Long-Term Fundamentals of Tesla Motors (TSLA)

[DonPedro]

Here's a clip from yesterday with Elon discussing expansion into China. It finally made me realize just how important the Chinese market is.

http://www.youtube.com/watch?feature=player_detailpage&v=MBItc_QAUUM#t=2614

49:14 - "[We're] doing a little bit of advance planning on the third generation vehicle that will be a mass market, affordable electric car."

That seems a long way off from what a lot of people imagine about the GenIII. If they are now at the stage of "a little bit of advance planning", what does that mean for when GenIII will be launched?

 

[brysondad]

Do u think there's a risk/mistake made by Netflix when they misjudged consumer reaction of roving mail DVD option?

What if tesla gen3 is "technically" $30k, but just like the $50k model s, it is quickly abandoned? And gen3 , with decent options, is now $50k?

 

[Norse]

Do u think there's a risk/mistake made by Netflix when they misjudged consumer reaction of roving mail DVD option?

What if tesla gen3 is "technically" $30k, but just like the $50k model s, it is quickly abandoned? And gen3 , with decent options, is now $50k?

Still Nissan and Bmw will not sell one single EV with profit when a 30k$ option comes. But its also smart. People will upgrade and most will probably spend 40k. However the GEN3 will never meet demand before 2030 IMO

 

[ItsNotAboutTheMoney]

Do u think there's a risk/mistake made by Netflix when they misjudged consumer reaction of roving mail DVD option?

What if tesla gen3 is "technically" $30k, but just like the $50k model s, it is quickly abandoned? And gen3 , with decent options, is now $50k?

Then I won't buy one and I suspect many other people will be similarly disappointed. It'd still be a success if it was a well-equipped $50k performance car, but to really blow the market open they need to get to the bottom of the luxury market to get that plus upsell the premium mainstream buyers.

 

[Norse]

To me the big question is where will they build the European GEN3? Building a 30k$ car in California to ship it to Norway makes me think it might be abit more expensive here.

 

[sleepyhead]

Then I won't buy one and I suspect many other people will be similarly disappointed. It'd still be a success if it was a well-equipped $50k performance car, but to really blow the market open they need to get to the bottom of the luxury market to get that plus upsell the premium mainstream buyers.

A base 3 series (not talking about the crappy 320 but 328 base) also starts at close to $40k and you have to spend $45k - $50k to get decently equipped.

I hope that the Model E also sells at around $50k, because:

1. As a shareholder, I want a good return and Tesla will have no problem selling millions of these cars a year at a price similar to BMW 3-series, i.e. starting at $37k and with must have options closer to $45k. BMW sells several hundred thousand of these in the US annually. They also have the 328x and 335 series that are even more expensive not to mention the M3.

2. As an owner, I don't want to drive the same car that all college kids are driving. It can't be too affordable so that it is still somewhat exclusive, like the 3-series. It should be targeted more towards the successful middle class person.

I know there are a lot of people hoping they can get the Model E for the same price as a Camry, but that is not going to happen. What is Tesla supposed to do if demand outstrips supply? The answer is obvious and they have to raise the price at least a little; like they did on the Model S.

That is the unfortunate course of the business, but as a shareholder I am perfectly happy with this and actually demand this behavior.

As a customer I can hedge the potential increase in Model E price by buying approximately $5k worth of TSLA shares today.

 

[mrdoubleb]

I hope that the Model E also sells at around $50k, because:

2. As an owner, I don't want to drive the same car that all college kids are driving. It can't be too affordable so that it is still somewhat exclusive, like the 3-series. It should be targeted more towards the successful middle class person.

Agreeing with everything Master Sleepy was saying, just adding a few thoughts...

I've been saying it for some time now, that when the time is right, Tesla should found another brand. Even if the (battery) technology was there to make a 15k car, they shouldn't... under the Tesla brand.

Not saying this should or will happen in the next 2-3 years - although, they should start trademarking some brand names if they have something in mind -, but I think this is the only thing that makes sense in the long term. Changing people's mind about EVs is onte thing, but a luxury/premium brand will always require some exclusivity. If every second teenager is driving a Tesla that would damage the brand.

Having said that, they could still market it like "xxxx brand by Tesla Motors", make use of the positive halo around the premium brand, and of course they could also share a big part of the parts and platforms between the 2 brands, leveraging mass production. Almost all big car companies do that - your Audi is probably as related to Skoda as humans are to chimps. Many of their common parts are even produced in my country/region.

As for Tesla itself, they could still go lower with pricing for a BMW series 1 competitor, a shorter, more compact ("Model C" anyone?) version of the Model E.

