Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable

[CHGolferJim]

Cathie just said that ARK’s expected annual rate of return for TSLA investment through next five years is 45%....

edit: $2,835, or $2.6T mkt cap in 2025??

Thank you, I’ve been wondering when she would update. Is this for all known business units, or does she continue to exclude some to be comparable to other analyst assumptions?

 

[jerry33]

Please excuse my layman's understanding of the above abbreviated earnings doc. What were the profits without BEV credits? Seems like that is what everyone poo poo'd us (yes those are real words) on last time. I thought they said we wouldn't have had a profit without seeing credits.

This won't actually answer your question, but if Tesla had not spent money on R&D to sell superior cars, there would be no EV credits, so it's just as legitimate as any other source of income. Other companies could have done this too, but they didn't so now they have to purchase credits from Tesla. The negative analysts and media will always turn positives into negatives by twisting the facts to fit their point of view.

 

[Fred42]

Not sure if this has been posted:

SR+ RHD in Australia & UK have a delivery timeline of November 2020. Australia also got a range increase + $7k price reduction + power trunk

For wrong side EU drivers, it’s February 2021 for SR+ and November 2020 for LR.

So reading between the lines, It seems SR+ to EU, AU, HK, NZ etc will be Made In China LFP

And from now on, all Made In Fremont SR+ with Li ion cells will be only for the North American market

If I accept that, it still leaves the question of why no ships have left Pier 80 for Europe with LR 3's at this late date.

 

[Fred42]

Does anyone familiar with acquisitions know whether this would be a move that a company takes when it wants to be bought? (Reasoning: I can imagine that a company is more interesting for a buyer if it doesn’t come with huge financial obligations.)

I doubt that a trip through bankruptcy court to shed obligations can be avoided before Ford looks good enough to a potential buyer. As with Fiat's purchase of Chrysler.

 

[Knightshade]

Even supposing this were true (see The TalkingMule's response)... I have to think the infrastructure changes are going to start kicking in by the time there are 30 million EVs on the road. Even though that's a small fraction of the existing fleet, gas stations were barely profitable to begin with (all the ones around here have added sandwich or donut shops to try to make money).

Certainly I'd expect stuff like interstate exits consolidating to 1 or 2 gas stations instead of 8 or 10...

But as you point out, EVs will still be a tiny fraction of TOTAL cars on the road at that point.

Let's consider just the US for a second... ~18 million new sales a year... but a fleet of ~280 million vehicles.

So you're talking 15.5 years to turn over the whole fleet on average, and that's if -100 percent- of new car sales were EVs ever year for 15.5 years.

In 2020 they're estimated to be what 3% maybe?

Dealerships will have to start weaning themselves off ICE maintenance and repairs... somehow?

I suspect for a while you'll see higher maintenance suggestions for legacy EVs (hell Teslas used to be higher too).

And again in the next 10 years the vast majority of the overall fleet on the road will still be ICE and still need the normal crap done to em.

Another good chunk of dealer $ comes from financing and that'll stick around.

But again long term like gas stations you'll end up seeing consolidation and shrinkage.... Maybe just 1 or 2 Ford dealers in an area instead of 5 and so on.

Highway taxes are going to need to be rethought.

Already happening- a number of states have pushed EV registration taxes to try and compensate for lost fuel revenue.

My own state has done so.... though the amount they're charging is still a fair bit less than I was paying in gasoline taxes (pre-covid).

Not to mention, a Tesla 5+ years from now and fuel efficiency requirements 5+ years from now are together going to leave ICE cars looking a lot less competitive

Well, the election will impact that second one a bit, certainly HOPE you're right on that though.

Still, it was an easier argument to make when gas was $4/gal instead of under $2 as it is currently. (and folks are still driving quite a bit less too)

Put all that together, I think it's going to start feeling like ICE is staring down a tsunami.

So whatever year EVs hit 30M, maybe there will still be 50M ICE cars sold, but what are they going to be? Will they continue to try to undercut Tesla on price, even if that means under $20K (considering a $25K EV with cost of ownership advantages)? Will they try to outclass Tesla (and perhaps Lucid) at the high end on luxury? (Too niche.) Will they be stupendous diesel models so they still have better towing range? Maybe all the biggest cars, Suburbans and Minivans, will stay ICE where an EV still can't be efficient enough in that form factor. I don't know, but I don't see the 50M being the meaty middle of the market. If they lose pickups, what large and profitable segments are left other than big SUVs?

