Short-Term TSLA Price Movements - 2016

[larmor]

Is it possible to model the short term price of TSLA?

For example, here are some factors which are in play to determine the current market price:

• Oil at low
• vw gets wist slap for defrauding customers
• TM makes a fantastic car(s)
• TM car cannot have flaws d/t above
• Increasing sales of MX, while declining sales of panamera and S class.
  
• FWD
• delay on X delivery
• middle seats on MX don't fold
• MX vs. cayenne
  
• Unknown reservation to confirmation ratio for MX-market believes this ratio is much less than unity, CC said otherwise
  
• GF building but not built out
• GF years ahead of traditional auto makers, and hence ahead on price per kwh of battery cost
• direct sales model good for company to control sales
• direct sales model- unable to sell zeibart
  
• model 3 reservations in person then online
• model 3 production as modeled by MS and MX production and delivery
• Chinese sales & delivery- low for the past year, yet HK still has many MS
• German sales
• Future cars to be released as tesla killers in 2020 or later--market says these are more compelling
• Autopilot and AI
• AI and microsoft Tay (shudder)
• Hi freq trading
• Automated trading with stops
• Shorting-- (could get cold if u only have shorts on)
• 100 battery? replace, or OTA upgrade
  
• many more, feel free to add

And how will market react when these factors change. Would be hard, but not impossible with the enough data, data mining and stochastic modeling to create a model to predict the short term price. The number of news items per day/hour are finite...

 

[sub]

Meanwhile, from the brilliant mind of a Harvard Law professor (those folks always reliable in their assessment of Tesla Motors' telecommunications technical requirements), comes this gem of an article:

The Tesla Dividend: Better Internet Access — Backchannel

If we only knew of someone who was planning to launch a low orbit Satellite network at a low cost that would remove the need for all the wires.

 

[Papafox]

Is it possible to model the short term price of TSLA?

For example, here are some factors which are in play to determine the current market price:

• Oil at low
• vw gets wist slap for defrauding customers
• TM makes a fantastic car(s)
• TM car cannot have flaws d/t above
• Increasing sales of MX, while declining sales of panamera and S class.
  
• FWD
• delay on X delivery
• middle seats on MX don't fold
• MX vs. cayenne
  
• Unknown reservation to confirmation ratio for MX-market believes this ratio is much less than unity, CC said otherwise
  
• GF building but not built out
• GF years ahead of traditional auto makers, and hence ahead on price per kwh of battery cost
• direct sales model good for company to control sales
• direct sales model- unable to sell zeibart
  
• model 3 reservations in person then online
• model 3 production as modeled by MS and MX production and delivery
• Chinese sales & delivery- low for the past year, yet HK still has many MS
• German sales
• Future cars to be released as tesla killers in 2020 or later--market says these are more compelling
• Autopilot and AI
• AI and microsoft Tay (shudder)
• Hi freq trading
• Automated trading with stops
• Shorting-- (could get cold if u only have shorts on)
• 100 battery? replace, or OTA upgrade
  
• many more, feel free to add

And how will market react when these factors change. Would be hard, but not impossible with the enough data, data mining and stochastic modeling to create a model to predict the short term price. The number of news items per day/hour are finite...

Of course someone could model the short term TSLA price using such inputs . . . and it would be just as accurate as predicting the weather ten days in advance. Nonetheless, thanks for the nice summary of factors.

I received my Bachelor's Degree in Economics many years ago. It was during a time when oil prices zoomed upward and we jumped completely off the Phillips Curve and never returned during my studies. The Phillips Curve was previously considered a solid instrument used in the dismal science. I learned that the graduate students spent much time building their own models of the economy to predict what was going to happen, but nobody, even the top experts, could create a very good model. I realized at some point the complexity of the task falls prey to chaos. This is the reason I am so pooh pooh on complex models.

Consider, for example, the relationship between oil prices and TSLA. This is tough to quantify, but you might come up with a formula that involves assumptions, and its these assumptions that are going to bite you. They may appear to be true for a time and then diverge just like what happened with the Phillips Curve.

So, there are three men shipwrecked on a desert island: a physicist, a chemist, and an economist. They possess only one item, a can of beans. The physicist says, "I can devise a way to use this rock to hit the top of the can at precisely a 60 degree angle and in three stokes we'll have access to the beans."

