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

[Tslynk67]

What's lcc stand for?

LEAP covered calls, so the sell is underwritten by held calls

 

[CorneliusXX]

There's quite a few model Y bodies in GigaBerlin this week. Hopefully that means testing is ramping up.

 

[nativewolf]

1.4Bn vehicles in the world. If they have a 10 year lifespan that is 140m just standing still. It is true that one robotaxi can replace many vehicles but there are other use cases as costs tend to zero.

The 10 year lifespan number is low to me, maybe in the US in the 90s. Today Toyotas and Hondas average over 250k. That's a 10-25 year lifespan. My wife's lexus will get replaced by a Y but for now it is a 16 year old car that can easily go a few more. My truck has over 300 and that's just getting broken in on the F150 segment- 13 years old.

Globally I'd assume the average vehicle is expected to be in service 20 years for 70 mln replacement- currently we are bringing on lots of new consumers in China and India and other developing countries so there is net growth that is not likely to continue as the market builds out. Furthermore as you start getting closer to 2030 you have to take into account the growing volume of EVs as part of the fleet. A million mile battery is a lifetime battery- as long as the car does not get in a wreck and the primary frame is sound you'll never need another car; car lifespan will go to over 50 years in theory. The only reason to change a car would be user fatigue. A 50 year lifespan will drive global fleet replacement to 30 million units or so. Anyone doubting this only has to look at Cuba and see the 60-70 year old ICE fleet.

In short EVs are going to contract the global auto business to something about 20-30% of what it is today. If tesla actually builds 20 mln cars they could have 2/3 of the global capacity in 2035. It will require extreme financial discipline and savvy to manage the build of factories to capture the initial explosion in sales of EVs but be prepared for the cliff as ICE replacement nears in 2040-50 and global sales crash. Throwing robotaxis into the mix means a further reduction in net sales. Moving the car to a platform for recurring software sales is going to be critical to long term profitability of the auto companies. Regardless of fleet size we could see Tesla capturing the vast majority of global profits.

Globally this will cause massive massive unemployment in Germany Japan Korea Mexico China and strand tens of billions in assets and that looks to be a cliff we're going to come to sooner rather than later. Talk about disruption.

 

[ZachF]

US exceptionalism alert

(ever heard of Airbus ?

https://www.forbes.com/sites/greatspeculations/2020/01/06/how-airbus-has-grown-over-the-years-to-dethrone-boeing-as-the-largest-commercial-aircraft-maker/)

Boeing had 70-80% share of global passenger aircraft for a few decades after they made the 707.

...Now that eventually led to complacency and now the company is dealing with an infection of parasitic Jack Welch-style management.

 

[ZachF]

My hunch is Hyundai/Kia might be amongst the survivors as well. Their current EV offerings are more compelling than most others, possible partnership with Samsung for batteries and I get the sense they’re one of the more innovative car companies - look how far they’ve come in the last 30 years compared to the other ICE manufacturers. Also, the S. Korean government might be inclined to see them survive the transition.

bailouts will be a big factor for the current OEMS who survive.

Countries who have auto exports/companies as a large percentage of GDP (Germany, Japan) are going to get impacted the most for two reasons: Bailing them out will cost a much larger percentage of national income, and that national income will de undergoing a much larger decline

 

[CHGolferJim]

I still don't see the problem other than you have a broker who refuses to provide you with the most basic services. Change your broker. And the people who make the market in these bonds don't see the problem either or the market price wouldn't be but a fraction of what you think it should be..

It sounds like much ado about nothing.

I’m not holding these convertible bonds and haven’t paid much attention, but am surprised the initial agreements aren’t public documents. Does the requirement to publish only apply to equity raises and not debt?

 

[Stretch2727]

Not a question of passion, but economics.

Most people, as in the vast vast majority of people, simply can't afford new cars.

The average car being driven around today in the US is 12 years old.

As you say most aren't passionate, they just need to drive from A to B. If they can keep doing that in their 12 year old paid-for corolla, they will, because that's all they can afford to do.

And you know what else is going to slow that aspect down?

As it becomes more and more obvious the EV is the car of the future.... resale will remain relatively high on them compared to ICE vehicles.

So when that guys old corolla breaks down eventually, he's gonna be looking to either spending X dollars on another used ICE econobox to replace it... or some number significantly higher than X for a good used EV.

You can probably make some pretty substantial TCO arguments to him about why the EV might still be the better long-term choice. But he only has X, and he's stretching to come up with that, so he's buying the ICE car.

