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Breakdown of some common Bear arguments

Discussion in 'TSLA Investor Discussions' started by austinEV, Oct 29, 2015.

  1. austinEV

    austinEV Active Member

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    #1 austinEV, Oct 29, 2015
    Last edited: Jan 6, 2016
    Making a new thread so people can add/refute some specifics. This isn't a response to anyone in particular.
    For some of these arguments, Bears need to pick their issues and stick with their thesis. I see too many complaints that aren't self consistent. For instance I tune out when people complain that model S/X is an expensive toy for the rich and in the same breath say that we should all be worried about gross margins later due to competition. If TM has pricing power to command $135k pricetags then you cannot pitch gross margin concerns in the same thesis.


    Here are some other Bear arguments:

    On the model X:


    There are two things to hate about the model X, but they are mutually exclusive. Pick one. If you pick both it undermines your argument.


    Model X bear gripe #1: The model X is late. It was promised years ago and the rollout shows execution problems. Even now they released it and weeks later few, if any, have been delivered. This means we can extrapolate that the model 3 will also be late, maybe very late, and therefore your valuations should not include high volume revenue until years later. Without success in the master plan, TM is in effect just a small niche manufacturer and should be valued as such.


    Model X bear gripe #2: The model X is a stupid distraction. It largely cannibalizes sales from the model S, another large expensive car with a lot of seating. The model X has difficult to manufacture features that will cause the ramp to be slow. they should have used these resources and time to work on the model 3 instead.


    The breakdown:


    If you say the X is a distraction, (argument #2) then you concede that it wasn't necessary for the master plan. That the model S sales would have bridged financially to the model 3. If so, it doesn't matter how late the X is. Elon has said he gave copious schedule slip to make it "perfect". He is saying that it was not necessary for the master plan. So you cannot in the same breath whine that it is late. It doesn't matter by your own argument, and the priority was correct.


    If you say the X is late and an execution disaster (argument #1) then you are saying it is necessary for the master plan. That the infusion of model X demand is probably necessary to make it to 2017/2018 when model 3 sales can potentially begin in the best case. You cannot then argue that it is a dumb distraction and they should not have added fancy distinguishing features. The car and it's features must be necessary for revenue creation by your own argument.


    Bull response: The model X provides demand insurance in case there is slack in demand on the model S. If they had never made the X bears would be screaming about how TM was a one-trick pony and writing obituaries for the "dated" model S on the daily. The model X ramp will be bumpy but in 6 months they will be shipping in volume and all will be forgiven. The model S ramp was similarly bumpy.


    The model 3 will not necessarily be late (or very late) based on the model X experience. Elon learned his lesson and they plan to make the model 3 simpler.






    On battery supply risk:


    Again, there are 2 bear thesis you can pick from. You cannot pick both or you undermine your own argument.


    Battery supply crisis #1: LG is a mature, leading battery maker. They supply lots of automakers right now. They are signing supplier deals with major automakers. They will tool up and make a large number of cells at high quality and low cost, enabling any automaker to make slightly modified models and compete with TM, which has no pricing or quantity advantage any more.


    Battery supply crisis #2: At any time, some new technology, chemistry etc will come along and render the large investment in the TM Gigafactory obsolete. Any automaker will be able to buy these new superior cells and TM will have no advantage and a dead asset in the desert.

    The breakdown:


    If you believe that global LiIon supply will catch up (theory #1) then you cannot also list #2 as a risk, since ALL manufacturers will be caught equally flat-footed trying to catch up with the new wonder solid state tech or whatever. LG will also have stranded assets.


    If you believe in #2, no one should be making cells or EV's at all. Better to sit on the sidelines. That makes LG's investment the height of folly too, like TM.


