Long-Term Fundamentals of Tesla Motors (TSLA)

[Driver Dave]

Not sure about fundamentals, but certainly long term. I've got several lots of shares that I acquired between 2010-2012. It took a while but this is getting very interesting!

Congrats on that buy!

I got in 2016 end of year dip. So it is indeed getting interesting.

Not as very interesting as 2010-2012 lots, but can't complain at all.

Long term 10 year hold should be very very very interesting for all involved.

 

[gene]

Damn, 2010-2012! Lucky you. My buys were all beginning 2013.

 

[DragonWatch]

I fell like Silas Manor ~ just sayin'

 

[heltok]

I am trying to find long term projections for 2030. Do you have any or seen any? Like this one by Gali:

 

[petit_bateau]

This is my corresponding projection, based upon figuring the maximum rate at which they could reasonably add industrial (production) capacity. If one simply does annualised growth projections it gets to 30 mln vehicles in 2030 as even then one does not hit the upper-bound constraint of the S-curve. Since financial capital is not a constraint (TSLA are passing through the fully self-financing barrier at present), the real constraints are either the market, or the industrial capacity (which is either set by battery capacity, or assembly capacity. I don't see product design as a constraint, nor charging roll-out etc. So far I do not see other manufacturers becoming a market constraint - this means that TSLA are absolutely correct to accelerate as fast as they absolutely can.

 

[jeewee3000]

It will be interesting to compare the two charts above with the Battery Day roadmap regarding battery production. That should give us a more accurate view of the first coming years.

Regarding the Hyperchange graph, I disagree with how little Cybertruck will sell comparatively. Cybertruck has the potential to equal Model 3 or even Y in sales, since it's more EV for less money (albeit aimed at a different consumer base).

Either way I agree with the sentiment of both graphs that 1 million cars annual production/deliveries will be taken for granted soon, with the next goals way more lofty as Elon has hinted at immense and continuous growth. Good days (years) lay ahead.

 

[EinSV]

In May 2016, with the SP at $207, I estimated the 2020 share price at $1205 based on Elon's target of 1 million cars in 2020.

Tesla is probably ~6-9 months from hitting the 1 million car per year rate, but with performance far exceeding pessimistic market expectations we have now hit and exceeded the $1205 target.

What will 2025 bring?

Elon has estimated that revenue growth will likely exceed 50% per year. Assuming 50% annual growth from 2019 and 10% net margins results in revenues of $280B and earnings of $28B in 2025.

For a company growing at 50% into enormous markets, a P/E of 50-100+ is reasonable.

Using the low end of that range results in a market cap of $1400B. Assuming ~15% dilution results in a share price of ~$6350.

IMO this rough estimate is likely to be too low rather than too high, because by 2025:

• Tesla Network likely will be up and running in a significant number of markets, which should increase margins and P/E
• P/E 50 is very conservative for a company growing ~50% per year
  
• 50% annual growth is extreme by normal standards, but Tesla could grow even faster given its innovation, ability to sprout factories quickly and at low cost, rapidly falling costs, lack of strong competition and other factors

 

[EinSV]

My "rather be lucky than good" 2020 estimate (link below) was far too low on Model 3/Y margins, wrong on the 3/Y v S/X mix as Tesla pushed S/X up market, and Tesla is a bit behind schedule in hitting 1 million cars per year. But to some extent the mistakes canceled each other out, Tesla far outperformed market expectations, and here we are.

Long-Term Fundamentals of Tesla Motors (TSLA)

 

[Makofoto]

Tesla just announced that they are already expanding on the planned facilities for the Berlin Giga Factory. Btw. My TSLA profits paid for my new 3 in less than 6 months.

 

[Doggydogworld]

My "rather be lucky than good" 2020 estimate (link below) was far too low on Model 3/Y margins, wrong on the 3/Y v S/X mix as Tesla pushed S/X up market, and Tesla is a bit behind schedule in hitting 1 million cars per year. But to some extent the mistakes canceled each other out, Tesla far outperformed market expectations, and here we are.

Long-Term Fundamentals of Tesla Motors (TSLA)

Your 2020 estimates vs. (probable) reality:
S/X - 180k ("Actual likely to be 200-250k") vs..... 50k
3/Y - 800k vs 450k
Rdstr - 20k vs 0k
Tesla Energy Storage - 3b revenue vs 1b Profit - 7b vs 0.5b
Shares out - 164m vs 200m

Share price - 1205 vs 1400 (so far)

Tesla massively under-performed your conservative estimates and raised much more money to do it. But share price exceeds your target! Hope you send Chairman Powell a nice Christmas present

 

[EinSV]

Tesla massively under-performed your conservative estimates and raised much more money to do it. But share price exceeds your target! Hope you send Chairman Powell a nice Christmas present

I look at it differently. Tesla Model 3 margins have massively outperformed my 2016 estimate of 15%, and all indications are Model Y margins will be even better. Given 3/Y volumes this fundamentally changes the financial picture of the company and its future prospects. It also makes it easier to see how Tesla can make a substantial profit on lower-priced, even higher volume vehicles like the car being designed in China and the potential European-designed hatchback Elon discussed recently.