Goes back a bit to who is supplying the other 10 million EVs.... If Ford manages to get a successful, profitable, electric F-150 out there they can probably still keep kicking out $15,000 fiestas to undercut 25k EVs too.

If GM has a successful and profitable EV Hummer maybe they can do the same.

Or maybe they both fail and Rivian is suddenly the second biggest american car company after Tesla in 2030?

When 30M EVs are sold, isn't everyone buying an ICE by then going to grit their teeth and bear it, not hold their head up with pride?

Aren't the OEMs going to be doing the math... collectively we sold 50M ICE this year... from the EV factories ramping around us and the demand we're seeing in the market, looks like that will be 35M ICE next year and 15M ICE the year after... um, I'll take that golden parachute now please?

As I said- there'll be consolidation.

There's 20 major car companies right now (sold more than 1 million vehicles annually)- Tesla's not there yet but will be in 2022 with the 50% YoY math (could be 2021 by it'd be a hell of a ramp at 3 factories)

Anyway of those 20

5 of em are Chinese companies...6 are Japanese... 5 are European... 3 American (one half American being FCA), and the remaining one is South Korean.

Wait, actually, PSA (peugeot citroen) is merging with FCA, so that's already down to 19.

And realistically 17 as Nissan, Mitsubishi, and Renault have been cross-owned in an alliance for a while now.

Now among those companies, is roughly 83ish million cars sold.

But 1/4 of that is just the top 2 (Toyota and VW)...and 1/2 are the top 5 (those 2 plus Hyundai/Kia, GM, and Ford)

Some won't make it. Maybe most won't.

Some probably will though.

Remains to be seen who.

That is not remotely what he said. It was:

Basically implying exponential growth turns the whole market over somewhere between 2026 and 2030.

30M in 2027
40M in 2028
60M in 2029
Etc.....

My apologies. He cited 2030 as the date Tesla would "probably" hit 20 million itself prior to.

Let's say they hit it in 2029. Whom do you believe would be making the other 40 million EVs in your forecast above?

Because right now Tesla is making more EVs than anyone else by a wide margin.

And THEY only hit 20 million in 2030 if they maintain 40-50% YoY unit sales growth every year for 10 years (~45% annual) from 2020 numbers gets you there).

So given everyone else is starting much smaller they need even higher/faster unit growth in EVs, every year for a decade, to get there.

Which other companies do you see actually doing that rather than dragging their feet like they have been and forcing tens of millions into new ICE vehicles because there's still not 80 million new EVs to replace the 80 million ICE cars sold a year?

 

[Hock1]

This won't actually answer your question, but if Tesla had not spent money on R&D to sell superior cars, there would be no EV credits, so it's just as legitimate as any other source of income. Other companies could have done this too, but they didn't so now they have to purchase credits from Tesla. The negative analysts and media will always turn positives into negatives by twisting the facts to fit their point of view.

Yes. Thank you. I've been thinking the same thing. The revenues generated by "credits" are ROI just like any other revenue that comes in as a result of investment of capital, blood, sweat and tears.

 

[BriansTesla]

Elon, who tends to be pretty optimistic in his timelines, thinks we MIGHT get to 30 million new EVs sold per year by 2030 (by everyone, not just Tesla).

In recent years annual new car sales are north of 80 million a year.

Leaving over 50 million new ICE vehicles a year, 10 years from now, someone will still need to be producing.

It's certainly possible GM won't be among those doing it, but I think the speed with which some folks think ICE manufacturing is going away entirely does not match with what's possible under even the most optimistic timelines of ramping of worldwide battery production (and needed infrastructure improvements especially in less developed countries)-

And as we have seen, nobody other than Tesla appears to be acting in a way that would bring about even THAT optimistic of a scenario (30 out of 80 million a year new cars being EVs by 2030)

Brings up the horse and buggy analogy. ICE will still exist, they just won't be important any more.

 

[dc_h]

FYI: Morton Grove aka @mortonlund89 on twitter has some big news he's posting tomorrow. He's been monitoring east coast shipping for alternate shipping to Europe. He may be also following new shipping from Shanghai. I've patreon'ing a couple of other people, looks like I'll be adding another.

 

[ggr]

Nice graphic about Tesla's growth in car shipments. Nothing we didn't already know, but cute.
https://twitter.com/ICannot_Enough/status/1317493648469204993

 

[Silentk]

If I accept that, it still leaves the question of why no ships have left Pier 80 for Europe with LR 3's at this late date.

Just checked Ireland car levels - not a single vehicle new or used available, or even en route.