The chemist replies, "No, we're going to lose too many beans that way. Instead, we'll put the can in the salt water and in precisely 3.1 days the sodium chloride in the seawater will weaken the can until we can remove the top without losing any beans."

"That won't work," replied the economist. "It'll take way too long. Here's what we're going to do. First, let's assume we have a can opener..."

I did my graduate studies in another field.

 

[McMuggets]

Two biggest risks to the Tesla business:

1. Dilution of Musk's voting share block.

2. Competition that can corrupt governments.

All third and fourth order risks and beyond are too distant compared to the fist two to even worry about and they are all well within the scope of management control.

Even the first two are strongly mitigated. Musk has an escalating options package to offset dilution and is not obliged to raise dilutive rounds unless he wants to and SpaceX in particular makes Musk a vital member of the US military industrial complex and a key NASA contractor and has in that role already backed down ULA (Boeing & Lockheed Martin) by suing the Air Force and put the RD-180 on the political map and is clearly not to be messed with lightly.

If one reads Ashley Vance's book on Musk, one would realize that Musk has learned his lesson about relinquishing control of any of his companies. He will try his best to keep a controlling share of Tesla probably indefinitely. He would be the absolute last to sell and first to buy more.

 

[Julian Cox]

An orderly withdrawal of investment from oil is critical for the larger financial market. Think of the recent macro turmoil. Recent macro was driven by modest energy efficiency gains. Slowly drawing down assets, think Norway, will protect the financial markets we all depend on. Look at the Saudis now, already drawing down 50 years of savings and looking at bankruptcy by 2020. Disorderly transitions on a global scale usually involve upheaval and often war. What would Russia do as it starts drowning in debt. What happens in the Middle East as its financial and energy clout dissipates. These are changes fraught with global risks that can hurt Teslas markets. The financial and political impact of EVs are huge and unknown. The sooner this uncertainty is priced into the market, the more risk can be mitigated. Maybe not a short term post, but something that needs more understanding.

I am starting to get a hint that the patttern is knowable all be it very obscure indeed and getting to grips with it is challenging to a lot of deeply held assumptions.

The global economy is not just be based on oil as a commodity. It is also based on confidence in oil reserves as an asset. To a lesser but still significant degree it is based on the oil industry as a source of direct employment. We will either simply bust out of oil or we may boom out of oil in an industrial revolution. I cannot see that one yet but it is not going to be orderly in either direction. The commodity trade in oil may be somewhat manageable and market regulated and what we have seen recently is just turmoil in commodity trading. However the perceived asset value of reserves is not so easily regulated. This will go from an AAA rated bedrock of the economy to junk in a multi $Trillion vortex when the time comes. This is not necessarily a terrible thing if it occurs back to back with a multi $Trillion renewables infrastructure boom (aforementioned industrial revolution) but of course it will be if it just results in a depression to which the word Great is an inadequate descriptor. Worth noting that nations don't need to go to war with one another over building their own renewables infrastructure - too busy building infrastructure at home.

One thing is for sure IMO is that EVs will not impact oil directly. Oil demand is a second order effect of EVs on automotive. Sounds tautological but the implications are all-important.

EVs even in very large numbers will not have a significant direct effect on retiring or displacing the ICE fleet. Instead they will progressively depress the residual value of perfectly serviceable ICE cars making these affordable to new and additional customers downmarket. Concerns over declining residual values and anticipation for EVs that can meet their needs will push traditional new car buyers towards leasing and ride sharing (also essentially leasing) and I firmly believe the OEMs will prefer to cooperate with pushing out vehicles on lease than to curtail production and voluntarily concede to downsizing. This will ultimately come home to roost at ICE auto makers upon the return of sub-prime lease inventory where the used vehicle market won't stand the price the OEMs need to recoup to stay in business - essentially absorbing, concentrating and concealing the risk of declining residuals until the show bursts spectacularly.

Then the auto OEMs will go bust, precipitously, then the oil reserves will be downgraded.

All of this will go on looking completely fine for another ten years or so from now until it suddenly isn't - just like the sub prime mortgage collapse. Nothing to worry Tesla in the short term.

