Long-Term Fundamentals of Tesla Motors (TSLA)

[wdolson]

Here's something that's been bugging me for a while, maybe folks here can explain. Elon's/Tesla's stated goal is to advance the transition to EVs by making compelling electric cars.

Ok, so how does autopilot advance this? Autopilot and it's sensors and software has almost nothing inherently to do with EVs. Computerized ICE throttle control is pretty advanced, there's not much EV advantage there to be had from the autopilot point of view. Everything else, brakes, sensors, steering, etc has nothing EV specific. Autopilot research projects have been done fairly extensively over years on non-EV cars.

Regardless, let's assume Elon thinks autopilot is the next huge differentiator in auto transport. Let's say Tesla succeeds and creates a really compelling autopilot in a way that moves the market. Doesn't that encourage other manufacturers to pursue autopilot? And if so, isn't that taking focus away from their transitioning to EVs?

If the goal is to push EVs, then Tesla should be taking all that money on autopilot and instead pushing the R&D on batteries and manufacturing even further, driving costs down, expanding their product line down market (e.g. 3 and Y either faster and/or released closer together) and creating completely dominant EVs. Push the market to understand that EVs are the dominant must-have feature. Make the market follow into the EV category.

...

So...what am I missing? Can someone make the link that pushing the market's adoption of autopilot somehow pushes EV adoption?

Tesla also needs to compete with existing ICE and almost everyone is working on something like autopilot right now. Tesla saw this as a coming technology and decided to get ahead of the curve, which they did. I suspect Tesla looked at what they could buy off the shelf and they probably felt they could do better. The Model S got hailed as the safest car every tested and that myth was pretty much put to bed, but active collision avoidance systems are becoming common in cars and will probably become a standard feature soon. Tesla had to do something, so why jump in on the tail end of the curve when they could move to the forefront with just a little more effort.

In effect autopilot has become another compelling selling point.

 

[HiTech]

Here's something that's been bugging me for a while, maybe folks here can explain. Elon's/Tesla's stated goal is to advance the transition to EVs by making compelling electric cars.

Ok, so how does autopilot advance this? Autopilot and it's sensors and software has almost nothing inherently to do with EVs. Computerized ICE throttle control is pretty advanced, there's not much EV advantage there to be had from the autopilot point of view. Everything else, brakes, sensors, steering, etc has nothing EV specific. Autopilot research projects have been done fairly extensively over years on non-EV cars.

Regardless, let's assume Elon thinks autopilot is the next huge differentiator in auto transport. Let's say Tesla succeeds and creates a really compelling autopilot in a way that moves the market. Doesn't that encourage other manufacturers to pursue autopilot? And if so, isn't that taking focus away from their transitioning to EVs?

If the goal is to push EVs, then Tesla should be taking all that money on autopilot and instead pushing the R&D on batteries and manufacturing even further, driving costs down, expanding their product line down market (e.g. 3 and Y either faster and/or released closer together) and creating completely dominant EVs. Push the market to understand that EVs are the dominant must-have feature. Make the market follow into the EV category.

I get autopilot is really nice and will, someday, be a key feature of every car, but I can't understand how Tesla's push for it now can possibly help their EV mission statement. If it wildly succeeds, it takes away the impetus for other manufacturers to get on the EV bandwagon and instead focuses them on autopilot. If it fails, it's an anchor or money pit holding Tesla back. If it's only a partial success, its payback time is measured in what, a decade? And what's the opportunity cost, the money that didn't go towards advancing EV-specific technology? There's no scenario with autopilot I see that advances the EV transition. I suppose from a purely financial viewpoint, a wild success at least gives Tesla a leading position in a future autopilot-focused market, keeping them alive to hopefully eventually get back to advancing EV adoption.

Any ability for autopilot to advance the EV cause seems tangential at best. If Elon wants to advance it, form a startup spin-off that has it's own VC funding. Hell, he could even be on the board...wouldn't be any different burden on his time than now since he's supposedly having autopilot report directly to him now.

So...what am I missing? Can someone make the link that pushing the market's adoption of autopilot somehow pushes EV adoption?

I think it has less to do with keeping up with the other auto manufacturers, than it does with putting together a set of technology that will, at some day in the near future, significantly shift the way people drive. I think this has to do with more than just calling your own car to you from your garage. More like the shared vehicle concept, etc. Seems to be going towards helping to electrify the vehicles and also to reduce congestion/traffic...
Maybe I'm thinking too much into this, but I think this tech has a huge impact on the success of Tesla, and where the whole industry moves in the future.

