Long-Term Fundamentals of Tesla Motors (TSLA)

[theschnell]

In 10 years they will probably be producing 3 - 5 million vehicles, but they will be producing them at good profit margins, still be supply constrained, and they will have millions of reservations of people willing to wait a year or two or three for their car.

Their market cap will be over $600 billion. Several other automakers will be on the brink of bankruptcy or will have already gone bankrupt.

 

[MacRocket]

In 10 years they will probably be producing 3 - 5 million vehicles, but they will be producing them at good profit margins, still be supply constrained, and they will have millions of reservations of people willing to wait a year or two or three for their car.

Their market cap will be over $600 billion. Several other automakers will be on the brink of bankruptcy or will have already gone bankrupt.

I think you are spot on with your estimates of vehicle production and profitability.
I’m thinking if you add in Tesla’s other businesses such as utility storage, batteries, charging, solar roof etc. then total market cap could exceed 1 Trillion in a decade or so.

 

[theschnell]

I’m like the analysts, totally forgetting about their other businesses.

I guess I didn’t totally forget, just knew that someone who couldn’t see the future of Tesla’s car business would be extremely unlikely to see the future of their other businesses.

 

[ggr]

Do you really believe what you are talking about ?

To become of the big players they have to produce 10 million vehicles. To build up and start that kind of car capacity Tesla would need 20 years and financially get over the rounds in the next years..

Taking your question literally (although I'm not sure why I bother), Tesla shipped about 2500 cars in 2012, and over 100000 in 2017 (only counting full calendar years here; source). That's a CAGR of just a tad over 109% per year. Call it doubling. From 100k to 10M is a factor of 100. Doubling every year for 7 years is a factor of 2^7 = 128...

Now you might argue that they can't keep it up for 7 years, and you might be right. But they've already kept it up for 7 years!

And then I would argue that you're ignoring the fact that they are moving into cheaper and more mass-produced cars from their established base that supported the 100% growth. Pretend for the nonce that they do exit 2018 at the 10k/wk rate they have projected. That means that in 2019 they will produce more than 500k cars; assume just 500k. Now, the CAGR from 2012 to 2019 given those figures has actually gone up to 113%. Now a factor of 20 from the end of 2019, doubling every year, takes only 4.5 years.

My conclusion is that even on Elon Time, 10M/yr by 2028 would only be 4 years late.

 

[Reciprocity]

Taking your question literally (although I'm not sure why I bother), Tesla shipped about 2500 cars in 2012, and over 100000 in 2017 (only counting full calendar years here; source). That's a CAGR of just a tad over 109% per year. Call it doubling. From 100k to 10M is a factor of 100. Doubling every year for 7 years is a factor of 2^7 = 128...

Now you might argue that they can't keep it up for 7 years, and you might be right. But they've already kept it up for 7 years!

And then I would argue that you're ignoring the fact that they are moving into cheaper and more mass-produced cars from their established base that supported the 100% growth. Pretend for the nonce that they do exit 2018 at the 10k/wk rate they have projected. That means that in 2019 they will produce more than 500k cars; assume just 500k. Now, the CAGR from 2012 to 2019 given those figures has actually gone up to 113%. Now a factor of 20 from the end of 2019, doubling every year, takes only 4.5 years.

My conclusion is that even on Elon Time, 10M/yr by 2028 would only be 4 years late.

You are right about everything as always.. boss.

But I argue that 10M is not really even necessary to accomplish the goals and to become a very profitable and extremely successful company. If you combine BMW, Porsche and Ferrari, you dont get more then 5M cars a year. Add in 100,000 Semi's a year from a competitor like Cummins or someone who only makes Diesel big rigs and you are still under 5M/Year. Yet you could could have similar profits as all of those companies combined. Now throw in TE, which could easily be as large as the vehicles. Lastly, add in the charging network, where I contend that Tesla will have margins at some point, once all chargers are converted to Solar + Battery and potentially some wind as well. When a Tesla solar roof costs between $50-100k and the 2% of the market share for new roofs is 100,000 per year, then you can see how TE could be similar volumes as the vehicle sales. Each Semi will consume as much as 31 model 3s and there will only be one realistic way to charge them, Megachargers, where Tesla will have a markup, as much as 30%. Tesla very well could become the largest Utility on the planet just from Super and Mega chargers.