Note: ICE OEMs cannot incrementally introduce EVs to prevent this outcome. Although one could pick any point in economic history as an origin, this pattern nominally commences on the 31st March 2016 with the tipping point introduction of an EV that undercuts the mid market for new ICE vehicles. ICE OEMs can only dramatically hasten this outcome by undercutting their own core products in an attempt to compete on price - and it will be immediately obvious to ICE auto OEM management that perusing smaller pure-EV makers in this way is not a viable option.

 

[Johan]

I am starting to get a hint that the patttern is knowable all be it very obscure indeed and getting to grips with it is challenging to a lot of deeply held assumptions.

The global economy is not just be based on oil as a commodity. It is also based on confidence in oil reserves as an asset. To a lesser but still significant degree it is based on the oil industry as a source of direct employment. We will either simply bust out of oil or we may boom out of oil in an industrial revolution. I cannot see that one yet but it is not going to be orderly in either direction. The commodity trade in oil may be somewhat manageable and market regulated and what we have seen recently is just turmoil in commodity trading. However the perceived asset value of reserves is not so easily regulated. This will go from an AAA rated bedrock of the economy to junk in a multi $Trillion vortex when the time comes. This is not necessarily a terrible thing if it occurs back to back with a multi $Trillion renewables infrastructure boom (aforementioned industrial revolution) but of course it will be if it just results in a depression to which the word Great is an inadequate descriptor. Worth noting that nations don't need to go to war with one another over building their own renewables infrastructure - too busy building infrastructure at home.

One thing is for sure IMO is that EVs will not impact oil directly. Oil demand is a second order effect of EVs on automotive. Sounds tautological but the implications are all-important.

EVs even in very large numbers will not have a significant direct effect on retiring or displacing the ICE fleet. Instead they will progressively depress the residual value of perfectly serviceable ICE cars making these affordable to new and additional customers downmarket. Concerns over declining residual values and anticipation for EVs that can meet their needs will push traditional new car buyers towards leasing and ride sharing (also essentially leasing) and I firmly believe the OEMs will prefer to cooperate with pushing out vehicles on lease than to curtail production and voluntarily concede to downsizing. This will ultimately come home to roost at ICE auto makers upon the return of sub-prime lease inventory where the used vehicle market won't stand the price the OEMs need to recoup to stay in business - essentially absorbing, concentrating and concealing the risk of declining residuals until the show bursts spectacularly.

Then the auto OEMs will go bust, precipitously, then the oil reserves will be downgraded.

All of this will go on looking completely fine for another ten years or so from now until it suddenly isn't - just like the sub prime mortgage collapse. Nothing to worry Tesla in the short term.

Note: ICE OEMs cannot incrementally introduce EVs to prevent this outcome. Although one could pick any point in economic history as an origin, this pattern nominally commences on the 31st March 2016 with the tipping point introduction of an EV that undercuts the mid market for new ICE vehicles. ICE OEMs can only dramatically hasten this outcome by undercutting their own core products in an attempt to compete on price - and it will be immediately obvious to ICE auto OEM management that perusing smaller pure-EV makers in this way is not a viable option.

I'll indulge, since it's a long weekend and this thread has already strayed far beyond short term movements of TSLA (however the long term prospects of TSLA is just the short term zoomed out).

@Julian and @dc_h, you're absolutely correct that the necessary divestment out of oil assets is going to be very challenging for the world economy, and that the risk of it happening in a bubbly fashion/crisis is substantial, but as you point out Julian, a second industrial revolution fueled by renewable energy could mitigate this scenario, perhaps completely and with it could come a world with far less incentive to go to war over securing access to and control over fossil fuels. It might even usher in a future with something that I know Musk himself thinks to be of great importance: increased global coordination.

Now, in the auto sector you're very correct to point out the high risk of a bubble forming, much like the one in the housing sector, with sub prime financing on ICE cars. We know for a fact that dealers in the US have been pushing cars with no-money-down 72 month or even 96 month financing at rates below 2%. This is of course unsustainable in itself, but becomes an armed warhead in conjunction with BEVs quickly making ICEs more and more worthless.

If transportation beyond personal transport, i.e. land based goods transport, air traffic and sea traffic, goes electric sooner rather than later this will of course increase the tempo of this transition.