All that said, there is no way I'm giving up driving my own Tesla!!!

 

[JRP3]

It could also be as simple as Elon wanting Tesla to make the safest cars in the world, and an autopilot that is statistically safer than a human driver helps make that happen.

 

[ecarfan]

Elon wants to make the most compelling cars -- only EVs of course because electric drive is the best -- on the market and offering Autopilot is part of what makes cars compelling, in his opinion. I agree. Autopilot right now, essentially "V1", may not be compelling to everyone, but you have to start somewhere. Many people find it very useful, and it will improve rapidly over the next few years, to the point where many more people will begin to think of it as "essential".

 

[ckessel]

If someone wants a car with the latest safety and technology features, they have to buy Tesla.

Ok, let's take that as a given. It certainly helps advance autopilot. My question is/was though, how does that help advance EVs?

If everyone thinks they have to focus their R&D to match Tesla's autopilot to compete then...well...they're not trying to advance their own EV programs and that is Tesla's mission statement.

I'm not dismissing the value of autopilot. I guess I'm questioning Tesla's priorities relative to their mission statement. Unless Tesla's given up on that mission statement I suppose.

 

[Drax7]

Assisted safety is a huuuuge benefit, and differentiates the product and increases the moat.

moreover it might even give them pricing power in an industry that is very competitive

 

[ItsNotAboutTheMoney]

Ok, let's take that as a given. It certainly helps advance autopilot. My question is/was though, how does that help advance EVs?

If everyone thinks they have to focus their R&D to match Tesla's autopilot to compete then...well...they're not trying to advance their own EV programs and that is Tesla's mission statement.

I'm not dismissing the value of autopilot. I guess I'm questioning Tesla's priorities relative to their mission statement. Unless Tesla's given up on that mission statement I suppose.

Tesla advances EVs by selling cells. Tesla has to compete on amenities, and driver assistance is something that companies have been working on for quite some time. Tesla were able to gain an advantage by taking risks with Autopilot that other manufacturers would not take.

 

[ecarfan]

Tesla has not "given up" on its mission statement. Again...Tesla wants to make the most compelling cars available. A key part of that is that they be EVs because that supports Tesla's mission. But a key part of making a compelling car is offering Autopilot, as I posted just up thread. Elon believes that in the not too distant future essentially all new cars will include or have autonomous driving as an option. So to keep up and make sure that Tesla offers compelling cars, developing and improving Autopilot is critical.

Ok, let's take that as a given. It certainly helps advance autopilot. My question is/was though, how does that help advance EVs?

If everyone thinks they have to focus their R&D to match Tesla's autopilot to compete then...well...they're not trying to advance their own EV programs and that is Tesla's mission statement.

I'm not dismissing the value of autopilot. I guess I'm questioning Tesla's priorities relative to their mission statement. Unless Tesla's given up on that mission statement I suppose.

 

[ckessel]

Tesla has not "given up" on its mission statement. Again...Tesla wants to make the most compelling cars available. A key part of that is that they be EVs because that supports Tesla's mission. But a key part of making a compelling car is offering Autopilot, as I posted just up thread. Elon believes that in the not too distant future essentially all new cars will include or have autonomous driving as an option. So to keep up and make sure that Tesla offers compelling cars, developing and improving Autopilot is critical.

Ok, that makes sense, except Tesla isn't trying to "keep up". They're trying to lead and dominate. They've self-admittedly done and/or are doing a huge ramp up in hiring for autopilot. Elon's said so in tweets and interviews and said the autopilot team reports directly to him.

It's almost always much cheaper to get parity than it is to lead. It's the 80/20 rule in software where you get 80% of the benefit with the first 20% of the effort. Being the leader, pushing that R&D envelope, is expensive. I'm a software developer for 20 years now, I've been in that discussion over and over when features come up. "Is this a core part of our mission/product?" Yes, we lead. No, we buy/follow. Deciding if it's core...well, that can be hard and, sadly, incredibly political (company politics, not global).

Also, from a software viewpoint, detection is typically that 80% rule. Step 1 isn't that costly: detecting blind spots, detecting lane drift, and so forth. Step 2 where the software takes simple direct action is harder, but still relatively straight forward: if X is in front of the car, engage emergency brakes. Step 3, autonomous decision making (often called "self healing systems" in my world) is MUCH, MUCH harder. Huge software R&D expense.

