Yes there are certainly variables to be considered. However, all things being equal, wages, equipment etc. Builder A still makes double the profit in two whilst the expenses ratio remains constant hence more exponential growth.
All that aside and being we are talking Tesla vs others here My question would be if you were to liquidate all companies right now, who would come on top or going forward, how many cars does X company has to make to match Y's company profit margin per vehicles sold (not manufactured).
While I was highlighting builder B being more productive, you're right, builder A will be more profitable due to overall revenue being double, 52 patios per year versus 26. Builder B has the bigger profit margin due to better efficiency, Builder A has more profit overall due to volume. We assume infinite demand for patios, but if it gets competitive, builder B can offer a cheaper price to put builder A out of the market. Even in this very basic example can very quickly grow arms and legs in terms of business case and which builder has the best set up. You can debate the strengths and weaknesses of each business case and which has the foundation for future success. Both have strengths and weaknesses.
My question to Tesla is around their manufacturing model. On Tesla earnings call last night Elon mentioned the 3 brutal years of ramping up the model 3. They got their in the end, it wasn't easy, but they did it. Last year the M3 sales were approx. 500k cars. 1.2m MY. Is the M3 getting a little long in the tooth now? They went to huge effort over 3 years to get the construction method right but now sales are faltering? When does MY demand taper off and then, decline? Everyone is wondering about the CyberTruck and the new M2 car but nobody is asking about the new M3 or the next MY. Mild refreshes are historically there to maintain sales, rather than grow sales.
They can't keep flogging the existing M3 and MY for years to come, they'll be too stale so what is the plan? Tesla go to great expense in their cookie cutter manufacturing model, giga casting but the downside of that is the ability to create brand new models. How has this machinery been depreciated on their balance sheet? If they need to create brand new manufacturing facilities every 7 to 10 years for model refreshes, what's the capex for this?
Someone has already mentioned BMW Neue Klasse platform. There will be 6 different BMWs from this investment initially, with potential for more. Tesla approach is the polar opposite, quote:
The iX3 SUV (code-named NA5) is due in late 2025. It will be built at BMW's new factory in Hungary. An extended iX3 version (NA6) will be built in China.
In 2026, BMW will start production of a 3 Series-sized sedan (code-named NA0)
at its Munich plant. Later, production will launch in Mexico and China.
A coupe-styled sedan called the iX4 (code-named NA7) is also expected in 2026, and a station wagon variant is due in 2027.
The sixth model is a compact SUV (code-named NB5), which is expected to replace the iX1.
With the arrival of the Neue Klasse, BMW is expected to introduce a new nomenclature to avoid confusing customers during the transition to the electric age.
The 3 Series-sized electric sedan would be designated as the i320 or i330 depending on the specification, while the 3-Series combustion engine cars would be designated as the 320 and 330, dropping the "i" for gasoline versions and "d" for diesel versions.
So when we consider that the discussion arrived from the 'Legacy is too slow and Tesla is fast' statement, I just can't agree. My worry is that we should already have the M2 by now and that the new M3 and MY should already be in the pipeline. Tesla doesn't even seem to have that on their radar, let alone have even the back of a napkin start of a plan. Thats a worry.
My belief is that Tesla hit the sweetspot on price and brand value 2 years ago but the salivating investors were hungry for more and they've become a victim of their lofty share price and their attempts to grow into it. They've cheapened the brand via price cuts, less brand appeal/exclusivity and all the extra YOY sales in 2023 hasn't actually earned them any more profits. Effectively, yhey've traded their brand value for volume but failed to get the extra profit and that looks like a mistake IMO. You can't get that brand value back very easily now so was the extra volume worth it? I'm not convinced it was.
Lets say they create the M2 and sell 1m per year at 10% profit, thats $2.5B profit per annum. Industry standard ex growth would probably price that at x8 for future value, so the M2 adds $20B to the value of Tesla. $20B is the value of that car to Tesla, and people talk about $1T valuation. The numbers just don't stack up.
2m cars a year for existing line up at $100B revenue and say 10% margin, $10B profit x 8 is $80b valuation, add the M2 and Tesla is worth $100B selling 3m cars a year. And what happens when Govts start removing subsidies, thats a huge headwind incoming.
Sorry for the long post but I know there will be a number of Tesla investors within the forum, and maybe they haven't seen the data presented to them in this way, but its important to consider. The EV market will be expanding though, so thats an opportunity for Tesla but its by no means a free pass for eternal growth. The 2023 growth came at a pretty brutal cost, namely overall profit, profit margins and a reduction in overall brand value.
