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Future value of Tesla motors

MABMAB

Member
Jun 19, 2019
947
3,839
weifoph
I would like to engage in discussion about what the future value of TSLA as a company. What follows is a screen capture of some of what I've worked on, it is much more bullish than estimates I made many years ago. I've done some math hoping to make sure my use of financial math is correct. I ran calculations using available data for AMZN to make sure I was appropriately using P/E. The following are assumptions:
1. There are 175,060,000 shares of TSLA outstanding per TSLA Tesla, Inc. Stock Quote
2. Tesla sold 362,000 cars in 2019 and going forward could sell 50% more vehicles per year.
3. Average selling price is $50,000. I think this number is currently too low and might end up being too high in the future.
4. Income or profit is assumed to be 10% as I recall this was part of original info Tesla or Elon put out for mass market vehicles.
5. A future value P/E would like be high. AMZN is currently 84.5

So here is the data I come up with.
Tsl future value.PNG


My discussion: It will be difficult for them to produce 50% more vehicles next year using the data I know. China is at best going to produce 100,000 cars next year though the goal is for 500,000 per year. Model Y is the unknown both domestically and in China. It would bear well for 50% more cars if the Y did not affect model 3 production in Fremont. It might be best to be conservative. My sales and income figures likely underestimate current sales and income, for instance Finviz says current sales are at 24B, not the 18+ I have listed. Solar and energy sales are not included. FSD development might significantly alter things in the future. The one trillion dollar market cap is first attainable in 2024, more likely in 2025. This is significant for the pay package Tesla Announces New Long-Term Performance Award for Elon Musk | Tesla, Inc.

The other thing to consider is the number of vehicles sold. My early estimates were somewhat based upon the world market selling 100M vehicles each year and that TSLA would capture 10% of that market. While I ultimately hope for more of the market, organic 50% growth has them capturing the 10% marketshare within 10 years.

I generally think the above dates and associated figures are a little early, meaning I think it will take longer for the sales figures to occur.

What say you? How can I better think of things?
 

gerebgraus

Member
Nov 1, 2019
324
1,414
Boston, MA
I would like to engage in discussion about what the future value of TSLA as a company. What follows is a screen capture of some of what I've worked on, it is much more bullish than estimates I made many years ago. I've done some math hoping to make sure my use of financial math is correct. I ran calculations using available data for AMZN to make sure I was appropriately using P/E. The following are assumptions:
1. There are 175,060,000 shares of TSLA outstanding per TSLA Tesla, Inc. Stock Quote
2. Tesla sold 362,000 cars in 2019 and going forward could sell 50% more vehicles per year.
3. Average selling price is $50,000. I think this number is currently too low and might end up being too high in the future.
4. Income or profit is assumed to be 10% as I recall this was part of original info Tesla or Elon put out for mass market vehicles.
5. A future value P/E would like be high. AMZN is currently 84.5

So here is the data I come up with.View attachment 498909

My discussion: It will be difficult for them to produce 50% more vehicles next year using the data I know. China is at best going to produce 100,000 cars next year though the goal is for 500,000 per year. Model Y is the unknown both domestically and in China. It would bear well for 50% more cars if the Y did not affect model 3 production in Fremont. It might be best to be conservative. My sales and income figures likely underestimate current sales and income, for instance Finviz says current sales are at 24B, not the 18+ I have listed. Solar and energy sales are not included. FSD development might significantly alter things in the future. The one trillion dollar market cap is first attainable in 2024, more likely in 2025. This is significant for the pay package Tesla Announces New Long-Term Performance Award for Elon Musk | Tesla, Inc.

The other thing to consider is the number of vehicles sold. My early estimates were somewhat based upon the world market selling 100M vehicles each year and that TSLA would capture 10% of that market. While I ultimately hope for more of the market, organic 50% growth has them capturing the 10% marketshare within 10 years.

I generally think the above dates and associated figures are a little early, meaning I think it will take longer for the sales figures to occur.