The other driving sector of the big change coming is of course the energy production market. We can already quickly see how things are shaping up here: Natural gas peaker plants turning in to stranded assets in which the investments will never ever be recouped, coal plants becoming stranded assets, soon new oil field developments becoming stranded assets etc. etc. Now who has financed all of this? Of course it all comes back to the big banks in the end, just like the housing crisis. Too big to fail right?

To me the bigger picture is one of a game of musical chairs where it's becoming very clear that when the music stops (oil looses most of its value) there definitely won't be enough chairs for everyone. Those who are early to act, big funds divesting out of fossil fuels, sovereign wealth funds divesting, even entire countries who are early adopters in transforming away from being fossil fuel based will be the winners. The losers should be the ones who are late to change, but as always the real losers risk being the ones left with holding the baby will be the tax payers having to (again) bail out big finance, who (again) are "too big to fail".

IMO the only way forward when faced with this type of situation is to do what people have always done in the past: innovate out of the hole we've dug for ourselves. Hopefully and again IMHO in this case this is a kind of double entendre: we need to innovate out of both the economic hole we've dug (the oil bubble) as well as the man made climate change disaster were facing. At this time in history the solution to both issues will go hand in hand.

As individual investors we are in a position to both profit as individuals at the same time as we help accelerate the proper course(s) of action by putting our investment dollars in the correct ventures. As they say: a win-win

 

[Julian Cox]

I'll indulge, since it's a long weekend and this thread has already strayed far beyond short term movements of TSLA (however the long term prospects of TSLA is just the short term zoomed out).

@Julian and @dc_h, you're absolutely correct that the necessary divestment out of oil assets is going to be very challenging for the world economy, and that the risk of it happening in a bubbly fashion/crisis is substantial, but as you point out Julian, a second industrial revolution fueled by renewable energy could mitigate this scenario, perhaps completely and with it could come a world with far less incentive to go to war over securing access to and control over fossil fuels. It might even usher in a future with something that I know Musk himself thinks to be of great importance: increased global coordination.

Now, in the auto sector you're very correct to point out the high risk of a bubble forming, much like the one in the housing sector, with sub prime financing on ICE cars. We know for a fact that dealers in the US have been pushing cars with no-money-down 72 month or even 96 month financing at rates below 2%. This is of course unsustainable in itself, but becomes an armed warhead in conjunction with BEVs quickly making ICEs more and more worthless.

If transportation beyond personal transport, i.e. land based goods transport, air traffic and sea traffic, goes electric sooner rather than later this will of course increase the tempo of this transition.

The other driving sector of the big change coming is of course the energy production market. We can already quickly see how things are shaping up here: Natural gas peaker plants turning in to stranded assets in which the investments will never ever be recouped, coal plants becoming stranded assets, soon new oil field developments becoming stranded assets etc. etc. Now who has financed all of this? Of course it all comes back to the big banks in the end, just like the housing crisis. Too big to fail right?

To me the bigger picture is one of a game of musical chairs where it's becoming very clear that when the music stops (oil looses most of its value) there definitely won't be enough chairs for everyone. Those who are early to act, big funds divesting out of fossil fuels, sovereign wealth funds divesting, even entire countries who are early adopters in transforming away from being fossil fuel based will be the winners. The losers should be the ones who are late to change, but as always the real losers risk being the ones left with holding the baby will be the tax payers having to (again) bail out big finance, who (again) are "too big to fail".

IMO the only way forward when faced with this type of situation is to do what people have always done in the past: innovate out of the hole we've dug for ourselves. Hopefully and again IMHO in this case this is a kind of double entendre: we need to innovate out of both the economic hole we've dug (the oil bubble) as well as the man made climate change disaster were facing. At this time in history the solution to both issues will go hand in hand.

As individual investors we are in a position to both profit as individuals at the same time as we help accelerate the proper course(s) of action by putting our investment dollars in the correct ventures. As they say: a win-win

There is already an uptrend in ICE vehicle leasing as opposed to purchase (as well as Leasing of ICE-hybrids and compliance EVs). There is already lots of anecdotal evidence linking this pattern of consumer behaviour to market anticipation of the Tesla Model 3.

