How to Evaluate TSLA future- assumptions and data

[nursebee]

HELP!

Many years ago I worked on a valuation model for TSLA the car company, I made some basic assumptions about what the future could hold and came up with my own reasonable future value per share. This has allowed me to sit tight at times and not panic sell. I would like to work on a new model that encompasses all the areas TSLA has to provide income: Solar, autos (this includes the unknowns of the truck), the Big Rig Truck, and autonomous taxi service, and I guess energy storage. I want to make a lot of assumptions, would like input here for WHAT to assume.

What I did for cars was look at what the worldwide market was, guessed that they could eventually capture 10% of the market, figure on profit per car given what they said the profit would be, and figure how how this would be reflected in the share price given some expected P/E figures. I was quite bullish and did not give the company enough time to execute, but subtracted 20% off the value per year going backwards.

My assumptions, or things I want to figure out.

Cars:
Is 10% of the addressable market reasonable and when could it happen?
What confidence level is reasonable to have in the above?
What percent profit could be expected per vehicle at scale?
I really have high confidence in cars. p[erhaps 100% but I should tone that back.

Big rig trucks:
I think I see that they might sell 40,000 trucks a month in the US? US Heavy Truck Sales
Other sources suggest lower amounts.
10% of the market? When? What is reasonable?
What confidence level?
% profit?
I would run figuring on 10% of the market, but this would take a while, likely a dedicated factory to get anywhere near 4,000 trucks a month.
If autopilot really works or if one driver could control many loads this would really go gangbusters.
I think it would take a minimum of 5 years to get a 10% factory market going...
I have moderate confidence this could happen, but tough to know without a product on the market yet.

Solar: I am not that bullish on this for TSLA.
Not available where I live, TSLA does not serve locally
Product not compelling to knowledgeable consumers, similar for less.
Integration and cross selling keys, what differentiates?
It is bullish that california 2020 requiring solar on new construction.
Addressable CA market? 120,000 starts a year? 10% of market? I dont live there, please share if you live there and have insight into the market.
I think sales will be low for a while. 10% of a required CA market is only 12,000 systems a year @ maybe $20,000 per system.
LOW confidence

Autonomous taxis, Transportation as service (TAS)
US market is 26B per year: Taxi & Limousine Services in the US - Market Size | IBISWorld
I got no clue on this one. TSLA could capture a lot of the market if they get the product right, truth is they could chage the entire face of transportation wherein much fewer people would need cars.
PRODUCT DEPENDENT
I assume you can't use current data and capture a percent of the market because if it works, IT CHANGES everything.
Uber use is ubiquitous with the youth of the day, many don't care for muscle cars or driving. Could shift the paradigm totally.
Perhaps need to look at how many miles a person needs for transportation needs each year.
The US has 327M people. Perhaps 210M licensed drivers: Office of Highway Policy Information - Policy | Federal Highway Administration

My mind is blown away considering the ramifications of valuing self driving cars and TAS

Thank you for sharing any of your thoughts on this as I work on a valuation model.

 

[nursebee]

Assuming the average driver puts on 10,000 miles a year
@ .65/mile that would be $6,500/year per person or $541 per month
No insurance! No repairs! No liability or risk!
My conservative spouse says the amount is worth it and there would no longer be a need to own a car.
If TSLA got 1/4 of the fee, it would be $1625 per driver per year.
Maximum market could be 210M x 1625 = 341B per year!
How many drivers in the world? 1.2B? https://www.quora.com/What-percent-of-the-world-population-knows-how-to-drive-a-car
So the maximum market per year is in excess of 1T per year

I could assume that the US market, they could capture 1/4 of the market = 85B per year
How many cars would it take?

I can see how he so confidently says TSLA could be a 500B company

 

[nursebee]

Watching all of this video is great but he talks about potential future paradigm at about the 3 hour mark

 

[mrmage]

Autonomous driving is where the big value is, but there are so many factors required for this to work: regulations, technology, and public perception. Any of these being fully realized will prevent Tesla from deploying FSD to the full capabilities envisioned by the bulls while the bears fail to see that even partially working FSD has enormous applications.