    Bull response: The scale of the GF is larger than LG's production even with plausible increases. Then the other automakers may indeed have 10 "competing" Bolt/leaf vehicles. But they will all draw from a battery supply which is smaller than the TM/Panasonic partnership. There could be 1000 competing nameplates and it wouldn't matter. This is even true if a competitor makes a GREAT car. Like someone makes an attractive, sporty, BMW 3 type car for 60k that goes 250 miles and has TM type acceleration. That car would have a long waiting list but volume would be limited by supply. Counting makers and models is not relevant. If some new technology pops up, I trust that TM will be the ones to move quickly and utilize this tech. After all, the GF is conceived as a marketplace for suppliers to set up shop under their roof and provide cells to TM. That is a custom-made concept for any new breakthrough tech. If you made a new superior battery who would you call first? The only reason that TM is building a GF is that the industry would not move to create the capacity. They would have preferred to just pick up the phone and buy billions of cells but could not. To the extent that the industry is chasing, they are reacting to the market leader TM, firmly in control of the industry. Elon would be happy if this develops. Also, if the non GF industry creates copious high quality cells, Tesla can just buy them too. True, the asset looks dumb but that is sunk cost. Tesla wouldn't be the first car company to mothball a factory.


    Also, in scenarios where another battery tech was just a little better, GF output could be used for stationary storage forever. That is essentially a bottomless market.
    [Edit 11/5/15: It seems unlikely that LG is matching the TM price point, or their $150/kwH or whatever that slideshow said is accurate. During the Q3 ER call JB and EM shrugged that off as an unlikely price point.]

    Below are some bear arguments that come in one flavor, I think.


    On future competitors:


    Bear argument: Tesla does not have a monopoly on EV's. New cars from Nissan, GM, BMW and others will be just as compelling as Tesla cars, boxing out TM of the growth that investors expect. It is easy to call up LG and get great cells and make an EV. Currently LG can already match the pricepoint and density of panasonic. All the other OEM's have to do is tool up, which they can easily do in this capital intensive industry, better than TM which doesn't have deep pockets. Fast forward to say 2020 and there will be MANY EV's and TM will be a bit player, and should be priced accordingly. The stock should be $50/share and bulls are deluded.

    Elons response: Great! We need to save the planet.


    Bull response: Great! EV's are not competing with each other as much as with ICE vehicles. Even if the non-Tesla offerings were TWICE TM's volume (unlikely) that would mean that TM was the dominant automaker in the hottest, fastest growing segment in global transportation. (33% TM, 66% other, split 3 or more ways still means TM is the largest EV maker). Tesla investors WANT 100% EV adoption at some point in the future. None of us thinks it will be 100% Tesla, Tesla doesn't even think that. It is far better for major manufacturers to join the party. Again, they are chasing TM, the dominant market driver. These concepts, vaporware, and real products prove that TM is on the right path, more or less.


    Just because there are some competitors doesn't spell doom for these reasons:

    1. They are limited by cell capacity. Even if LG is building a secret factory the exact same size as the massive GF, that isn't a problem for TM. Why would it be? The global ICE market is vast. LG: please build 5 gigafactories. Tesla will probably happily buy some.
    2. They need to build a network of DC charging stations. Admittedly they could, with pocket change. Phone me when they do.
    3. Bears forget about Tesla's actual competitive advantages:
      1. in house tech. Most makers offshore that to Bosch, Continental, LG, etc.
      2. Owned dealer network. No middlemen markup, no haggling. best in class purchasing experience.
      3. owned repair network. No profit motive to make cars which fail. No frustrating maintainance upselling.
      4. tighter than normal supply chain. Particularly with in-house batteries they will control a huge amount of thier own content.
      5. young, fast moving non union Si Valley workforce.
      6. No legacy retirement or debt costs.
    4. Automakers have not shown great seriousness about EV's to date. Compliance wierdmobiles like the BMW i3, even the Nissan Leaf is hard to love. It is commonly understood that this is the "innovators dilemma" problem with the incumbent makers. If GM gets serious about EV's, say they make a great Bolt that gets 200 miles, and costs $40k before incentives. That car would be a wild success. that is similar in spec to the model 3 and would be a serious cause to cross-shop. Reservation lists would be very long. GM could sell as many as they could make, for many years. Initially they will be production limited. They might even invest in a worldwide DC fast charging network. They might get frustrated in the lack of battery supply and consider funding a new battery factory. In other words, GM in 2017 is Tesla in 2013, but far worse, because that new EV GM is eating old GM alive. Sales for ICE cars which look terrible in comparison would plummet. The sales of 20k Bolts per year might cost them *millions* of sales of ICE cars while customer prefer to sit on a wait list rather than buy another ICE. GM knows this, which is why they will not heavily promote the new EV tech. They cannot fully invest in EV's without killing their business that keeps the lights on. The dealer networks will downplay the great Bolt. All the majors are in this position.