Barring some huge government incentives (for example incentives that can apply to buying USED evs, especially if replacing an ICE vehicle) that's gonna keep old ICE vehicles on the road longer too.

In general agree with your arguments. It will be interesting to see what happens to the price of gas with the disinvestment in oil. I have seen arguments that oil will be dirt cheap with lack of demand and others that say the price will climb as oil companies stop investing. A high price could get people to move to EV sooner. As well I believe the marginal cost of electricity is only going down as renewables take hold.

 

[Yuri_G]

Seriously if a left turn is such a challenging "edge case", then I'm sure not seeing Robotaxis in 2030.

Edit:
...unless maybe in 2 weeks...

And I'm not not a fan of the scenic rectangles.

How often do you make an unprotected left across 3 lanes and a median? 99% of drivers will never encounter this scenario. The vast majority of lefts like this are at lights.

 

[CHGolferJim]

View attachment 690454

Weekend gets even more amusing.

An ETF that mechanically takes bigger TSLA shorts for every purchases Cathie Wood owns and makes in TSLA? What could possibly go wrong here?

Could this ETF be shorted?

 

[winfield100]

Yeah ...but a fool that would buy a mountain??

think “outside the gravity well”
put some next gen Merlin or Raptor engines on a small/medium icey asteroid (“tales of the flying mountains” by Poul Anderson)
viola
you have both a ship AND reaction mass AND oxygen and can mfg additional fuel from concentrated sunlight from volatiles when necessary

 

[TheTalkingMule]

The only math that gets you to 100% EVs (or even especially close) for annual sales by 2030 is when you assume new car sales of non-EVs will entirely crater to nearly 0.

Because there's not going to be enough EV batteries to replace even half of the current ~70 million ICE sales by 2030 in any industry predictions I've seen- including Elons.





Absolutely.





Yup- but keep in mind when Elon threw out the 20 million a year number he said he expected the entire rest of the industry to be at 10 million EVs.

So you still need 40 million more cars a year. (Or believe annual new car sales will drop from ~70 million to ~30 million I suppose)





Sure... the smaller car (whatever they name it) will be one example, some kind of van has been discussed pretty often as not only filling a consumer market demand but also replacing a lot of ICE delivery vehicles...and they're gonna need a truck smaller than the CT eventually just to name a few.





Yup, but 2030's a bit early for that.

Everyone likes to point at that NYC parade photo as evidence horse->car transition was SUPER fast... but it really wasn't... horses stopped showing in that parade, but remained in common use in NYC for another decade or two afterwards...and even longer in much of the rest of the country.

Bear in mind, 70 million new cars sell a year... but there's something like 1.4 billion on the road total. And that number keeps increasing

Which means 95% of them in any year aren't new cars.

Even if 100 percent of new car sales became EVS tomorrow
(and again that's just not physically possible with current and even projected for the next 5-8 years battery supplies)
It'd take at least 10 years before half the cars on the road are EVs, and at least 20 years to replace all cars on the road with EVs, and that's only if you assume net zero new cars which isn't a sound assumption especially in countries like China where car ownership is highly coveted and growing rapidly.

Run that same type of math with "only" 30 million new EVs a year by 2030 and it's a lot longer before ICE is a minority on the roads.


So given the known facts and math, 100% annual sales as EVs is not going to be earlier than the mid to late 2030s, and only if battery supply keeps ramping like crazy.

Which means you're looking more like 2050, optimistically, before "all" cars on the road apart from collectables/toys are EVs because that's the soonest enough EVs will exist.






Not a question of passion, but economics.

Most people, as in the vast vast majority of people, simply can't afford new cars.

The average car being driven around today in the US is 12 years old.

As you say most aren't passionate, they just need to drive from A to B. If they can keep doing that in their 12 year old paid-for corolla, they will, because that's all they can afford to do.

And you know what else is going to slow that aspect down?

As it becomes more and more obvious the EV is the car of the future.... resale will remain relatively high on them compared to ICE vehicles.

So when that guys old corolla breaks down eventually, he's gonna be looking to either spending X dollars on another used ICE econobox to replace it... or some number significantly higher than X for a good used EV.

You can probably make some pretty substantial TCO arguments to him about why the EV might still be the better long-term choice. But he only has X, and he's stretching to come up with that, so he's buying the ICE car.

Barring some huge government incentives (for example incentives that can apply to buying USED evs, especially if replacing an ICE vehicle) that's gonna keep old ICE vehicles on the road longer too.