This is not just a fad, this is a tectonic shift of vehicle depreciation risk moving from the consumer to OEMs and it is not offset by rising lease costs to balance that risk, if anything OEMs are discounting leases as a go-to method of moving inventory as opposed to price slashing MSRPs essentially masking the problem. That indicates that this trend is not driven by demand pressure for leasing but a weakness of consumer appetite for purchasing - and it is already moving the problem downstream without reducing ICE production volumes (or ICE mileage consumed) as previously indicated I.E. Delaying Judgement Day. Obviously oil has nothing to worry about with this going on until it stops. All of these lease cars will end up in the used vehicle market at whatever price the market will bear until end of life 15-20 years from now with only a mild and very delayed acceleration of scrapping aging ICE vehicles on account of residual value suppression making them uneconomic to repair.

 

[Kiwi_Guy]

Inovation

Folks, in the spirit of the long weekend and the ongoing discussion about oil assets, ICE bubbles etc, can I recommend two recent articles by Huw Price, Bertrand Russell Professor of Philosophy and a fellow of Trinity College at the University of Cambridge.

The first, written 3 months ago and titled: “The Cold Fusion Horizon” talks about the “reputation trap” the field suffers from — meaning that discussion of the subject is so taboo, that people steer clear of the topic to avoid tarnishing their reputations. The second, written days ago is titled Is the cold fusion egg about to hatch? | Aeon Opinions and highlights pointers suggesting a big announcement in a new source of clean energy may be very imminent.

Quoting from his first article, which discusses the progress of Andrea Rossi, an engineer from Bologna, who claims to have a cold fusion reactor producing commercially useful amounts of heat:

"Imagine that someone had a working hot-fusion reactor in Florida – assembled, as Rossi’s 1MW device is reported to be, in a couple of shipping containers, and producing several hundred kilowatts of excess power, month after month, in apparent safety. That would be huge news. As several people have noticed, a new clean source of energy would be really, really useful right about now."

I leave you to conclude what the impact such an announcement (which really IS imminent) would have on $TSLA, the fossil fuel industry and the world economy.

 

[Julian Cox]

Here is the results of a 60 second web search for the anticipated existence of a used car sluice gate:

Automobiles – Lucrative opportunities you can exploit in Africa’s huge and rapidly growing vehicle market - Smallstarter Africa

Nigeria alone, $5 billion annually, mainly used from US, Canada and EU.

@jhm Here is the EV displacement that you have been modelling at a guess - but don't despair Oil and ICE is definitely screwed regardless. Just a different mechanism. Just to note that it has drastically different implications for assumptions for near to mid term Oil futures because where these cars go, oil consumption can surely follow. Worth double checking who is pulling whose leg when it comes to the notion of EVs displacing oil demand.

 

[cheshire cat]

I'll indulge, since it's a long weekend and this thread has already strayed far beyond short term movements of TSLA (however the long term prospects of TSLA is just the short term zoomed out).

" I (aye) thank you" (Arthur Askey)

 

[McMuggets]

Tesla Motors Inc (TSLA) Michael Zanoni Returns To Amazon.com, Inc. (AMZN)

There's no room for major mistakes in Elon's world. I'm sure some FUD will appear because of this news, but in reality if you do not perform to your pay-grade you should leave it up to someone who can.

 

[Ukland Wombat]

off topic....but following on

@dc_h and @Julian and @Johan​

When it comes to dealing with cataclysmic change, the US is the exemplar of adaptability because of it's capital markets and "can do" mentality. So I look to the US. But what of it's own cohesiveness... it's social stability? I don't take it for granted.

 

[ggr]

Tesla Motors Inc (TSLA) Michael Zanoni Returns To Amazon.com, Inc. (AMZN)

There's no room for major mistakes in Elon's world. I'm sure some FUD will appear because of this news, but in reality if you do not perform to your pay-grade you should leave it up to someone who can.

It could be personality clash between Zanoni and Wheeler.

 

[lango]

ICE car production has been growing in absolute numbers more than EV has up until now. This can change before 2020 but for that to happen EVs in China needs to take off, otherwise this will continue to 2020 even if Tesla produces 500 000 or 1 000 000 by 2020.
Average oil consumption of the ICE fleet though will go down a bit because of regulations and introduction of hybrid drive-trains, but marginally.

The coming success of Model 3 will create a big demand vs supply gap for EV and cause ICE vehicle transactions to be delayed/postponed, go down in ASP or have the effect of increased ratio of leasing vs purchases. The ICE fleet will not become smaller, but older and less valuable because there is still unit growth in the overall market. This can change of course if there is a major downturn in the economy.

