Edit: Purpose of this post is to ignite discussion into figuring out how large Tesla can eventually get. This can potentially serve as a guideline in figuring out how long we would want to hold the stock.
Please note all these numbers reflect projections “at maturity”:
Model - S
US Sales
Matured state US sales can be projected based on "current" run rate accounting for greater install base of service-stations and to a lesser degree superchargers and showrooms.
Tesla has ranger-service, over the air updates/fixes for software issues, much fewer physical maintenance issues due to far fewer moving parts.. Despite all this, almost nobody will buy a Model S without having a service center within driving distance. It's a mental comfort people want to have before buying an expensive car with a very new technology from a very new car company.. Service stations are a "basic need" precursor to sales growth.
If the current run rate is 20K units per year, with the existing service station network, at maturity we can reasonably expect 30K to 40K unit sales per year.
Elon mentioned in many occasions that we haven’t hit the ceiling of US demand yet and he wants to test it mid next year. 30K to 40K US units is not crazy at all.
Also another key thing to remember, so called financial analysts put Model S in some sort of luxury class and say only x number of cars can be sold. But they miss a key point: fuel savings.
They disregard fuel savings saying that a person spending close to $80K to $100K wouldn't care about gasoline savings (with an underlying assumption that an average person drives 15K miles per annum). This seems logical on the surface but falls flat in reality.. I personally know a person who drives 200miles a day! So, believe it or not, he puts in about 50K miles an year. One of his big reasons for buying Model S was fuel savings (and he is not concerned about depreciation, battery or otherwise).. To get a truly accurate picture, we need to rank-order all car owners by miles driven in descending order and see what the 10th percentile person drives. Unfortunately I couldn't find data on it. But if the data says the person's car will pay for itself over time in gasoline savings, then it means for 10% of population the car is effectively free and so they would buy it.
Given this added perspective, 30K to 40K cars an year appears truly conservative (14million non-commercial cars were sold in US last year). But note though some of the sales done purely on fuel savings may migrate into gen-3 sales.
In summary, I think I made enough of a case for 30K to 40K US annual sale projection "at maturity".
Global Sales
Global sales can be projected as a function of US sales. In a simplistic view we can use luxury brands annual revenue breakdown by geography to come up with a factor of US sales to come up with a global sales projection.
This is US Revenue as percentage of global revenue
BMW: 21% Audi: 14% Diamler(Mercedes): 24% Average: ~20%
So we can simply multiply 30K to 40K with 5 to get global projection of 150K to 200K units.
Of course, many things are different about Tesla. If we want to dig into the details, here is a pros and cons view:
Fuel prices are lot higher in rest of the world than in US. So savings multiply.
Some analysis is here: Tesla Motors Inc (TSLA): Tesla Motors' Full Analysis, Its Only Mistake, Outlook And Elon Musk - Seeking Alpha
Tax/Government incentives vary by the country but in many countries the incentives are lot higher than in US. Take Norway (maybe on the extreme) for example:
Ref: Norway Shows the Way With Electric Cars, But at What Cost?
Above two could make Model S effectively priced equivalent to a $35K ICE car.
In Europe, people are lot more eco-conscious, have stronger anti-war sentiment (which is often waged for oil) and they actually listen to scientists.
Tesla clearly knows this. The current and planned service-centers/stores give a very clear picture of what Tesla is aiming at. Europe map is very densely populated than US/Asia.
Ref: Stores Service Centers | Tesla Motors
Asia is much harder to estimate, primarily because my gut feeling is lot fewer people live in independent homes with private garages than in US/Europe. I had a chat with an immigrant from Hong Kong on this subject and he said it doesn’t matter if people live in apartments. (Some) people there are so rich they will get what they want. Power ports will be installed in no time.
Also, Japan for instance has the largest solar base installed in the world. All of their oil is imported. As a country they will have a huge incentive to go electric.. This might be true for most Asian economies (oil is imported and account for the biggest chunk of current account deficits). So this can be a positive factor that will work against the negative factor of urban apartment dwelling.
Then there is rest of the world too, like Russia, South Africa, Latin America etc.