What say you? How can I better think of things?
Historically Tesla had two major disadvantages compared to legacy carmakers: 1. BEV tech. was much more expensive than ICE tech. 2. Scale. Expecting profit would have been too much, especially because Tesla optimizes for long term growth and profit and survival and not for short term profit. It is a miracle that Tesla survived. For 1. Improvement in BEV cost ~10%/year vs. ICE improvement ~2%/year (Do not argue with me on this one. I used the scientific method ). We are at a tipping point now that BEV tech. will be become cheaper soon. 2. Tesla' scale is in the same order of magnitude as e.g. BMW. If we consider that Tesla has bigger plants and less models we could argue that BMW has no longer scale advantage over Tesla and Tesla is still growing very fast. This is also at a tipping point as well.
Tesla has major advantages over legacy makers in many factors most important is system design, and not assembler of separate hardware and software. To change that for legacy automakers will take possibly 15 years if they succeed. (e.g. Tesla introduced the large display in 2012. Legacy car makers still unable to do it. To put in a big display is easy and dirt cheap these days. Their problem is their inability to combine all data into one system. So they still need a bunch of little displays and they have one mid-size display for navigation and entertainment.) Legacy makers can make great components. (I-pace has good motors, Taycan is great design), but they cannot create a system competitive with Tesla.

Conclusion: Tesla is at the tipping point where its cost has reached or will reach parity this year with German premium carmakers. This will change into major cost advantage compared to all legacy makers in 2-3 years. This cost advantage will result in huge improvement in Tesla's gross margin probably getting close to 50% in their higher-end cars , and in turns, that means accelerating growth and profit of the company that should be reflected in the table. So I think going forward Tesla's gross margins and growth will be much higher and that will become already clear with the Q4 report. Profit will not be that high but the gross margin will be a surprise.
 

ammulder

'98 GS400 -> P3D+
Apr 11, 2019
1,006
3,348
Philly area
The problem I have with this kind of estimate is that growth is factory-dependent. They did Gigafactory Shanghai in 2019 for 2020-2021 growth. They're doing Gigafactory Berlin for 2022-2023 growth, though going from 2 factories to 3 is less of a difference than going from 1 factory to 2. So, I buy aggressive growth through perhaps 2023. If you add up Fremont, Shanghai, and Berlin max production (including not yet existent phases 2 or 3) I think you can squint and make the 1.86M cars in 2023. They can't let up on the pace of additional buildout at those three factories, but it's possible.

I don't see another million vehicles coming out of those three factories in 2024, though, to reach 2.8M deliveries. I don't see a million coming out of any one additional factory in its first year of operation. So I'd say they need to be building two factories in 2021, to have ramp-up production in 2022-2023 and be fully up to speed at 500K production (each) in 2024.

The chart shows another 1.4M added in 2025. So I guess they need to be building three factories in 2022.

Another 2.1M in 2026. So four more factories in 2023.

I mean, I guess we knew that building factories was going to need to be a core competency in order to keep up this growth.

But if they're going to be building NINE factories in 2021-2023, shouldn't we be hearing something by now? Didn't we hear rumors of a Europe factory a year in advance?

I love Tesla, but I would be utterly blown away if they could sustain that pace of factory development. I just don't think it's realistic.

So therefore, I don't think the growth estimates shown in the chart are realistic.

I'd be happy to be wrong, of course. :)
 
Last edited:

Todesbuckler

Member
May 19, 2019
76
1,903
Germany
Thanks for your estimates.
Personally, I think the growth assumptions are a little bit high.

I used smaller growth figures for my own calculations until 2023. My model is rather conservative for our forum, but significant higher than analyst estimates.
Price targets are based on a Non-GAAP PE of 30 and 60, as well as on a Non-GAAP PEG of 1. If everything works out for Tesla and we do not get a major recession, a price between 1.000-2.000 USD in 2023 seems realistic without too optimistic forecasts.