    On massive Capex requirements:


    Bear argument: Tesla will need *billions* of new capital, and years, to build out the factories to build a significant number of cars. This implies they will not really grow and or there will be massive dilution. This isn't like software or phones. It is really hard making cars. The other OEM's will eat their lunch in just a few years. TM will be lucky to be a small niche player, and should be valued as such.


    Bull response: Yes there are many factories to build and it will take years. That does not imply that dilution or risk from competitors. Your argument concedes that EV's are a growing market that other OEM's will get into. They TOO have to invest billions to make cells, and retool their existing factories to make the new EV models. Worse, the other makers have to abandon their bread and butter, the engine and transmission lines. This has gradually become the core of automotive manufacturing, with much of the other assembly being outsourced. GM, Nissan, BMW have to reinvent themselves as EV makers which will cost billions and take years. There is no reason to think that TM is in an inferior position. TM is a pure-play with no legacy costs and investments.


    Raising capital in a secondary to build a factory is not dilution. The new shares are balance by new value, the factory and it's production capacity. The new buyers get a share in the more valuable company, and existing shareholders also get a share in the new value.




    It is kind of funny to note that there are a few bear arguments that don't show up any more and we don't have to refute. I introduce the Bear argument graveyard:


    EV's are expensive toys for the rich and early adopters. The global market is small and may be saturated.

    No one is seriously arguing this any more. Every maker is scrambling to put a plug on anything that rolls. A car with a plug is synonymous with the future.


    EV's are not really green. They use coal/dirty power and this is greenwash by Elon and other leftwing nuts.

    Never true, and ignores the fact that gasoline powered cars are always dirty. Also rendered obsolete now that the general public is on board with the better argument: EV's are just superior cars and driving experience. Fast, silent.

    EV's will never be popular. People want the rumbling engine. Real men drive cars that are noisy.


    See above. That has never resonated. People get the appeal of silent power. Men, women, young, old.

    EV's are dangerous. They burst into flames.

    I still have people snark about this. ICE cars burn all the time. EV's have an excellent safety record.



    Special TFTF list. : (edit Jan 6, 2016)

    1) TM will need capital to build factories in the future, thus will do capital raises, which will cause dilution which will cause the stock to go down. (Yes it will do raises, no it won't tank the stock.)

    2) If the majors enter the EV market TM will fail (they won't, and it wouldn't)

    3) If other startups enter the EV market TM will fail (it wouldn't, competition is all transport).

    4) the EV change if it happens will be really slow, since factories take a long time to build (True, so what? The yield on our ever increasing stock will be somewhat lower? up is up. The competition will not be able to do it faster so the speed is not relevent.)

    5) If another battery company makes cells TM will fail (it won't, more the merrier).


     
  2. DrGuest

    DrGuest Member

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    I found this article, in Quartz

    Have Tesla and Apple disrupted the auto industry past the point of no return?

    to contain some great "Bear Breaking" ideas and concepts. Actually it presents Bearish Theory for the Rest of the Auto Industry that do not even apply to TM.