The major ICE manufacturers will not start producing EVs on a massive scale until 2020 at the earliest and it is if/when this happen or when Tesla becomes much bigger to matter on a global production basis that a significant shift in ratio between ICE and EV will start to happen.

 

[Ukland Wombat]

off topic

ICE car production has been growing in absolute numbers more than EV has up until now. This can change before 2020 but for that to happen EVs in China needs to take off, otherwise this will continue to 2020 even if Tesla produces 500 000 or 1 000 000 by 2020.
Average oil consumption of the ICE fleet though will go down a bit because of regulations and introduction of hybrid drive-trains, but marginally.

The coming success of Model 3 will create a big demand vs supply gap for EV and cause ICE vehicle transactions to be delayed/postponed, go down in ASP or have the effect of increased ratio of leasing vs purchases. The ICE fleet will not become smaller, but older and less valuable because there is still unit growth in the overall market. This can change of course if there is a major downturn in the economy.

The major ICE manufacturers will not start producing EVs on a massive scale until 2020 at the earliest and it is if/when this happen or when Tesla becomes much bigger to matter on a global production basis that a significant shift in ratio between ICE and EV will start to happen.

Absolutely.

But before the big shift in production comes the big shift in capital (its why we read here) and that of itself might be cataclysmic.

 

[Julian Cox]

The major ICE manufacturers will not start producing EVs on a massive scale until 2020 at the earliest

I have attempted to explain as clearly as I know how that this is completely impossible, no ifs or buts. Not without passing through bankruptcy first.

Are you suggesting major auto makers might go bust in a year's time or less, compete their restructuring and emerge as EV players by 2020 or that I have left some room for doubt on the table on this subject?

If it is the latter then I should apologise. As soon as it becomes impossible to sell a hobbled EV at a significant premium to an equivalent ICE vehicle and treat EVs as a little niche market all to itself, its all over. That's like 5 days time.

Beyond the competitive tipping point where the ability to make millions of engines is no competitive advantage either in terms of price or customer value, making EVs becomes a poisoned pill with no way to insulate any benefit from going to market with them from turning off millions of consumers at a time from a less compelling and more expensive ICE vehicles.

Unless as a large automaker you can launch with the capacity to make millions of EVs and can simultaneously afford to write off the ability to make millions of ICEs, you cannot go there - just advertising a cost competitive EV would be fatal. Bankruptcy restructuring is always going to be a cheaper option than even trying to do this.

Tesla does not need millions of unit capacity to go there directly - if a million customers defect from ICE for Tesla's that isn't bankruptcy that's just pure opportunity.

This is what a tech disruption is and it is mathematically inescapable. There is no room for doubt, only delusion like disagreeing that 2+2=4. It does equal 4 no matter what authority says otherwise.

 

[Ukland Wombat]

off topic

I have attempted to explain as clearly as I know how that this is completely impossible, no ifs or buts. Not without passing through bankruptcy first.

Are you suggesting major auto makers might go bust in a year's time or less, compete their restructuring and emerge as EV players by 2020 or that I have left some room for doubt on the table on this subject?

If it is the latter then I should apologise. As soon as it becomes impossible to sell an hobbled EV at a significant premium to an equivalent ICE vehicle and treat EVs as a little niche market all to itself, its all over. That's like 5 days time.

Beyond the competitive tipping point where the ability to make millions of engines is no competitive advantage either in terms of price or customer value, making EVs becomes a poisoned pill with no way to insulate any benefit from going to market with them from turning off millions of consumers at a time from a less compelling and more expensive ICE vehicles. Unless you can launch with the capacity to make millions of EVs and can simultaneously afford to write off the ability to make millions of ICEs a large company cannot go there. Bankruptcy restructuring is always going to be a cheaper option than even trying to do this.

Tesla does not need millions of unit capacity to go there directly - if a million customers defect from ICE for Tesla's that isn't bankruptcy that's just pure opportunity.

This is what a tech disruption is and it is mathematically inescapable. There is no room for doubt, only delusion like disagreeing that 2+2=4. It does equal 4 no matter what authority says otherwise.

please don't stop there, it was just getting interesting...