 

[ammulder]

Interesting figures on S-vs-X and 3-vs-Y from Car and Driver (using data from IHS Markit) -- this is the first time I've seen real numbers and not simply estimates:

New electric-vehicle registrations in the US from January 2020 through July 2020:
Model S: 7,599
Model X: 10,953

Model 3: 62,369
Model Y: 15,878

(they also point out that the Model 3 shows more US registrations in that period than all other EVs combined; the Bolt is the only other model that surpasses ANY Tesla model, with 9,315 US registrations in that period)

 

[FrankSG]

Thanks again for your awesome work.
Has there been any change in Tesla's business that might influence you to revise your SP chart? Of course, there's macro change with interest rates at near zero. Thus higher multiple than what you had in that chart.
As it is today, the SP is above your SP estimation post Q2-2020 ER.

I am of the view that shares are right now priced to perfection.
Only a very significant beat over consensus will likely give a >5% bump to SP post ER.
The only catalysts I see pushing SP higher is Q4 ER, or S&P inclusion anytime from now.
Perhaps S&P inclusion prospects is still providing strong support from going down further than it ever did in the last several weeks.
Any thoughts?

That row in that table shouldn't be interpreted as a SP prediction per se. A stock rarely goes up in linear fashion like that, as we've seen with TSLA over the last decade.

The 50x EBIT multiple is simply something I've used, usually to look at options, because I think 50x EBIT is more than reasonable for TSLA as a high-growth, high-potential company (AMZN is closer to 100x EBIT). Of course the current low interest rate environment influences this, as do many other things, such as the fact that Tesla is likely to grow unit volume by nearly 100% YoY in 2021.

I wouldn't say shares are priced to perfection, but I can sort of see where you're coming from. Besides S&P Inclusion (and perhaps the market waking up to autonomy), I also think that Tesla beating earnings in the next few quarters probably won't make the stock price double/triple again like it did over the past few quarters. This run can't go on forever, and although it can and likely will continue to go up, it does have to slow down at some point, or else Tesla will be valued at $2T at this time next year, and $10T in 2022/2023.

 

[dc_h]

Last evening Elon tweeted that he had neck bone surgeries. Although not stated, the year of the surgeries is likely 2019 when the scar was first noticed. His tweets seen below should clarify the situation, and calm the rumors spread after people became concerned about the scar on his neck.

View attachment 599518

The concern was mostly glee from some tslaq characters. Possibly the all time low for them.

 

[dc_h]

Even supposing this were true (see The TalkingMule's response)... I have to think the infrastructure changes are going to start kicking in by the time there are 30 million EVs on the road. Even though that's a small fraction of the existing fleet, gas stations were barely profitable to begin with (all the ones around here have added sandwich or donut shops to try to make money). Dealerships will have to start weaning themselves off ICE maintenance and repairs... somehow? Highway taxes are going to need to be rethought. Not to mention, a Tesla 5+ years from now and fuel efficiency requirements 5+ years from now are together going to leave ICE cars looking a lot less competitive (they're going to what, have more turbochargers than cylinders and shut down the engine every time you coast?).

Put all that together, I think it's going to start feeling like ICE is staring down a tsunami.

So whatever year EVs hit 30M, maybe there will still be 50M ICE cars sold, but what are they going to be? Will they continue to try to undercut Tesla on price, even if that means under $20K (considering a $25K EV with cost of ownership advantages)? Will they try to outclass Tesla (and perhaps Lucid) at the high end on luxury? (Too niche.) Will they be stupendous diesel models so they still have better towing range? Maybe all the biggest cars, Suburbans and Minivans, will stay ICE where an EV still can't be efficient enough in that form factor. I don't know, but I don't see the 50M being the meaty middle of the market. If they lose pickups, what large and profitable segments are left other than big SUVs?

When 30M EVs are sold, isn't everyone buying an ICE by then going to grit their teeth and bear it, not hold their head up with pride?

Aren't the OEMs going to be doing the math... collectively we sold 50M ICE this year... from the EV factories ramping around us and the demand we're seeing in the market, looks like that will be 35M ICE next year and 15M ICE the year after... um, I'll take that golden parachute now please?

EV’s should be much more profitable for highway fuel stations. Longer refueling times means longer stops. More meals and more coffee.

 

[FireMedic]

Will 80 million cars still be sold annually by 2030? I’m no expert. But if used Teslas are gonna last >500,000 miles, and robotaxis are a thing in 2025...then my instinct says the annual global auto sales drops considerably. Has anyone modeled this? I’d be interested to see what the EV adoption curve does to the global auto sales curve.