Those long-term estimates are inherently difficult to accurately determine. Please let me know if someone comes up with huge differences on a certain model or business segment, such as Tesla Energy (could be way higher with Solar roofs and utility size batteries).
TSLA.png



EDIT: (I did not include production amounts of Semi, Pick-up and Roadster - but they are included in deliveries)
 
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MABMAB

Member
Jun 19, 2019
947
3,839
weifoph
The problem I have with this kind of estimate is that growth is factory-dependent. They did Gigafactory Shanghai in 2019 for 2020-2021 growth. They're doing Gigafactory Berlin for 2022-2023 growth, though going from 2 factories to 3 is less of a difference than going from 1 factory to 2. So, I buy aggressive growth through perhaps 2023. If you add up Fremont, Shanghai, and Berlin max production (including not yet existent phases 2 or 3) I think you can squint and make the 1.86M cars in 2023. They can't let up on the pace of additional buildout at those three factories, but it's possible.

I don't see another million vehicles coming out of those three factories in 2024, though, to reach 2.8M deliveries. I don't see a million coming out of any one additional factory in its first year of operation. So I'd say they need to be building two factories in 2021, to have ramp-up production in 2022-2023 and be fully up to speed at 500K production (each) in 2024.

The chart shows another 1.4M added in 2025. So I guess they need to be building three factories in 2022.

Another 2.1M in 2026. So four more factories in 2023.

I mean, I guess we knew that building factories was going to need to be a core competency in order to keep up this growth.

But if they're going to be building NINE factories in 2021-2023, shouldn't we be hearing something by now? Didn't we hear rumors of a Europe factory a year in advance?

I love Tesla, but I would be utterly blown away if they could sustain that pace of factory development. I just don't think it's realistic.

So therefore, I don't think the growth estimates shown in the chart are realistic.

I'd be happy to be wrong, of course. :)

I agree that factories for batteries and vehicles needs to be built out more and it is tough to see these numbers come to fruition with the knowledge out there now. I am encouraged by execution so far and in the compensation plan has them at 1T at some point in the future. I hope they plan another US factory, especially for the Semi industry. Could they capture 50K in sales each year for maybe 10B in sales per annum?

Class 8 trucks - sales by brand 2018 | Statista

I thought I read that the China plan was for 500K per year when built out.
Too early to trust Berlin time frame.
 

MABMAB

Member
Jun 19, 2019
947
3,839
weifoph
Historically Tesla had two major disadvantages compared to legacy carmakers: 1. BEV tech. was much more expensive than ICE tech. 2. Scale. Expecting profit would have been too much, especially because Tesla optimizes for long term growth and profit and survival and not for short term profit. It is a miracle that Tesla survived. For 1. Improvement in BEV cost ~10%/year vs. ICE improvement ~2%/year (Do not argue with me on this one. I used the scientific method ). We are at a tipping point now that BEV tech. will be become cheaper soon. 2. Tesla' scale is in the same order of magnitude as e.g. BMW. If we consider that Tesla has bigger plants and less models we could argue that BMW has no longer scale advantage over Tesla and Tesla is still growing very fast. This is also at a tipping point as well.
Tesla has major advantages over legacy makers in many factors most important is system design, and not assembler of separate hardware and software. To change that for legacy automakers will take possibly 15 years if they succeed. (e.g. Tesla introduced the large display in 2012. Legacy car makers still unable to do it. To put in a big display is easy and dirt cheap these days. Their problem is their inability to combine all data into one system. So they still need a bunch of little displays and they have one mid-size display for navigation and entertainment.) Legacy makers can make great components. (I-pace has good motors, Taycan is great design), but they cannot create a system competitive with Tesla.

Conclusion: Tesla is at the tipping point where its cost has reached or will reach parity this year with German premium carmakers. This will change into major cost advantage compared to all legacy makers in 2-3 years. This cost advantage will result in huge improvement in Tesla's gross margin probably getting close to 50% in their higher-end cars , and in turns, that means accelerating growth and profit of the company that should be reflected in the table. So I think going forward Tesla's gross margins and growth will be much higher and that will become already clear with the Q4 report. Profit will not be that high but the gross margin will be a surprise.

It would be nice if margins were better. I stuck with my original 10% amount as it is what they had originally talked about pre model 3 release (Maybe 10 years ago). If factory and battery stuff remains constrained they can indeed make higher margin cars.

How do you think margins and growth will accelerate?
 