 

[JRP3]

What are you all going to do when teenagers are driving used Tesla's? :wink:

 

[blakegallagher]

What are you all going to do when teenagers are driving used Tesla's? :wink:

I think we will all be happy when teenagers are driving Gen 3's with "autopilot" and more importantly crash avoidance technology from Tesla . From comments from JB and Elon it appears they are pushing hard on this front.

 

[AlMc]

I think we will all be happy when teenagers are driving Gen 3's with "autopilot" and more importantly crash avoidance technology from Tesla . From comments from JB and Elon it appears they are pushing hard on this front.

+1. I would trade in my S in a heartbeat to be able to get an E for my early teen daughter with those types of safety features. We talk about auto safety in my family almost daily as the day approaches when she can drive. The debate: If nothing else is out there 'safer' than the S when that day comes she may be driving a two year old S....mine.....


edit: But only if TM comes out with firmware to limit some of power/top speed :wink:

 

[DonPedro]

To me the big question is where will they build the European GEN3? Building a 30k$ car in California to ship it to Norway makes me think it might be abit more expensive here.

Companies are increasingly finding that rising salaries in China and other Asian countries mean that they can produce more cheaply at home. Blue collar labor is actually quite cheap in the US, and the high level of automation also reduces the importance of the local cost level.

 

[ModelS8794]

A base 3 series (not talking about the crappy 320 but 328 base) also starts at close to $40k and you have to spend $45k - $50k to get decently equipped.

I hope that the Model E also sells at around $50k, because:

1. As a shareholder, I want a good return and Tesla will have no problem selling millions of these cars a year at a price similar to BMW 3-series, i.e. starting at $37k and with must have options closer to $45k. BMW sells several hundred thousand of these in the US annually. They also have the 328x and 335 series that are even more expensive not to mention the M3.

2. As an owner, I don't want to drive the same car that all college kids are driving. It can't be too affordable so that it is still somewhat exclusive, like the 3-series. It should be targeted more towards the successful middle class person.

I know there are a lot of people hoping they can get the Model E for the same price as a Camry, but that is not going to happen. What is Tesla supposed to do if demand outstrips supply? The answer is obvious and they have to raise the price at least a little; like they did on the Model S.

That is the unfortunate course of the business, but as a shareholder I am perfectly happy with this and actually demand this behavior.

As a customer I can hedge the potential increase in Model E price by buying approximately $5k worth of TSLA shares today.

I think the benefit of EV vs gas will be even more acutely felt at the Gen3 price level. As Musk pointed out last week (not for the first time I am sure) a 35k base price point will bring car + fuel for Gen 3 competitive with a $25k ICE in the US, and competitive with a $20k price point ICE in Europe.

Merely looking at this factor alone, one can see how demand for a $35k Gen3 can far outpace the 'accepted' understanding of the total addressable market at that level. That higher demand, coupled with the large increase in gross profits from Tesla's ability to sell at MSRP rather than at the wholesale prices ICE mfrs sell to dealerships, gives me a warm feeling inside as an investor, even accepting a base $35k and ASP of $42-45k.

 

[smorgasbord]

1. As a shareholder, I want a good return and Tesla will have no problem selling millions of these cars a year at a price similar to BMW 3-series, i.e. starting at $37k and with must have options closer to $45k. BMW sells several hundred thousand of these in the US annually.

Sorry to nitpick, but BMW sells only about 100K 3-series in the US annually. And about 400K world-wide. And that includes all variants.

 

[Norse]

Companies are increasingly finding that rising salaries in China and other Asian countries mean that they can produce more cheaply at home. Blue collar labor is actually quite cheap in the US, and the high level of automation also reduces the importance of the local cost level.

My point is that cheapest model S costs over 10k more in Norway then in the US. So I I wonder what the difference will be on the GEN3

- - - Updated - - -

I think the benefit of EV vs gas will be even more acutely felt at the Gen3 price level. As Musk pointed out last week (not for the first time I am sure) a 35k base price point will bring car + fuel for Gen 3 competitive with a $25k ICE in the US, and competitive with a $20k price point ICE in Europe.

Merely looking at this factor alone, one can see how demand for a $35k Gen3 can far outpace the 'accepted' understanding of the total addressable market at that level. That higher demand, coupled with the large increase in gross profits from Tesla's ability to sell at MSRP rather than at the wholesale prices ICE mfrs sell to dealerships, gives me a warm feeling inside as an investor, even accepting a base $35k and ASP of $42-45k.

A 35k$ GEN3 is comepetitive with a free gas car in Norway.

 

[tftf]

Sorry to nitpick, but BMW sells only about 100K 3-series in the US annually. And about 400K world-wide. And that includes all variants.