Tesla had already made a compelling car, winning awards, leading sales in their class. Reaching parity makes sense to maintain that lead, showing that an EV is better and has no sacrifices. Doing that "Step 3" level of autopilot...I don't get how it helps. Tesla is constantly stating how they're production constrained. Well, spend that Step 3 money on taking care of production issues! They're always saying how the world will need multiple Gigafactories, how they're already sold out well in advance for Powerwall stuff. Fine, spend that "step 3" money advancing those items! Start lining up that 2nd gigafactory or pushing the first one faster.

I understand what people are saying. Safety, parity, those all make sense. What doesn't make sense to me is trying to dominate in an area that's not core to their stated mission. If Tesla was a normal ICE vendor, I could see it since it'd be what differentiates them.

Batteries, producing more EVs, leading those are all core to the mission of sustainable transport (and generation/storage). Leading on autopilot as core to Tesla's mission?....

Someone mentioned Tesla's big autopilot push as a "moat" around their product. I'm looking to see Tesla honor their mission statement of advancing sustainable transport. If Tesla can't keep enough "moat" to thrive by focusing on their core mission, then it seems like they've got the wrong mission.

 

[rosinchard]

re: Why Autopilot: Elon's view is that within about 10 years any car that can't drive itself will be seen as a quaint piece of nostalgia.

So in his mind 'Car' and 'Self Driving Car' are the same thing.

So Tesla start working on it. But due to their software/Silicon Valley approach and the advantages of an all-electric foundation, they realise they can hit it out of the park and do it much better than everyone else. They have so many advantages: always-on cars, software expertise, internet connected cars etc...

Seems to me non-electric cars are going to be at a distinct disadvantage on self-driving as the sensors and AI components get more numerous and complicated and need more power.

 

[Model 3]

I understand what people are saying. Safety, parity, those all make sense. What doesn't make sense to me is trying to dominate in an area that's not core to their stated mission. If Tesla was a normal ICE vendor, I could see it since it'd be what differentiates them.

Their mission is "to accelerate the advent of sustainable transport by bringing compelling mass market electric cars to market as soon as possible."
https://www.teslamotors.com/blog/mission-tesla

Yes, you are right in that Autopilot do not have anything to do with EVs in general, but it does have something to do with "compelling (mass market) (electric) cars". They want to make EVs that customers may buy - not because they are electrical but rather in spite of that they are. This is why they make cars that are "insane" or "ludicrous" fast, and why they want to lead in automatic driving.

 

[wdolson]

Ok, that makes sense, except Tesla isn't trying to "keep up". They're trying to lead and dominate. They've self-admittedly done and/or are doing a huge ramp up in hiring for autopilot. Elon's said so in tweets and interviews and said the autopilot team reports directly to him.

It's almost always much cheaper to get parity than it is to lead. It's the 80/20 rule in software where you get 80% of the benefit with the first 20% of the effort. Being the leader, pushing that R&D envelope, is expensive. I'm a software developer for 20 years now, I've been in that discussion over and over when features come up. "Is this a core part of our mission/product?" Yes, we lead. No, we buy/follow. Deciding if it's core...well, that can be hard and, sadly, incredibly political (company politics, not global).

Also, from a software viewpoint, detection is typically that 80% rule. Step 1 isn't that costly: detecting blind spots, detecting lane drift, and so forth. Step 2 where the software takes simple direct action is harder, but still relatively straight forward: if X is in front of the car, engage emergency brakes. Step 3, autonomous decision making (often called "self healing systems" in my world) is MUCH, MUCH harder. Huge software R&D expense.

Tesla had already made a compelling car, winning awards, leading sales in their class. Reaching parity makes sense to maintain that lead, showing that an EV is better and has no sacrifices. Doing that "Step 3" level of autopilot...I don't get how it helps. Tesla is constantly stating how they're production constrained. Well, spend that Step 3 money on taking care of production issues! They're always saying how the world will need multiple Gigafactories, how they're already sold out well in advance for Powerwall stuff. Fine, spend that "step 3" money advancing those items! Start lining up that 2nd gigafactory or pushing the first one faster.

I understand what people are saying. Safety, parity, those all make sense. What doesn't make sense to me is trying to dominate in an area that's not core to their stated mission. If Tesla was a normal ICE vendor, I could see it since it'd be what differentiates them.

Batteries, producing more EVs, leading those are all core to the mission of sustainable transport (and generation/storage). Leading on autopilot as core to Tesla's mission?....

Someone mentioned Tesla's big autopilot push as a "moat" around their product. I'm looking to see Tesla honor their mission statement of advancing sustainable transport. If Tesla can't keep enough "moat" to thrive by focusing on their core mission, then it seems like they've got the wrong mission.

