musk think?
    Elon Musk has stated that he hopes competitors will succeed in building legitimate EV competitors to transition the world to a battery-electric transportation economy powered by renewable solar energy. But if recent attempts and facts show anything, it's that GM's Bolt is nothing but smoke and mirrors meant to make consumers think EV's are poor choices. We should closely watch Tesla's development of the Model X SUV this year. If it is as desirable and class-leading as its sedan cousin the Model S and wins as many awards, there is strong reason to believe the Model III will dominate BEV sales for years to come as well, leaving the competition in the dust.
     
  20. SteveG3

    SteveG3 Active Member

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    All very good points Flux.

    To me your first point towers over any discussion of the EV market... the battery supply issue is actually a massive moat around Tesla's growth for at least the next 15 years in my estimation. That's not just about the Bolt and GM, but the entire auto industry.

    Elon did not want to build a Gigafactory, he had to. No one else would build the batteries to enable even 0.5% of the market to be long range EVs in 2020. Had the Bolt looked like a compelling vehicle and GM looked motivated to produce it, the battery supply still would have meant it was a non-issue for Tesla's growth. Tesla's greatest challenge, ramping up battery supply, is also the greatest moat to it's future growth. I doubt anything the other automakers do will impact Tesla's growth whatsoever before for at least 15 years. That's about the earliest I see enough battery supply coming online to make it possible Tesla might be demand constrained (that is, collective spending of $300-500 billion on new battery plants to make it possible for 30-50% of the vehicle market to be long range EVs,).

    One question though... I saw where GM did not commit to building the Bolt yet, but did you see something directly from GM saying the Bolt was at least 4 years away?
     

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