In short, I dont know that 10M cars is required to complete the mission. If you take food directly of the plates of every big car manufacturer by attacking their highest margin, and most profitable models, then they will respond with EVs sooner or later. At some point, it will be very hard to make money from icev due to the lack of resources and progress. Once batteries get significantly cheaper than $100/KWh, it will not make sense to continue to build and expand Ice products.

Think of Tesla more like the Iphone and the rest of the industry as Android. There are 10x as many android handsets sold every year, but Apple owns 90% profit share for the cellphone industry. This is what Tesla will want to be and what they could be in 10 years. Could they also be selling 10M Cars, Trucks and Semi's? I guess they could, but it wont matter much as long as they own the top 1/3rd of the market in terms of margin. This will force competitors to react and will force some out of business.

 

[Waiting4M3]

....
Think of Tesla more like the Iphone and the rest of the industry as Android. There are 10x as many android handsets sold every year, but Apple owns 90% profit share for the cellphone industry. This is what Tesla will want to be and what they could be in 10 years. Could they also be selling 10M Cars, Trucks and Semi's? I guess they could, but it wont matter much as long as they own the top 1/3rd of the market in terms of margin. This will force competitors to react and will force some out of business.

Just to add to that analogy, the top Android phone makers are not the same previous generation cellphone powerhouses, such as Nokia, Blackberry, some may hang on like Sony and Motorola, but their glory days are gone.

 

[BornToFly]

Just when you thought there couldn't be a dumber analyst than Tamborino, Johnson shows up! A year ago, it was obvious to anyone with more than two brain cells that the ugly Bolt with no charging network and average performance was never going to be a threat to Tesla. Tesla has taken over the respective markets for the S and the X because they are BETTER than similarly priced gasoline cars. The Model 3 is the same. If other automakers also make EVs that are better than the gasoline vehicles they currently produce, they aren't going to take sales away from Tesla, they are going to take ICE sales away from themselves. EVs are not a zero sum game. Eventually EVs will take over the entire 100 Million/year vehicle market. But I'm sure Johnson already knows that and is just trying to manipulate the stock price. He, and the Trolls on this site, can't really be that dumb.

 

[The Blue Owl]

He, and the Trolls on this site, can't really be that dumb.

Wanna bet?

 

[ggr]

But I argue that...

That was never an argument just now... (ObPython)

I completely agree with you. I just kicked back on the question "Does anyone really believe 10M in 10 years?".

 

[tslagreen]

Just when you thought there couldn't be a dumber analyst than Tamborino, Johnson shows up! A year ago, it was obvious to anyone with more than two brain cells that the ugly Bolt with no charging network and average performance was never going to be a threat to Tesla. Tesla has taken over the respective markets for the S and the X because they are BETTER than similarly priced gasoline cars. The Model 3 is the same. If other automakers also make EVs that are better than the gasoline vehicles they currently produce, they aren't going to take sales away from Tesla, they are going to take ICE sales away from themselves. EVs are not a zero sum game. Eventually EVs will take over the entire 100 Million/year vehicle market. But I'm sure Johnson already knows that and is just trying to manipulate the stock price. He, and the Trolls on this site, can't really be that dumb.

 

[tslagreen]

Guy is a bozo. There is a distinct sense of desperation emanating from shorts like this guy and others like Chanos. Amazing to me guys like this still have credibility. I mean I think bands like Flock of Seagulls were still together when Enron was around.

 

[hcsharp]

Now you might argue that they can't keep it up for 7 years, and you might be right. But they've already kept it up for 7 years!

Why did you stop at only 7 years? Before that, they grew by 50 - 100% per year. I would argue they've been doing it now for 10 years.