I posted some scenarios in the investors thread, and suggest adding risk adjusted value based on various scenarios: Some considerations:

Regulations: What if regulators partially approve FSD, but not fully? For example, they only allow it for certain areas or under certain conditions (e.g. can only be used in certain locations or times, or must have driver in car?). How can they ensure the most common accidents (damage to car or some non-life threatening injury) are handled?

Technology: What if FSD only partially works, but not well enough for robotaxies as optimistically envisioned? What's the value of FSD when applied to reducing stress during commutes, improving safety, or if FSD is only allowed for certain areas? What's the competitive advantage or market for those cases?

Perception: What if FSD is not fully accepted even if it's safe enough? For example, if it drives very conservatively, trips could be much slower during rush hour making FSD less appealing when traffic is heaviest. Robo rentals are a way around that.

 

[nursebee]

Mathematical thoughts as posted elsewhere, part of what I was going to work on with this:

Facts
40B cap on 22.5 B sales = TSLA

Ford 41 B cap, 158 B sales
Toyota 193B Cap, 275 B sales
AMZN 939 B Cap, 241 B sales

Compared to tech/growth, TSLA value can be justified. Compared to autos, not so much.

What has to happen is TSLA needs to demonstrate continued growth to drive future expectations and value. As it is now, the word in public is model 3 is stagnant, battery capacity limited such that other models can't be brought forward, they just bought a new company that might improve value but can't just turn that spigot on. Perhaps the Y and Semi and roadster are all ready to to into production yet they need battery cells and perhaps MXWL tech integration first. Perhaps TSLA goes it alone with battery building using the new tech but will remain constrained by scaling up. In many ways, the TSLA story seems on hold until this all gets sorted out. Changing the story from transportation to TAAS really takes some getting used to. If mutual funds bought the auto company but EM pivoted to TAAS, the premise for trade entry is gone and ought to be exited. This is true for everyone, if the reasons to enter a trade are no longer there, GET OUT.

In order to move up, I think the battery growth has to happen, they have to decide what they are going to do with MXWL tech, then bring forth new products for more growth. Perhaps they can grow double with China factory but they will need more manufacturing space for Y, semi, truck, and others. This can't happen overnight. There is no rush to own TSLA here and now. I think they are walking a tight rope financially with all this growth and hope the latest round fuels the future.

On TAAS, it is real tough to judge the value. UBER and Lyft are kind of comps, but are in a different sector compared to EVs. One million autonomous taxis on the road in a hear? Horse tonky, all those owners are not going to let them out. They are too busy complaining and manufacturing issues, their 10K clear coats, their paint quality etc... to let loose the car out of their sight. More so true for X/S owners (excess owners). Rare will be the person that puts their car into service. Hence the leasing for TSLA to get the cars back. Perhaps in 3 years the TAAS segment will grow then.

What is wrong with the new chip/computer that they publicly acknowledge that they are already half thru design of the next one?

$300-400 share price might be justifiable when these issues are figured out. Each of them has chance of failure. If all of them have to come true to justify much higher prices, like the half trillion market cap, it really looks hair brained.

What are the chances of the following:
TSLA EV growth to 1M cars a year in next 5 years? I say 25%.
MXWL integration next 3 years? 50%
Increased capacity for all models next 3 years using MXWL tech to scale? 10%
TAAS as being sold by EM next 3 years? 5%
Self driving being allowed in US and elsewhere so that it can be a driver of revenue, next 3 years? 5%
Solar and/or battery adoption in more TSLA households, any time frame? 25%
Large battery storage capacity growth, using MXWL and able to grow to scare, next 3-5 years? 20%

Chances of all of the above happening? Take whatever percent estimates you have given the value drivers of the future and MULTIPLY them together and you get the percent chance of that happening. using the above figures there is 0.00015% chance of all of them happening. If you think there is a 95% chance of each of the above happening, there is only a 73% chance of all of them happening.

In total, their is a slim to none chance of TSLA being a 500 B market cap company any time soon...