The overall sales can be found here, BMW Group also sells quite a lot of MINI cars, around 2 million in total per year is the 2013 estimate (that would be a record):

BMW - Wikipedia, the free encyclopedia

 

[smorgasbord]

I don't think the Mini is in the same category as the 3-series and the upcoming Model E.

 

[marvinat0rz]

A 35k$ GEN3 is comepetitive with a free gas car in Norway.

Did you do the calculations on this? Seems about right to me. As in, a $35k electric car is more or less cost-competitive with a gasoline car if you get the gasoline car for free.

Probably not quite this good, but close. Quick calculation with no discounting the value of money, 12000 kilometers/year * $2.33/liter of gasoline * 0,07 liters/kilometer = $2796/year in fuel costs per year. So after 12.5 years (no discounting or inflation adjustment) you've paid more in gas than the price of the car. Add in fewer servicings/repairs after year 5 (typically at around $1000 each, and I'm being conservative here) and cheap electrical power, free parking and no road tax for at least a few years, and your ballpark estimate starts to look very good. The yearly distance driven is also quite conservative, ~7500 miles.

(Gasoline in Norway is approximately $10/gallon, but I've used $9.32 in these calculations).

 

[bonaire]

Sorry to nitpick, but BMW sells only about 100K 3-series in the US annually. And about 400K world-wide. And that includes all variants.

Sleepyhead does well with the stock trading numbers. But saying Tesla will sell millions of a $35-45k car worldwide per year is quite a long shot. When one says millions, they mean multiple millions. Five million $40k cars annually is 200 billion dollars gross. It would make Tesla the largest product exporter in the USA, but we would assume other worldwide factories. This is way outside the capability of one company to dominate this type of sales profile for such an expensive car. 200,000 annually when tied into a general widening of competition, a decline of incentives over time and a slow adoption rate of EVs (slower than hoped by all EV advocates) means that people may be taking a very overly-optimistic view of Tesla and the EV industry's future. Without even more selective models and options available, there will have to be more attractiveness than the smooth acceleration, moderate luxury and "different" factor. In five to ten years, if EVs gain traction, there will be a stable of competitors. EVs are happening but at a slower rate than predicted a few years ago and assuredly not at the rate that some fans expect to occur ongoing.

 

[sleepyhead]

Sleepyhead does well with the stock trading numbers. But saying Tesla will sell millions of a $35-45k car worldwide per year is quite a long shot. When one says millions, they mean multiple millions. Five million $40k cars annually is 200 billion dollars gross. It would make Tesla the largest product exporter in the USA, but we would assume other worldwide factories. This is way outside the capability of one company to dominate this type of sales profile for such an expensive car. 200,000 annually when tied into a general widening of competition, a decline of incentives over time and a slow adoption rate of EVs (slower than hoped by all EV advocates) means that people may be taking a very overly-optimistic view of Tesla and the EV industry's future. Without even more selective models and options available, there will have to be more attractiveness than the smooth acceleration, moderate luxury and "different" factor. In five to ten years, if EVs gain traction, there will be a stable of competitors. EVs are happening but at a slower rate than predicted a few years ago and assuredly not at the rate that some fans expect to occur ongoing.

The only way that Tesla doesn't sell the Model E in millions is if it introduces a cheaper model that will cannibalize sales. I think that Tesla will introduce a new brand when this happens (Scion vs. Toyota).

EV adoption will happen as fast as Tesla expands capacity.

The competition is so far behind that they will not be able to catch up any time soon. I guarantee you that Tesla will be the biggest car manufacturer in the world, and it will happen a lot sooner than you expect.

If you want to be successful in business, then you have to see the future, think big, and then execute: Bill Gates, Steve Jobs, Elon Musk, etc.

If you really want to make a lot of money in the stock market then you have to see the future, believe in it, and then put your money where your beliefs lie.

If you can't see the Tesla revolution coming, then you will never see any good investment opportunity even if it hit you in the head. This is about the easiest and most obvious investment opportunity of a lifetime that you will ever get. It really doesn't get any easier than this. Even at today's share price Tesla is a huge bargain. The only reason it is so cheap is because people still can't see that Tesla is growing a lot faster than anyone imagined; and will continue to do so. Demand is a lot higher than anyone can imagine, and definitely a lot higher than Elon Musk says it is; probably 2- 3 times higher than he says it is.

 

[PeterJA]

EVs are happening but at a slower rate than predicted a few years ago...

I've noticed that people who dismiss Tesla like to change the subject from Tesla to EVs in general.

The Model S was launched a little over one year ago. It is not like other EVs.