 

[LN1_Casey]

Brings up the horse and buggy analogy. ICE will still exist, they just won't be important any more.

I actually don't think so. For a horse and buggy, it's pretty self contained. You get a horse, which are creatures that breed on their own and feed of easily accessible grass/hay/apples, and need minimal mechanical knowledge to deal with, and a buggy, which in the most basic form still work with four wheels and a box.

A car however, requires gasoline--which substance alone takes many, many steps to get to the consumer. It's not like it grows out of the ground, the average individual can't produce it themselves. Same for oil. With the increase in electric cars, gasoline consumption will decline--and that whole chain needs every step at it's current level to survive. Any one section fails and the hole system will be thrown out of whack. Look at what happened during the peak Coronavirus lock down--oil futures were negative. And that was only a brief reduction in use!

Even if you can get the pricey gas/oil, the average person can't maintain their own vehicle without other, highly specialized services which may also collapse with the lack of demand. Where are they going to get their head gaskets? Where are they going to get their timing belts? Where are they going to get that one sensor connector that's notoriously difficult to come across? With more and more people having electrical cars (and thus no need for timing belts, or fuel pumps, or spark plugs, etc), the AutoZones and like business may also collapse.

Further off that last one--while gasoline itself is widely used in any number of engines, and thus may still have some application, all the various makes and models of cars will not have that same luxury. You have a 1998 Ford Explorer? Can't use the timing belt from a 2017 Mini cooper. Part costs may take a bit longer to collapse, as it's not as monopolized as gasoline, but I don't doubt that ICE parts will become more and more difficult to get as people switch to EVs, and thus don't need those parts on the regular any more.

So, no, I don't think ICE cars will be as tenacious as horse and buggies are. I think they'll have a mass die off, with exponential growth.

 

[[email protected]]

Will 80 million cars still be sold annually by 2030? I’m no expert. But if used Teslas are gonna last >500,000 miles, and robotaxis are a thing in 2025...then my instinct says the annual global auto sales drops considerably. Has anyone modeled this? I’d be interested to see what the EV adoption curve does to the global auto sales curve.

Tony Seba thinks the number of cars sold will plummet 80 percent or so, soon....

 

[Knightshade]

Brings up the horse and buggy analogy. ICE will still exist, they just won't be important any more.

FWIW a lot of people overstate just how quickly that transition happened... often with the famous "parade in NYC" pictures showing on a decade or so from "only 1 car in the parade" to "majority cars in the parade"

This ignores a ton of relevant data... like the fact 20 years later horses still numbered in the tens of thousands in NYC, and that OUTSIDE of dense urban cities horses remain the majority for ~30 years past the "mostly cars" parade picture.

(and that hell, in many underdeveloped places, horses are STILL actively and commonly used for transport)

Tony Seba thinks the number of cars sold will plummet 80 percent or so, soon....

He also thinks in that video that peaker power plants will be obsolete by 2020 (which is now, and he's wrong- there's still like 1000 of em active in the US alone-- for the same reason he's wrong ICE will be replaced by EVs by 2025- it is literally impossible to produce enough batteries to make either prediction true)

He also uses the same, flawed, NYC example I just discussed.


His general conclusions are spot on- some of his timelines are.... very overly optimistic.

 

[MP3Mike]

Tony Seba thinks the number of cars sold will plummet 80 percent or so, soon....

Yeah, I don't see that happening. The first problem is child safety seats. What do you do with them when you go to the mall? You pack them with you? Or do you have to essentially rent the car to keep it during all your trips? (Parents aren't going to want to deal with installing and uninstalling child safety seats constantly.)

There are also things I like to keep in the car so that they are nearby when necessary, but not have to pack them around.

tl;dr I won't be one of the people giving up my personal vehicles. Some people might, or they might just give up a second vehicle, but it isn't going to be an 80% reduction in personal vehicles.

 

[FireMedic]

He also thinks in that video that peaker power plants will be obsolete by 2020 (which is now, and he's wrong- there's still like 1000 of em active in the US alone-- for the same reason he's wrong ICE will be replaced by EVs by 2025- it is literally impossible to produce enough batteries to make either prediction true)
.

Just because they exist doesn’t mean they’re not obsolete. I’m a fire fighter and we still have Nokia flip phones in the fire engine. They’re completely obsolete but they’re still around because for some purposes they don’t need replacing.