Another disincentive could be the size of the car. As I understand people in rest of the world drive lot smaller cars than Model S.
Overall I suspect if we put together the pros and cons, we might end up with a net-positive situation. But to eliminate any bias, we can go with a net-neutral attitude.
So a factor of 5 and a projection of 150K to 200K "global sales" per annum at maturity might be reasonable.
Model X
I don't have a global breakdown for SUV/CUV vs Sedans. I will do more research on this. For now, my gut feeling is X will do very very well in US and may trail S in non-US markets. All in all I expect X to have as many unit sales as S.
S & X Timeline
My timeline for Model S and X maturity is roughly the same time as gen-3 introduction. Basing this primarily on Elon's comments in the latest annual shareholder meeting. Timelines for global expansion seem to be inline with this projection too.
Gen-3 and beyond
I believe Gen-3 will be at least 5x as successful as Model S - just based on price. Elon said Model S is affordable by 10% of US population. On other hand the average purchase price of a car sold in US was about $32K last year. So a $35K car in about few years will be affordable by 50% of the population, even without including fuel and maintenance savings.
Timeline for maturity could be 3 to 4 years from initial production, say about 2020.
So overall I have these numbers (again, at "mature" state):
Model S: 150K to 200K
Model X: 150K to 200K
Gen-3 (including both sedan and suv): 1.5 to 2mil units
These numbers might be higher than what even most ardent longs believe. But I think there is one person who has even bigger numbers in mind and that is... Elon Musk!
He said in many occasions that his ultimate goal is to ensure that more than 50% of the cars sold (globally) are electric. This he said can be accomplished in about 12 to 13 years in various occasions.
About 90million cars are sold globally per annum. If Elon were to reach his objective, 45million cars sold would be electric. As we can see competition looks miserable. We can safely assume Tesla will take at least 10% of that market share. That would imply 4.5million cars per annum.
In this perspective my gen-3 projection looks quite reasonable.. With fuel savings, Gen-3 will compete with camry/accord class of cars.. Maybe another step-change in battery efficiency 4 years from gen-3 production, Tesla might be able to build a civic/corolla competitor. That might take us to that 4.5million level.
Please note all these numbers reflect projections “at maturity”:
Model - S
US Sales
Matured state US sales can be projected based on "current" run rate accounting for greater install base of service-stations and to a lesser degree superchargers and showrooms.
Tesla has ranger-service, over the air updates/fixes for software issues, much fewer physical maintenance issues due to far fewer moving parts.. Despite all this, almost nobody will buy a Model S without having a service center within driving distance. It's a mental comfort people want to have before buying an expensive car with a very new technology from a very new car company.. Service stations are a "basic need" precursor to sales growth.
If the current run rate is 20K units per year, with the existing service station network, at maturity we can reasonably expect 30K to 40K unit sales per year.
Elon mentioned in many occasions that we haven’t hit the ceiling of US demand yet and he wants to test it mid next year. 30K to 40K US units is not crazy at all.
Also another key thing to remember, so called financial analysts put Model S in some sort of luxury class and say only x number of cars can be sold. But they miss a key point: fuel savings.
They disregard fuel savings saying that a person spending close to $80K to $100K wouldn't care about gasoline savings (with an underlying assumption that an average person drives 15K miles per annum). This seems logical on the surface but falls flat in reality.. I personally know a person who drives 200miles a day! So, believe it or not, he puts in about 50K miles an year. One of his big reasons for buying Model S was fuel savings (and he is not concerned about depreciation, battery or otherwise).. To get a truly accurate picture, we need to rank-order all car owners by miles driven in descending order and see what the 10th percentile person drives. Unfortunately I couldn't find data on it. But if the data says the person's car will pay for itself over time in gasoline savings, then it means for 10% of population the car is effectively free and so they would buy it.
Given this added perspective, 30K to 40K cars an year appears truly conservative (14million non-commercial cars were sold in US last year). But note though some of the sales done purely on fuel savings may migrate into gen-3 sales.
In summary, I think I made enough of a case for 30K to 40K US annual sale projection "at maturity".