That's not how these transitions usually work. The kind of switchover you're describing would have us still buying flip phones today.

ICE purchases will be deemed foolish by 2025 and very few will be sold in 2030. Yes, this will lead to a few years of far fewreer than 70M cars being sold. People will simply ride out their used cars longer or not upgrade. No chance consumers are out there buying ICE offerings from BMW or an ICE Camry in 2028.

We don't know what it'll look like, but it won't be the smooth 30 year ease-over you're describing. It's called disruption for a reason.

 

[jbcarioca]

I have seen this assertion frequently, but there is never any evidence to support it. Is it a conclusion from first principles or reasoning by analogy? (it can't happen because it never happened before)

I see no first-principles reason why Tesla can't keep building new factories that hire workers from ICEmakers that go bankrupt. Sure, governments want to protect their industrial base (jobs and tax revenue), but Tesla can provide the jobs and tax revenue, and maybe increase them temporarily (during factory construction, which requires lots of workers) and permanently (by increasing exports, as Tesla is doing now in China).

Other industries provide lots of examples of products/services that are dominated by one company: Boeing for commercial aircraft, Xerox (formerly) for copiers, Google for internet search, YouTube for internet video, Twitter for social broadcasting, Facebook for "friending." Sure, competitors exist, but they have tiny market shares.

The auto market never had one dominant company because no automaker had significantly better technology than the others. Tesla is different. A better mousetrap can rule the mousetrap market.

Boeing is #2 in commercial aircraft, Airbus is #1.
Xerox disappeared when others became better, You might even have said Kodak. Neither were ever near monopoly worldwide.

As for the social media, those have high shares in some countries, not so much in others.

Your entire list points out that some companies dominate in some countries for some products, but nobody ever has done it broadly for a long time, much less had a monopoly.

The closest to a monopoly without a specific government mandate probably was Microsoft Office, and that is not any longer anywhere close to that status. Google for search is in that position in the US, but the largest user base by a long distance is Baidu.

All your cases tend to show that even when considering only US-centric, cherry-picked examples there are precisely zero cases of a new entrant in an established industry becoming anywhere near dominance.

In the auto industry there are several highly successful Chinese companies and one company that dominates it’s home market, is successful worldwide and began in the 1960’s, Hyundai. They are the only case of dominance, and that only in South Korea.

So, there is zero, repeat zero, chance the Tesla will have global dominance in BEV such as it nearly has today in many places. They may well be the best and or highest quality, but they will never have the kind of share that companies have when they invented the entire subject, such as Xerox, Polaroid, Kodak and Bayer once did.

 

[jw934]

In the midsize segment, Tesla Model 3 was the best selling car in June in Europe with 262% increase vs 2020.

Overall, M3 had the second highest volume, with VW Golf 6% (1550 sales) ahead.

Source: Jato

 

[CorneliusXX]

The 10 year lifespan number is low to me, maybe in the US in the 90s. Today Toyotas and Hondas average over 250k. That's a 10-25 year lifespan. My wife's lexus will get replaced by a Y but for now it is a 16 year old car that can easily go a few more. My truck has over 300 and that's just getting broken in on the F150 segment- 13 years old.

Globally I'd assume the average vehicle is expected to be in service 20 years for 70 mln replacement- currently we are bringing on lots of new consumers in China and India and other developing countries so there is net growth that is not likely to continue as the market builds out. Furthermore as you start getting closer to 2030 you have to take into account the growing volume of EVs as part of the fleet. A million mile battery is a lifetime battery- as long as the car does not get in a wreck and the primary frame is sound you'll never need another car; car lifespan will go to over 50 years in theory. The only reason to change a car would be user fatigue. A 50 year lifespan will drive global fleet replacement to 30 million units or so. Anyone doubting this only has to look at Cuba and see the 60-70 year old ICE fleet.

In short EVs are going to contract the global auto business to something about 20-30% of what it is today. If tesla actually builds 20 mln cars they could have 2/3 of the global capacity in 2035. It will require extreme financial discipline and savvy to manage the build of factories to capture the initial explosion in sales of EVs but be prepared for the cliff as ICE replacement nears in 2040-50 and global sales crash. Throwing robotaxis into the mix means a further reduction in net sales. Moving the car to a platform for recurring software sales is going to be critical to long term profitability of the auto companies. Regardless of fleet size we could see Tesla capturing the vast majority of global profits.

Globally this will cause massive massive unemployment in Germany Japan Korea Mexico China and strand tens of billions in assets and that looks to be a cliff we're going to come to sooner rather than later. Talk about disruption.