I think @Teslie was referring mostly to capital growth. Every time I think about it, I realize it's staggering, both the amount and the speed. It's easy to understand Teslie's perspective. I've always said Tesla's biggest headwind looking back has been growing pains. That will continue to be their biggest headwind going forward for some time. Growing pains includes raising capital but I think a bigger obstacle will be finding enough workers. How many more gigafactories will they have to build in the next 7 years? Sure new factories are mostly automated but you still need a lot of people.

 

[ggr]

Why did you stop at only 7 years? Before that, they grew by 50 - 100% per year. I would argue they've been doing it now for 10 years.

I think @Teslie was referring mostly to capital growth. Every time I think about it, I realize it's staggering, both the amount and the speed. It's easy to understand Teslie's perspective. I've always said Tesla's biggest headwind looking back has been growing pains. That will continue to be their biggest headwind going forward for some time. Growing pains includes raising capital but I think a bigger obstacle will be finding enough workers. How many more gigafactories will they have to build in the next 7 years? Sure new factories are mostly automated but you still need a lot of people.

Why? Because it was easier to find the data and the Roadster was sort of an outlier. Again, I don't disagree with anything you say.

 

[ls7corvete]

Add in 100,000 Semi's a year from a competitor like Cummins or someone who only makes Diesel big rigs and you are still under 5M/Year. Yet you could could have similar profits as all of those companies combined. Now throw in TE, which could easily be as large as the vehicles.

Not mention that each big rig produced and every TE installation makes a vastly larger impact on the enviroment than producing a sedan. Diverting more effort to these projects can produce more enviormental change and even more profits.

 

[Reciprocity]

Not mention that each big rig produced and every TE installation makes a vastly larger impact on the enviroment than producing a sedan. Diverting more effort to these projects can produce more enviormental change and even more profits.

Yes, but I believe the plan is not too make and sell every EV and every type of vehicle, but to put massive pressure on competitors by attacking and dominating the higher end of the margins. This forces competitors to respond and they are trying. Porsche has said that they are going half EV by 2025 then the other half by something like 2030. I can assure you they wouldn't be doing that if Tesla wasnt taking their lunch money on the playground before school.

I think the semi has a two fold goal. The first is as you have stated, diesel rigs burn a large amount of very dirty fuel. But also, the scale of making 100,000 battery packs at an average capacity of 600KWh allows economies of scale that would not be possible with just half a million cars at 60KWh. This scale will save money for every pack made and help Tesla maximize the capex spent on the gigafactory. This offsets some of the advantages OEMs will have in future where they many customers and use scale to save costs. Tesla will have the best of both worlds. Scale and control. The ability to iterate quickly.

 

[mongo]

I think the semi has a two fold goal.

I'd say at least three fold. They'll save around 2 million a year using their semis to ship Model 3 packs from GF1 (at 5k/wk IIRC). Then there is car shipping, Boring dirt moving, lots of extra profit margin.

 

[wdolson]

Do you really believe what you are talking about ?

To become of the big players they have to produce 10 million vehicles. To build up and start that kind of car capacity Tesla would need 20 years and financially get over the rounds in the next years..

I said one of the biggest, not the biggest. Looking at the 2017 sales of light vehicles (non-commercial), Toyota sold 8.7 million cars which made them the top seller. VW was #2 around 7.6 million, Ford #3 at 7 million, GM #4 at 6.3 million, Nissan and Hyundai were #5 and #6 both around 5.5 million cars a year. Other totals include commercial vehicles which rearranges the mix a bit. In 2016 VA and Toyota were over 10 million total vehicles and GM was just shy of 10 million.

It's quite possible the car industry is looking at major disruption in the next decade. There is a video I've posted and some others have posted to of a lecture given about a year ago on how Tesla could massively disrupt the car industry. The speaker is not very animated and it's pretty dry, but I watched it a couple of times because it was very information dense.