Tesla appears to be about 6-9 months behind schedule on the 2020 target of 1 million vehicles (up from 500K), which is not significant in the grand scheme of things, especially since in the meantime Tesla has proven to be light years ahead of the competition, which continues to stumble.

The market appears to be finally recognizing that EVs are the future of the automotive industry and that Tesla has a massive growth runway as well as strong and rapidly improving financials, which justifies a richer valuation. As Tesla continues its relentless, explosive growth over the next 5 years, more and more market players will catch on, and want a piece of the action.

And once Tesla Network is up and running, all bets are off ....

 

[Thekiwi]

Anyone willing to share projections on car production going out for next 3 years based on currently announced factory plans?

Please feel free to correct my assumptions below for end of year 2022 capacity:

Fremont: (S/X/R/Semi: 100k) & (M3/MY: 500k) = 600k
Shanghai: Y / 3 / Hatch = 500k
Berlin: Y / 3 / Hatch = 500k
Austin: Y & CT = 500k

Total: ~2.1 million

Conservative 2023 projection:

Production/Deliveries: 1.75 million vehicles
Average Selling Price: $45k
Automotive Revenue: $78.75 Billion
Automotive Gross Margin: 17.5%
Automotive Gross Profit: $13.8 Billion

Bullish 2023 Projection:

Production/Deliveries: 2 million vehicles
Average Selling Price: $52.5k
Automotive Revenue: $105 Billion
Automotive Gross Margin: 25%
Automotive Gross Profit: $26.25 Billion

Conservative scenario assumes some small adjustments required as product mix changes, global economy is a little weaker than hoped, and plays on Elon's comments that he will definitely chase unit growth over profits if he has to choose, which would mean lower ASPs (possibly from cheaper hatch model etc) & also lower GM%.

Bullish scenario assumes new factory production ramps go well, global economy has recovered fully, and FSD take-up increases due to breakthrough in its performance, leading to higher ASPs & GM%.

 

[CorneliusXX]

Anyone willing to share projections on car production going out for next 3 years based on currently announced factory plans?

Please feel free to correct my assumptions below for end of year 2022 capacity:

Fremont: (S/X/R/Semi: 100k) & (M3/MY: 500k) = 600k
Shanghai: Y / 3 / Hatch = 500k
Berlin: Y / 3 / Hatch = 500k
Austin: Y & CT = 500k

Total: ~2.1 million

Conservative 2023 projection:

Production/Deliveries: 1.75 million vehicles
Average Selling Price: $45k
Automotive Revenue: $78.75 Billion
Automotive Gross Margin: 17.5%
Automotive Gross Profit: $13.8 Billion

Bullish 2023 Projection:

Production/Deliveries: 2 million vehicles
Average Selling Price: $52.5k
Automotive Revenue: $105 Billion
Automotive Gross Margin: 25%
Automotive Gross Profit: $26.25 Billion

Conservative scenario assumes some small adjustments required as product mix changes, global economy is a little weaker than hoped, and plays on Elon's comments that he will definitely chase unit growth over profits if he has to choose, which would mean lower ASPs (possibly from cheaper hatch model etc) & also lower GM%.

Bullish scenario assumes new factory production ramps go well, global economy has recovered fully, and FSD take-up increases due to breakthrough in its performance, leading to higher ASPs & GM%.

A couple of quick comments:

• Semi will be built in Austin.
• If either Shanghai or Berlin are producing a hatch in 2023 the production volume is likely to be over 500k as M3/Y are targeted for at least that amount alone

 

[petit_bateau]

If it helps here are mine, which are within a similar range :

My more optimistic whole-year scenario is :
2022 = 1.55m vehicles @ 80kWh/v
2023 = 2.15m vehicles @ 80kWh/v
To an extent this corresponds to your capacity projections, as opposed to production/sales projections.

My more central case is :
2022 = 1.28m veh, total co revenues = $89b, whole co net profit = $10.4b
2023 = 1.9m veh, total co revenues = $134b, whole co net profit = $18.3b

My more optimistic 2.15m are based on 2023 capacity of
Fremont = 0.65
Shangahi = 0.60
Berlin = 0.45
Texas = 0.30
China, GF6 = 0.15

I assume lines are added in 0.15m increments and that new ground is started on a new factory before existing factories are fully built out. That way one smooths the workloads.

regards, dspp / pb

 

[petit_bateau]

My previous case that I ran in 2018 which yielded 10mln vehicles in 2030 assumed fairly constrained cell supply. I had a corresponding higher case that I ran in 2018 that considered what would happen if Tesla could keep up 50% yoy growth and if all that cell capacity went into vehicles. This is it, and as you can see it reaches 30m/yr in 2030:

The battery day projections look more akin to this high case, but indicate that Tesla will ramp up the stationary market progressively so as to become a bigger fraction of the cell supply. Not doing so until now has made sense, and switching strategy progressively also makes sense. Anyway with a little tweaking that gives projections that look a lot like this in vehicles terms if one tunes to hit 20m in 2030:

and then they can modulate the amount of 'spare' cells that go into stationary storage to mop up the remaining cells, giving an increasing share that might look something like this:

This type of strategy allows them to manage discontinuities as cell capacity come on-stream before vehicle capacity is on-stream, and/or to manage cyclical demand fluctuations in automotive. Exactly what it will do for revenue and GM% is unclear as the performance of storage as a business stream at scale is uncertain.