The way I see it, just about every car maker is working on some kind of autopilot right now. Tesla could have developed a system that puts them on par with Subaru and a few of the leaders and that would have been cheaper, but they would have been behind the curve in about two years because it is an area where the technology is advancing very quickly. They chose to bite the bullet and jump to the forefront, even though that was more effort.

JB Straubel has made a point in one of his talks that most car executives are afraid of software. When they were developing an EV compliance car with Mercedes, the engineering department refused to trust the software to prevent the motor from doing something too extreme, so they insisted on a big steel bar to prevent the motor from going too far. Tesla's solution was to be careful writing the code so that problem would never arise. Tesla trusts software more than other car companies, so they trust they can make an autopilot system that is more capable than the rest of the industry who spend a lot of time with CYA that slows everything down.

I do see your point with the last 20% taking the bulk of the effort. I've been an R&D Electronic Engineer/firmware/software guy for over 20 years. The low hanging fruit is the easy part to develop, going a step beyond is what costs you.

Ultimately it's probably all driven by Elon Musk's perfectionism. He's a big thinker and wants to do big things. A big factor in the Model X delay was the falcon wing doors which Musk insisted on. The door handles on the Model S was another thing that caused delays and was a pet sub-project of Musk.

In the end, Tesla is becoming a leader in self driving cars, which is a valuable asset.

 

[GoTslaGo]

In the end, Tesla is becoming a leader in self driving cars, which is a valuable asset.

Yes! Furthermore you hit multiple demographics with Tesla's combination.

Model S/X with AP: More established, likely older demographic who are funding the company (now and foreseeable future).

Future,

Model 3 without AP: Younger who want the Tesla performance in a package they can afford.

Model 3 with AP: Younger who want above and to be able to age with the car; and older with less resources, but who want to stay reasonably mobile with AP.


As stated by others, Tesla's AP is defined by it's ability to grow over time. So you are not stuck with yesterday's software technology. Considering how younger folks are more tech savvy I can understand Tesla's appeal to the next generation of car buyers/users since it constantly updates. That's what appealed to me. Could have got a Mercedes, Volvo, Audi, etc.. with similar features, but then would be stuck with what is out there now, and out of date tomorrow.

Furthermore, I am always impressed by the youngsters (12 year olds) commenting on Youtube or Reddit posts, and their passion/desire to own a Tesla. They will be the future of Tesla. I still remember my first ride in a BMW, and how I was impressed by it. I went on to buy BMWs when I could afford it for 10+ years.

 

[R3D-83]

In the end, Tesla is becoming a leader in self driving cars, which is a valuable asset.

I would say Tesla will make one of the most advanced self driving cars with several others, but definitely not years ahead of others. BMW's new 7 series knows all autopilot tricks that Model S/X knows except auto lane change, but it's not a big deal to catch up with that. Same story with MB's new E-class or Audi. They are really in each other's ass in respect of AP development, so I don't think this is gonna be crucial in the future.

 

[dalalsid]

Full autopilot does have something to do with EVs. EVs can go charge themselves over wireless charging spots or with some solution like the Tesla snake thing and chargers can be installed anywhere in any parking spot. Not so with liquid fuels.

 

[ItsNotAboutTheMoney]

Model 3 without AP: Younger who want the Tesla performance in a package they can afford.

Model 3 with AP: Younger who want above and to be able to age with the car; and older with less resources, but who want to stay reasonably mobile with AP.

I have a feeling that auto-pilot systems will end up on every car, because they will prove themselves to reduce the number of and severity of collisions, and the result will be that insurance discounts will offset a significant part of the cost.

 

[HiTech]

I like the AP discussion, but can we bring this conversation back to the Long Term Fundamentals for TSLA?

I think $5,489! (okay, just trying to get attention...) :tongue:

 

[MSEV]

I agree with you, HiTech. It was an interesting discussion, but I wanted to hear what long term investors were saying about the current sale on TSLA stock.

 

[JRP3]

I agree with you, HiTech. It was an interesting discussion, but I wanted to hear what long term investors were saying about the current sale on TSLA stock.

I'd say buying opportunity if you have the funds. I mean nothing fundamental has changed with the company since a few weeks ago, and if back then someone told you they had some shares for sale under $150 what would you have done?

 

[EinSV]

If you can stomach some ups and downs this seems like the best opportunity for long-term investors since early 2013. Short-term problems with X launch and market downturn have created a great opportunity for LT investors. Added to my shares Friday for first time since 2012.