I found the video:
Charged EVs | How the Tesla Model 3 could trigger the collapse of the traditional auto industry

I agree with most of the points Julian Cox makes. Tesla's don't need to be able to meet demand to disrupt the industry, the disruption will happen when there is an affordable new tech car out there that people really want.

Tesla probably won't be the top auto maker, but will be in the top 10, possibly the top 5.

 

[dc_h]

I said one of the biggest, not the biggest. Looking at the 2017 sales of light vehicles (non-commercial), Toyota sold 8.7 million cars which made them the top seller. VW was #2 around 7.6 million, Ford #3 at 7 million, GM #4 at 6.3 million, Nissan and Hyundai were #5 and #6 both around 5.5 million cars a year. Other totals include commercial vehicles which rearranges the mix a bit. In 2016 VA and Toyota were over 10 million total vehicles and GM was just shy of 10 million.

It's quite possible the car industry is looking at major disruption in the next decade. There is a video I've posted and some others have posted to of a lecture given about a year ago on how Tesla could massively disrupt the car industry. The speaker is not very animated and it's pretty dry, but I watched it a couple of times because it was very information dense.

I found the video:
Charged EVs | How the Tesla Model 3 could trigger the collapse of the traditional auto industry

I agree with most of the points Julian Cox makes. Tesla's don't need to be able to meet demand to disrupt the industry, the disruption will happen when there is an affordable new tech car out there that people really want.

Tesla probably won't be the top auto maker, but will be in the top 10, possibly the top 5.

10 million is a huge number, but not sure how much they need to grow after 5 million to achieve the mission. They should hit 300,000 this year and about 500,000 in 2019 750,000 in 2020. After that they’ll be on track with at least two new factories designed to build a million each. Everything can move out a bit, but I think my estimates through 2020 are conservative, so the outyears don’t seem too optimistic.
Add in potential of Tesla Network energy and trucking and they can be the most profitable, if not the largest.

 

[Lbkmxp100d]

@dc_h, I agree 5 million would be a number I would be satisfied with. One thing I don’t think people are considering is when level 5 AP is released the world will be selling less vehicles. I’m just thinking about our current household where we currently have 4 vehicles and once level 5 is achieved I don’t see any reason to have more than 2. At any rate, 5 million a year will have $TSLA at a number that should be able to shave quite a few years of my retirement age. Can’t wait to watch the next 3-5 years w/ Teala play out under Elon’s watch.

 

[SteveG3]

Guy is a bozo. There is a distinct sense of desperation emanating from shorts like this guy and others like Chanos. Amazing to me guys like this still have credibility. I mean I think bands like Flock of Seagulls were still together when Enron was around.

Very likely working on the same 'team' as much of the media, that is, serve the imagined interests of massive wealth in the fossil fuel/ICE transportation status quo.

Think about it,

How does a guy with $10 million under assets get to refer to himself as a "hedge fund manager," much less get to appear on CNBC, and get invited to present at investor conferences where the likes of billionaire Ron Baron present?

How is it that the media never calls out other members of the media getting stories completely wrong?

How is it that guests who've said multiple things which time has proven utterly wrong get to appear repeatedly on CNBC, Bloomberg, etc, and not only are never asked about what they got wrong, but, are given a platform to try to paint Tesla/Elon as always getting things wrong?

How are basic and obvious flawed bear thesis never called out in the media... such as, "each new Model S and X Tesla sells they lose more money", "I saw a Model 3 with a panel gap = these Model 3s have build quality worse than the worst cars of the early '90s"... it's something of financial and journalistic malpractice to allow such obvious to spot fake news sham rationales go unquestioned.


In fact, the whole framework of discussion of Tesla on these networks has come to take as a given the false narratives of these obviously baseless accusations. I've seen hosts on these shows laugh reading the narrative of a bullish analyst (never mentioning the analyst's rationale), and repeatedly frame their conversations taking the idea that Tesla bulls do not analyze Tesla's value, but, rather fawn over and throw money at their cult leader.