    One point they make is how Tesla learned that starting from scratch with the Model S is the way to go as opposed to trying to retrofit an existing car like they did with the Roadster.
    The implication being that all the other Auto companies would find they are going to have to start from scratch also which may not be possible to do , economically.
    Here are some points from the end of the article about what starting from scratch would mean for the major player companies.
    "If you do all of that, what are the implications for an automobile manufacturer?



    1. Virtually all reusability between existing models and the new models is gone. This is a complete disruption of the economics of the car industry.
    2. The most powerful divisions within car companies lose almost all power.
    3. Massive investment in new frames and panels is required.
    4. Massive investment is required in new control systems.
    5. Completely new supply chain partnerships have to be forged.
    6. All of the executives and engineers who have made your company great on the back of internal combustion engines have to accept that they are back to close to zero. A lot of the engineers won’t have any role in the new world, or any way short of significant re-education and starting from junior positions to stay employed.
    So what’s going to happen to the car industry?




    1. All of the majors will continue to deny the reality of the situation and continue to bet on cars with traditional frames, limited batteries, limited electric range and performance, and with internal combustion engines continuing to do the heavy lifting.
    2. New competitors such as Tesla and Apple will kick the traditional cars to the curb in every way. More competitors will enter as it becomes obvious to corporations outside of the automotive industry that a massive disruption is killing the traditional car companies, and that they are incapable of responding to it. Traditional electronic and electric motor companies will start wrapping cars around their expertise. Motorcycle companies such as Lightning and Zero will be approached to build cars instead of bikes.
    Can we see this happening already?

    Yes, BMW’s strategy is what I’ve outlined above. Their two existing cars, the i8 and the i3, are both inferior to the Tesla in most ways, both require gas engines to get more than a rather pitiful distance (and space for the engines, gas tanks, lines, and pumps are all set aside in the i3, so it’s not like you can do anything useful like extend the battery pack). The frames pretend to being unique but they still expect a lot of traditional crap being there, which is obsolete. And their strategy of electric motor components in their entire range by 2025 still has no plans for real electric cars that could compete with Tesla, just more crappy electric cars with internal combustion engines for real driving.

    And BMW is one of the more innovative and adaptable traditional motor companies out there.



    Most of the current major car companies will fail because they can’t adapt to the disruption that electrification is bringing to their industry. They will refuse to cannibalize their other products. They will refuse to shift power and money to the electric divisions. They will refuse to engineer true electric cars because the economics don’t make sense until they don’t have any money to do it, anyway.

    This pattern has played out innumerable times over the past 100 years. Remember RCA? Philips? Control Data? Burroughs? Kodak?"

    I'd like to see the Big Manufacturers to answer these Bearish Theories about their ability to adapt and innovate.
     
  3. austinEV

    austinEV Active Member

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  4. bonaire

    bonaire Active Member

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    I didn't read the article but the only real bear issue with the Model X is the inability to currently deliver it at a rate that comes close to Model S. Once production is on-par with Model S throughput, then bears can make judgements. Deliveries do have to start soon, however. It does appear that Model S orders and Vin #s have ramped up in rate ever since the Model X reveal and I have to guess that some of the increase is due to cross-overs - moving from Model X to Model S to get one by year end.
     
  5. jerry33

    jerry33 S85 - VIN:P05130 - 3/2/13

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    As I recall, the first Model S cars didn't come out all that fast either.
     
  6. mrdoubleb

    mrdoubleb Active Member

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    One classic bear paradox that wasn't mentioned so far is about the imminent triumph of Fuel Cells over BEVs.

    Bear argument #1: low range and slow charging
    The argument goes, that Fuel Cell cars have a much longer range and can be refilled in a few minutes, like traditional ICEs. BEVs, they say will never get there, or at least not in the near future, while FC cars pushed by Toyota and maybe Mercedes will spread fast due to these advantages.

    Bear argument #2: lack of charging infrastructure
    The number of chargers and especially very fast chargers like the SC network pales in comparison to gas stations. People are creatures of convenience so large masses will refuse to plan their trip around the charging network.