MABMAB

Member
Jun 19, 2019
947
3,839
weifoph
Thanks for your estimates.
Personally, I think the growth assumptions are a little bit high.

I used smaller growth figures for my own calculations until 2023. My model is rather conservative for our forum, but significant higher than analyst estimates.
Price targets are based on a Non-GAAP PE of 30 and 60, as well as on a Non-GAAP PEG of 1. If everything works out for Tesla and we do not get a major recession, a price between 1.000-2.000 USD in 2023 seems realistic without too optimistic forecasts.

Those long-term estimates are inherently difficult to accurately determine. Please let me know if someone comes up with huge differences on a certain model or business segment, such as Tesla Energy (could be way higher with Solar roofs and utility size batteries).
View attachment 498961


EDIT: (I did not include production amounts of Semi, Pick-up and Roadster - but they are included in deliveries)

AMZN has a PEG of 3.02. If the market were not rationale, could not TSLA reach the same? Perhaps if AMZN used as a metric for how a growth company can do, your estimates are off by a factor of 3?
 
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Todesbuckler

Member
May 19, 2019
76
1,903
Germany
AMZN has a PEG of 3.02. If the market were not rationale, could not TSLA reach the same? Perhaps if AMZN used as a metric for how a growth company can do, your estimates are off by a factor of 3?

The rationality of markets is a long discussed academic topic and I personally do not believe in strictly rational markets. However, I also do not want to start a discussion regarding rational markets.
AMZN is to a certain extend a arbitrarily selected company. Markets could of course value Tesla with a PEG of 3. This would result into a 3x higher price target than my estimate. However, I prefer to make cautious estimates in order to have a degree of safety in my valuation approach. Nevertheless, the current price seems still quite low if we discount my future price estimates. This is a result of lower analyst consensus estimates compared to our estimates.
 
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MABMAB

Member
Jun 19, 2019
947
3,839
weifoph
Thanks for your estimates.
Personally, I think the growth assumptions are a little bit high.

I used smaller growth figures for my own calculations until 2023. My model is rather conservative for our forum, but significant higher than analyst estimates.
Price targets are based on a Non-GAAP PE of 30 and 60, as well as on a Non-GAAP PEG of 1. If everything works out for Tesla and we do not get a major recession, a price between 1.000-2.000 USD in 2023 seems realistic without too optimistic forecasts.

Those long-term estimates are inherently difficult to accurately determine. Please let me know if someone comes up with huge differences on a certain model or business segment, such as Tesla Energy (could be way higher with Solar roofs and utility size batteries).
View attachment 498961


EDIT: (I did not include production amounts of Semi, Pick-up and Roadster - but they are included in deliveries)

I'm not nitpicking, and enjoy such things, but is this an old spreadsheet that does not account for China factory or do you think model 3 production will stay as you have it? It seems you expect a plateau in 3 demand?
 

Todesbuckler

Member
May 19, 2019
76
1,903
Germany
I'm not nitpicking, and enjoy such things, but is this an old spreadsheet that does not account for China factory or do you think model 3 production will stay as you have it? It seems you expect a plateau in 3 demand?

Thanks for your comment. The model is up to date.
So far, I assume some cannibalization of model y towards model 3. That being said, I would be more than happy if this is not the case.
 
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MABMAB

Member
Jun 19, 2019
947
3,839
weifoph
I am assuming this topic is only about vehicles and not the energy side?
I do not know how to come up with figures for the energy side. I would love some input. I do like that California is requiring solar on all new homes, think the rest of the country//world should be doing the same.
 

Thekiwi

Active Member
Mar 31, 2016
1,541
13,900
Wellington
Possibly need to seperate long term valuations based on an autonomous ride sharing network definitely happening, from those that don't include it.
 

Rarity

Member
Jan 29, 2009
905
3,758
AMZN has a PEG of 3.02. If the market were not rationale, could not TSLA reach the same? Perhaps if AMZN used as a metric for how a growth company can do, your estimates are off by a factor of 3?

Why would Tesla's valuation be limited by Amazon's?

Tesla has been growing faster than Amazon was at a similar time in their life cycles.
 
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