There is some countering forces to reduced volumes:

• Ultra cheap transport will increase demand for transport - requiring more vehicles in established markets (think weekend robotaxi trips where you sleep overnight, or increased travel to friends and family when you can drink at their place and get a cheap robotaxi home) - I think intracity transport will increase substantially.
• Ultra cheap transport will open up new global markets - think all of Africa cruising around in cheap robotaxis

 

[T@oo]

There's quite a few model Y bodies in GigaBerlin this week. Hopefully that means testing is ramping up.
View attachment 690521

Interesting wrap. Now, where did I see the same wrap just recently… How are the odds the „just machine equipment“ in Austin uses the same wrap as Tesla‘s BIW Model Y shipments for Berlin?

Edit. And before you ask „What about the odd shape of the CT body in Austin?“ Well, Tesla knows the whole world is watching. Obfuscation.

 

[ls7corvete]

Seriously if a left turn is such a challenging "edge case", then I'm sure not seeing Robotaxis in 2030.

Edit:
...unless maybe in 2 weeks...

And I'm not not a fan of the scenic rectangles.

These turns are scarily common in my area. Though I think the biggest improvement in safety from AI/self driving wont be because they drive better, but because they are smart enough to avoid these situations. A human will take the unprotected left to save two minutes, the AI will not.

Safer and released sooner, though I can imagine the FUD the media will print regarding this.

 

[StealthP3D]

Interesting wrap. Now, where did I see the same wrap just recently… How are the odds the „just machine equipment“ in Austin uses the same wrap as Tesla‘s BIW Model Y shipments for Berlin?

It's not unthinkable that machine equipment from the same location would be wrapped using the same materials as auto components (but those were obviously Cybertruck components under the wrap in Austin).

Edit. And before you ask „What about the odd shape of the CT body in Austin?“ Well, Tesla knows the whole world is watching. Obfuscation.

Operating Tesla successfully and efficiently as they continue to ramp new models and new factories is busy, dirty, hard work requiring good decision making every step of the way. I'm very confident they didn't spend any extra time obscuring the parts they were shipping. They are focused like a laser on executing. There is a lot to do and very little reason to obscure. That just adds unnecessarily to the workload and would only be done if there were very good reasons to obscure. The odd shapes are almost certainly explained by palleting multiple components in the most expeditious way that was compatible with a high likelihood of arriving undamaged.

 

[StealthP3D]

These turns are scarily common in my area. Though I think the biggest improvement in safety from AI/self driving wont be because they drive better, but because they are smart enough to avoid these situations. A human will take the unprotected left to save two minutes, the AI will not.

I can't think of a single unprotected left in my area that requires crossing so many lanes of 50 mph traffic. Every area of the Country has different conditions that FSD must be optimized to handle. I think the real sticking point in that video was simply how far the median extended to the right (when viewed from the car making the left turn). I don't think I've seen anything like that before. None of this makes me think it will be difficult to train for, they have just been working on more prevalent challenges, not the one-off cases. They will get there.

 

[StealthP3D]

I’m not holding these convertible bonds and haven’t paid much attention, but am surprised the initial agreements aren’t public documents. Does the requirement to publish only apply to equity raises and not debt?

The original issue agreements are public. But they give Tesla the right to offer early redemption, on terms to be specified at a later date, to those holders who might benefit from early redemption. Those more recent early redemption offers are probably public too but they may or may not be easy to find (I haven't looked).

My point was simply that a good broker would not balk at providing those terms to their clients who may ask. Charles Schwab is one of the first discount brokers but they also know they exist to serve their clients. I don't own any of their stock but I have been very pleased with their service and rates over the years. If I asked my broker for this info and they wouldn't tell me where to easily find it or provide it to me, I would be looking for a different broker. Not tomorrow but immediately.

 

[StealthP3D]

Could this ETF be shorted?

So, you want to short an ETF that is short ARKK? Interesting thought but I'm pretty sure it would just track your returns if you were long ARKK, minus fees and inefficiencies. So I think your returns would be much better just going long ARKK.

The interesting thing about this short ETF is that they will have to buy TSLA whenever ARKK sells TSLA. Because I believe ARKK has a history of TSLA buys/sells that increase their returns, I can't imagine anyone thinking it would be a good idea to short ARKK (rather than just shorting the individual components like TSLA). But it seems to me that the existence of a short fund like this should serve to reduce the volatility of the components of ARKK, including TSLA.