    Bull counter:
    You cannot claim the inevitable triumph of FC over BEV due to the superior refueling capabilities while you bash BEVs for lack of charging infrastructure. There is no FC refueling network in place and when companies do start to build them out, complexities and costs will be astronomical compared to electric chargers. Electric power is practically everywhere, and where it isn't, solar panels or windmills can be deployed. EV chargers are a pretty simple, safe and cheap thing compared to a hydrogen fuel station.
     
  7. SebastianR

    SebastianR Member

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    In addition to your excellent points on FCVs, I think a good bull argument is that, the de-facto hydrogen fuel stations don't work as advertised. There are many articles / posts on how hydrogen stations fail, are out of service and of course - even if they work - how they can only fuel a very limited number of cars before they have long (>30 mins) downtime to get ready to fuel the next car. So even if you can fuel you car in just "minutes" (ever handled a hydrogen nozzle? not so easy thing to do!) - it does not help you if you can't find a working station and if your station needs half an hour rest before it can fuel your car.

    Last and most certainly the killer argument: FCV can't be refueled at home. They need a gas station. EVs never need a "gas station" unless they go beyond their range on a long trip. So for >90% of all EV use cases, there refueling doesn't even take "minutes" but mere "seconds" (plug-in when you get home, unplug when you leave in the morning). To me, all other arguments fade in light of this.
     
  8. jhm

    jhm Active Member

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    Another bear argument we don't hear so much any more is that the low price of oil will kill EV sales.

    The present price of oil only contributes about $1 to the cost of gasoline. So most of the cost now of gasoline are infrastructural costs such as refining, distribution and retailing. So gasoline really can't get much cheaper even if the price of oil drops below $20/bbl. Moreover, people buy Tesla cars more for high performance than for fuel savings.
     
  9. jhm

    jhm Active Member

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    To build on this, gasoline, diesel, natural gas and hydrogen all suffer from requiring expensive refueling infrastructure. We seem to take this for granted with gas station networks so well built up. But the infrastructural cost of gasoline, which excludes the cost of oil used to make fuel, is 4 to 5 cents per mile driven, that is about $500 to $600 per car per year, or over the life of a car about $9000 per car. Imagine spending $9000 per EV just for charging infrastructure, not counting the cost of electricity. Tesla spends maybe $1000 per car on on Superchargers and destination chargers and home owners spend about $1000 for charging at home, which may even serve multiple cars. So EV charging infrastructure is maybe 30% of the cost of gasoline infrastructure per car, the the EV infrastructure is likely to get cheaper per car as more EV enter the fleet.

    The cost of base energy be it oil, coal, NG, solar, wind or virtually anything else is all getting cheaper. So in the long run the cost and convenience of infrastructure becomes the critical issue driving the cost of powering a car. Despite the cheapness of natural gas compared to oil, very little NG infrastructure for passenger vehicles has made it an underutilized option. Hydrogen is even more handicapped than NG and has no hope of private investment forming an adequate refueling infrastructure. If you have to drive 20 miles out of your way to refuel hydrogen, it really does not matter how quickly the refueling happens. Just think of all those flex fuel vehicles with no place to buy ethanol. The fueling station model works only if a substantial share of vehicles are demanding that fuel. Even passenger diesel is somewhat disadvantaged for convenience because the majority of vehicles in this country use gas. The prospects for any alternative fuel are grim. Electricity is the huge exception to this for reasons well discussed.

    It used to be that bears thought EV charging infrastructure was a barrier to adoption. While this no doubt impacts the pace of adoption, it is not an economic barrier. Charging infrastructure is cheaper than gas infrastructure, so it will have no problem rolling out as more EVs hit the road. Not a barrier at all, but fast becoming an enabler.
     