Global Sales
Global sales can be projected as a function of US sales. In a simplistic view we can use luxury brands annual revenue breakdown by geography to come up with a factor of US sales to come up with a global sales projection.
This is US Revenue as percentage of global revenue
BMW: 21% Audi: 14% Diamler(Mercedes): 24% Average: ~20%
So we can simply multiply 30K to 40K with 5 to get global projection of 150K to 200K units.
Of course, many things are different about Tesla. If we want to dig into the details, here is a pros and cons view:
Fuel prices are lot higher in rest of the world than in US. So savings multiply.
Some analysis is here: Tesla Motors Inc (TSLA): Tesla Motors' Full Analysis, Its Only Mistake, Outlook And Elon Musk - Seeking Alpha
Tax/Government incentives vary by the country but in many countries the incentives are lot higher than in US. Take Norway (maybe on the extreme) for example:
Ref: Norway Shows the Way With Electric Cars, But at What Cost?
Above two could make Model S effectively priced equivalent to a $35K ICE car.
In Europe, people are lot more eco-conscious, have stronger anti-war sentiment (which is often waged for oil) and they actually listen to scientists.
Tesla clearly knows this. The current and planned service-centers/stores give a very clear picture of what Tesla is aiming at. Europe map is very densely populated than US/Asia.
Ref: Stores Service Centers | Tesla Motors
Asia is much harder to estimate, primarily because my gut feeling is lot fewer people live in independent homes with private garages than in US/Europe. I had a chat with an immigrant from Hong Kong on this subject and he said it doesn’t matter if people live in apartments. (Some) people there are so rich they will get what they want. Power ports will be installed in no time.
Also, Japan for instance has the largest solar base installed in the world. All of their oil is imported. As a country they will have a huge incentive to go electric.. This might be true for most Asian economies (oil is imported and account for the biggest chunk of current account deficits). So this can be a positive factor that will work against the negative factor of urban apartment dwelling.
Then there is rest of the world too, like Russia, South Africa, Latin America etc.
Another disincentive could be the size of the car. As I understand people in rest of the world drive lot smaller cars than Model S.
Overall I suspect if we put together the pros and cons, we might end up with a net-positive situation. But to eliminate any bias, we can go with a net-neutral attitude.
So a factor of 5 and a projection of 150K to 200K "global sales" per annum at maturity might be reasonable.
Model X
I don't have a global breakdown for SUV/CUV vs Sedans. I will do more research on this. For now, my gut feeling is X will do very very well in US and may trail S in non-US markets. All in all I expect X to have as many unit sales as S.
S & X Timeline
My timeline for Model S and X maturity is roughly the same time as gen-3 introduction. Basing this primarily on Elon's comments in the latest annual shareholder meeting. Timelines for global expansion seem to be inline with this projection too.
Gen-3 and beyond
I believe Gen-3 will be at least 5x as successful as Model S - just based on price. Elon said Model S is affordable by 10% of US population. On other hand the average purchase price of a car sold in US was about $32K last year. So a $35K car in about few years will be affordable by 50% of the population, even without including fuel and maintenance savings.
Timeline for maturity could be 3 to 4 years from initial production, say about 2020.
So overall I have these numbers (again, at "mature" state):
Model S: 150K to 200K
Model X: 150K to 200K
Gen-3 (including both sedan and suv): 1.5 to 2mil units
These numbers might be higher than what even most ardent longs believe. But I think there is one person who has even bigger numbers in mind and that is... Elon Musk!
He said in many occasions that his ultimate goal is to ensure that more than 50% of the cars sold (globally) are electric. This he said can be accomplished in about 12 to 13 years in various occasions.
About 90million cars are sold globally per annum. If Elon were to reach his objective, 45million cars sold would be electric. As we can see competition looks miserable. We can safely assume Tesla will take at least 10% of that market share. That would imply 4.5million cars per annum.
In this perspective my gen-3 projection looks quite reasonable.. With fuel savings, Gen-3 will compete with camry/accord class of cars.. Maybe another step-change in battery efficiency 4 years from gen-3 production, Tesla might be able to build a civic/corolla competitor. That might take us to that 4.5million level.
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