The above numbers are just quickies as I have not had time to rebuild my models to fully account for storage, or to accurately tune them to match battery day numbers. However directionally it may be helpful.

regards, dspp/pb

 

[Welajust3d1]

You need to keep in mind that U.S. auto production is less than 20 million per year for the entire auto industry. Tesla hitting your numbers is a pipe dream.

 

[Thekiwi]

You need to keep in mind that U.S. auto production is less than 20 million per year for the entire auto industry. Tesla hitting your numbers is a pipe dream.View attachment 593505

The largest automaker (VW) is in the ~11 million range, so Teslas goal isn't that much of a stretch. And why are you only mentioning US production? Tesla has factories under construction on 3 continents currently. Also, the global production of motorised transportation solutions is somewhere between 150-200 million, so Tesla producing 20 million units could represent as little as 10% of the overall transportation solutions market.

 

[renim]

Isnt globalised wheeled transport market closer to 100million vehicles than 200million (excluding 2 wheeled market)?

Car production: Number of cars produced worldwide 2018 | Statista

 

[perwis]

It took some time for me to digest the information from Battery day, but now I am more bullish than ever! The speed of innovation at Tesla amazes me and the future for Tesla looks much clearer and brighter now after Battery day.

I now think that Battery day is best summarized by Rob Maurer in his statement that what Tesla announced was “in great detail their exact plan to become the most valuable company in the world.”

Our own @DaveT also made an excellent analysis in which he noted that “Tesla Just Changed How Cars Are Made Forever”

which is essentially what Elon said at the event (and seems to be corrobated by Sandy Munro).

I think these two videos neatly captures two important messages from Tesla to us investors:

1. Tesla will not be constrained for batteries to put in their vehicles.

2. Tesla has made a new radical design of how to make electric cars, which is better than anything else by far, and will make sure that Tesla will continue leading the industry.

I think one should be wise to listen carefully what Elon and Tesla says, especially on an event such as this where they have likely thought very carefully what to communicate or not. So, what did they say and what are the impliactions for the long-term fundamentals of Tesla Inc?

Rob Maurer is very good at listening and taking seriously what Tesla says. He is also good at making rough calculations and making educated guesses filling out the missing pieces. Rob speaks quickly, so I had to slow him down and write down everything, but this is Rob’s calculations in the videe above, if I heard him right (please correct me if I am wrong):

Tesla say that they aim for 3TWh battery production by 2030.

Ok, what does this mean? First of all, Rob notes that this is 80x current production, which would be enough for 40 million vehicles of 75kW each.

Today Tesla produces battery packs of ca 35-40 GWh/y and using these to generate ca 30 B dollars in revenue.

This means that today Tesla generates revenues of ca 30,000M/40=750 M dollars per GWh.

Rob then assumes that Tesla passes on the cost savings from the improved battery to customers completely, so that the revenue per GWh decreases by 50% to 375 M dollars/GWh

Assuming Tesla can make this revenue per GWh then the calculation becomes:

3000 GWh * 375 M dollar / GWh = 1,125,000 M dollars = 1,100 B dollars in revenue = ca 1,1 trillion dollars!


Then, Rob also makes a “bottom-up” calculation:


Tesla aims for 20M vehicles produced by 2030.

Assuming 32,000-dollar average selling price.

20M*32,000 = 640 B dollars in revenue from automotive.


Assuming 100kWh/vehicle

Only 20M * 100 kWh = 2TW from vehicles.

This makes 1TWh for energy storage.

(Today Tesla selling for a little over 500 dollars / kWh)

Assuming 50 % of that is 270 dollars / kWh

1 TWh = 1B kWh

270 B dollars in revenue for Tesla Energy


Tesla Automotive + Energy = 910 B dollars per year in revenue

Add 10% for services and

we again get ca 1000 B dollars = 1 trillion dollars in revenue.


So only Tesla Automotive + Tesla Energy would be enough for over 1 trillion dollars in revenue by 2030. To this we could add any extra income from Full self-driving or Robotaxi or whatever new products they might release over the next ten years.


As a long-term investor, these kinds of calculations are important to make. I think Tesla and Elon are quite serious when they say that they aim for these numbers and now have a plan to reach them.


I would be very interested in seing other people’s updated long-term models, based on the new info from Battery day.

 

[renim]

The EV rush from 20% to 80% market share for evs will be very quick. The first 20% is hard and the last 20% is the hardest. Tesla is well positioned to grab a crazy large share of the middle 60% of the market. If they can do that, then there are only crumbs left over in regards to profits.

Jack be nimble, jack be quick, jack jump over the candle stick