  10. tftf

    tftf Member

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    #10 tftf, Nov 1, 2015
    Last edited: Nov 1, 2015
    I obviously agree with most of the bear arguments (especially regarding batteries, competition and dilution/heavy cap-ex requirements in the car industry) so I'm not going to repeat those points listed by the OP.

    Just about one item the OP mentioned:



    Gross margins (in addition to Tesla competitors using different metrics to calculate gross margins, this has been discussed before, I won't go into details) are going to be a concern in my opinion:

    Gross margins will be much smaller in the Model 3/Model 4 space. The price brackets of $20-35k and $35-50k at the lower and upper end for new cars (the current ASP is around $30-35k in many Western countries for new cars) are very competitive and filled with constant rebates.

    I think going down-market and building unit sales (even more so when using a lot of vertical integration on the supply and distribution side as Tesla does!) with the Model 3 and beyond could be the biggest strategic mistake for Tesla (yes, blasphemy, but please read until the end including the PS. I'm aware Tesla is not going to change course).

    What would the alternative strategy be (a much safer path for TSLA in my opinion, I already outlined this in 2013)?

    Never do a Model 3 or other lower-end models and stick to 3 current models: S/X and Roadster/sports car iterations with base prices starting at $50-60k, i.e. never release a car model below $50k.

    In this scenario, Tesla would try to become the "Porsche of EVs" with annual shipments around 75-150k units (or toys for the rich, if you want to choose a term with a negative connotation). Porsche has shown that this can work well in the ICE world. If so, Tesla wouldn't have to build a battery factory and they could still license out EV designs for third parties to let them build cars below that price bracket.

    PS: I'm well aware Tesla is on a different strategy as outlined in the last paragraph of this 2006 blog entry:
    http://www.teslamotors.com/blog/secret-tesla-motors-master-plan-just-between-you-and-me

    PPS: If you cry "chicken" when you read about "safer path" above, please do so. Every investor is free to invest his own money into TSLA. Trying to build "millions of cars" within a decade is just an incredibly risky path in my opinion and doesn't suit me on the risk-reward scale. Others will come to different conclusions and add shares / go long at any price since Tesla will "change the world" in their opinion. That's what CEO Elon Musk alluded to in his Apple market cap remarks/comparisons:

    http://www.marketwatch.com/story/tesla-market-cap-in-10-years-could-be-on-the-order-of-where-apple-is-ceo-elon-musk-says-2015-02-11

    I honestly think Tesla has a very high chance of going bankrupt before 2025 when choosing this path.

     
  11. austinEV

    austinEV Active Member

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    To paraphrase what I think are saying: Tesla can achieve higher margins by sticking with the more upmarket vehicles and never selling a lower cost model 3. The lower cost model 3 would have a lower per-unit margin so profitability goes down the more model 3's they sell?

    All true! But this isn't a suicide pact. TM isn't going to switch over to all lower margin vehicles as soon as they can. I imagine they will prioritize the higher margin model S/X at the top of the production queue and fill the factories with model 3. Assuming that Fremont should get to 500k/year as Nummi used to, only wildest Bull thinks just S/X would ship in those volumes. The model 3 rounds out the product line (and, as others have said, the average ASP will be much higher than 35k. The uptake of options will be very high at this price range. I figure 55-60k is reasonable for an average ASP). All of this is about having market and production options to optimize the investments they have already made. And with endless demand backlog, they can afford to invest in relatively minor retooling to "complete" fremont and eliminate the final bottlenecks.

    But, if demand for model S/X really did fill out Fremont, great. Make those. The revenue from that can fund quite a bit of expansion. Nothing in their plan prevents them from doing as you say, maximizing profits with the current high margin vehicles.

    Without the model 3 the specter of demand disruptions always looms. Having 3 vehicles across markets and price points makes TM a 3-legged stool. Currently, even something dumb, like a leaked model S refresh would "Osborne" demand horribly. TM with model 3 is far less risky, more efficient, and therefore more valuable.
     