 

[lango]

I have attempted to explain as clearly as I know how that this is completely impossible, no ifs or buts. Not without passing through bankruptcy first.

Are you suggesting major auto makers might go bust in a year's time or less, compete their restructuring and emerge as EV players by 2020 or that I have left some room for doubt on the table on this subject?

If it is the latter then I should apologise. As soon as it becomes impossible to sell an hobbled EV at a significant premium to an equivalent ICE vehicle and treat EVs as a little niche market all to itself, its all over. That's like 5 days time.

Beyond the competitive tipping point where the ability to make millions of engines is no competitive advantage either in terms of price or customer value, making EVs becomes a poisoned pill with no way to insulate any benefit from going to market with them from turning off millions of consumers at a time from a less compelling and more expensive ICE vehicles. Unless you can launch with the capacity to make millions of EVs and can simultaneously afford to write off the ability to make millions of ICEs a large company cannot go there. Bankruptcy restructuring is always going to be a cheaper option than even trying to do this.

Tesla does not need millions of unit capacity to go there directly - if a million customers defect from ICE for Tesla's that isn't bankruptcy that's just pure opportunity.

This is what a tech disruption is and it is mathematically inescapable. There is no room for doubt, only delusion like disagreeing that 2+2=4. It does equal 4 no matter what authority says otherwise.

I know we differ in opinion on this subject. I can add some color to my thinking:

I think we both agree that there is no way any ICE manufacturer can survive with gradually introduction of EVs. It has to be done on a massive scale with the majority of the vehicle platforms and EVs have to become a first class citizen. There is no plans of this happening yet for any of them. When I say 2020 does not mean I think that date is the most likely date of this to start to occur, just that there is 0% chance of it happening before. I do think the panic mode will start to happen around 2020, it will not happen sooner because Model 3 will take customers from such a broad base to not hurt one manufacturer enough to panic. There is also the customer inertia. Many will irrationally stick to their old brands and ignore EVs. The lead time for new vehicle platforms are also too long to really enable any type of panic development. They got the years laid out and have made their bets already.

I think a massive EV push can and will happen for some of them post 2020 with government support and share holder and customer pressure after some bad years, but the transition will mean years of losses. Surviving is much better from a share holder perspective than bankruptcy, even if it would cost more in total for society and business partners. There is also no evidence at all that government support will not happen, countries like China, Japan, South Korea and Germany (before diesel-gate) have a history of companies with great execution and governments that are going to bail them out and support them and this will also create the effect of pressure to move to EV from the governments. In Germany for example Merkel has already had serious talks with the German car industry about the slow adoption of EVs and how they are falling behind while the country is leading in the renewable transition. Society wants the transition and they want it from "their companies", too.

There is also a big difference between a GM type of bankruptcy which is more like a legal and moral reset of the company versus a bankruptcy that means going out of business and being totally replaced in the market by something else. The former I think is likely for a large number of ICE, but not the latter unless Tesla takes up an unheard of massive market share (which I don't rule out at all and can totally see happen).

From some of your previous posts I got the impression you mean that the old ICE industry will be replaced by startups because they will go bankrupt and put out of business. I think that is overestimating the difficulties for ICE to transition to EVs (but I do agree it will be extremely challenging and many will fail) and underestimating the difficulty for a startup to succeed.

Surviving a major technology transition is not impossible. It happened for example for global telecom that successfully made the transition from landlines to cellular networks.

In the end I am not sure it matters all that much if the current ICE companies are doomed to go under or not. The question is how large market share EVs will have at a certain time and how large Tesla's share will be.

If the total vehicle market contracts, which can happen for example because of autonomous fleet then the future looks very dark for those that lags behind. So what I wrote above is my prediction only in a slowly growing or constant market.

 

[vgrinshpun]

According to the report by Electrek, based on Chinese media reports, Tesla representatives had a meeting with local government in Suzhou regarding possible location for the new automobile factory there.

 

[Ukland Wombat]

off topic ICE OEMs going bust or not?

Thank you @lango and @Julian for your great posts above. Here's a point which might be relevant to both:

It's fascinating. To bail or not to bail? A political factor will be how many citizens (hostages to ICE and Oil) have voted EV (by reserving M3). Thereafter, any bailed ICE OEM will still go bust but more slowly (Julian) or maybe not (lango)?