  12. winfield100

    winfield100 Member

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    an intriguing thesis about the low price of oil, and why it will stay low, (at least to me) feeds off the observations. 1) PV planet wide installations is increasing @42%/yr. 2) this would mean at pr4sent rate ~70terawatts installed PV in 15 years (by 2030) 3)this would mean ~140,000terawatt hours of usable electricity by 2030 4) US uses about ~5,000terawatt hours electricity per year 5) fracked wells die/tap out in just a few years and oil needs to be at least 2x for them to be financially justified 6) tar sands similar. therefore Saudies see this future and are pumping as fast as possible while the ycan still sell oil. i seriously welcome "you are wrong and here's why..." as this is a nascent thesis (to me at least)
     
  13. strider

    strider Active Member

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    I have no dog in this fight but really the only question you need to answer is whether Tesla will continue to be valued as a tech stock with an infinite P/E (since there's no E) or will they be valued as a car company (GM's P/E is like 13, Ford's is 12). Elon's "let's save the planet" mantra is also contrary to Tesla's current stock valuation. To paraphrase the OP, bull's can't have it both ways. Tesla and EV's either remain niche high profit margin products or they become ubiquitous and margins will fall sharply.
     
  14. rage_777

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    Whatever happened to the "If the big automakers wanted to build a better EV, they can do that and crush Tesla"? I remember a lot of people kept saying that when the Model S first came out. Three years later, and still nobody stepped up to the plate to even challenge Tesla.
     
  15. dha

    dha Member

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    People have been predicting collapse of Apple's margins since the iPhone first came out. And Apple isn't anywhere near as vertically integrated as Tesla will be when the Model 3 starts shipping.
     
  16. austinEV

    austinEV Active Member

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    Yeah, strider I don't follow your logic. If EV's become commonplace, TM is positioned to be the market leader in a fast growing market. Everyone will be production constrained and TM has the best growth story. Everyone else will be scrambling for battery capacity.
     
  17. SebastianR

    SebastianR Member

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    I think this argument is still very prevalent especially in German car makers (maybe not the engineering team of the electric B-Class and a few others who really tried and failed).

    The obvious bull-arguments are:

    1) If they could easily build it, why didn't they? (As you said).
    2) If they could where would you charge for long-distance travel? Like iTunes became an argument to buy the iPhone, I see the Supercharger network as massive argument to buy a Tesla. No matter who cool / expensive / great a car is, if I can't charge it on long-distance travel, why buy it?

    Lastly, but this is a bit more nuanced and you open a whole new universe of conversation and discussion would be:
    3) Where would they get batteries enough to build +100k cars? Just like the SCs now, the Gigafactory will be another moat for Tesla in future.
     
  18. Perfectlogic

    Perfectlogic Member

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    The car and smartphone industries are very different. Cars are more commoditized, the rate of innovation is much slower compared to smartphones as it is a very old and mature industry. I think margins are core to the discrepancy between the bearish and the bullish view. TSLA will either have to achieve margins way higher than the highest margins seen in the industry today or become one of the very largest manufacturers with relatively high margins for Tesla to outperform the market significantly. And I just don't believe the pie in the sky margins are possible in this cut throat competition industry.
     
  19. dalalsid

    dalalsid Member

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    You mean the smartphones industry?
     
  20. strider

    strider Active Member

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    But that was exactly my point. Will Tesla continue to be viewed as a tech company w/ a tech company valuation or will they become a car company with a car company valuation? When you're looking at where the stock price will go, that is the only question you have to answer.
    See above. Tesla is currently valued as a tech company and not a car company. It also depends on your investing horizon. If it's less than 5 years then your argument applies. But above all the big automakers are masters of the supply chain. If EV's become commonplace and they decide to really get into this market they will be able to solve any supply problem that comes their way as they always have. At that point Tesla could remain a boutique manufacturer for high-end models (like Porsche). Idk what Porsche's stand-alone P/E would be but I'm guessing it's much closer to Ford's than Tesla's today.
     

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