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

[Unpilot]

small beer investors like myself.

That is easily fixed.....DM me I is a expert in that area.

 

[petit_bateau]

I am not challenging your valuation model, I disagree with your market share assumptions you based your valuations on.

You can not say just because Chinese are releasing more models and building more capacities they would be able to drop Tesla’s sales by 25% and margin by 30%.

That depends on product offerings and cost, and eventually boils down to engineering capabilities, which can not be predicted by financial models or capacity build ups.

Please go back and read the responses to others on exactly this which includes this and other points during the last couple of days. Especially (but not only) see #368,611 and a series of discussion with @StealthP3D and some other good thoughts by other people.

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

Let me correct that. "An eighty thousand pound EV truck under FSD is dangerous to the mission IMO" :) No FSD no one to blame but the driver. Giant FUD rigs:) This mist-have-FSD claim makes me want to raise my hand and ask how we cope with all the existing huge human driven trucks on the road....

teslamotorsclub.com

My base case remains my base case. Here I am examining what happens if .... the latest China info is indicative of the future .... and if it impacts Tesla and how might that be .... and how can I isolate that difference in outcome in such a way as to understand the delta term for a shareholder.

 

[petit_bateau]

If China achieves "strategic autonomy" from the West, where are they going to copy and steal IP from?

I find it interesting that in America the less educated tend to discount China as an adversary but the educated tend to overrate China. I am Taiwanese-American and I grew up in Taiwan so seeing the different American opinions of China has always amused me. For example, there are people who think China is just a sweatshop that produces cheap, low quality stuff, and we also have the more educated scholars who think China will take our lunch in 10 years. If you ever been to China or seen how their companies work, you will know neither will be the case. China will produce good quality cars, because their labor is cheap and are used to work long hours in conditions Americans won't tolerate (look up 996 working hour). If we line up 100 high school educated Shanghai employees and 100 high school educated Fremont employees, I am willing to bet that the Shanghai cars will have better quality and lower cost. The perception that China makes low quality stuff isn't because they are not capable of doing so but because they lack the incentive to innovate. Compliance and obedience are built in their culture; deviating from the guideline is always frawned upon. Price is the only strategy they can think of in any business/indsutry. They won't spend their budget in innovation because they will look to run on zero or even negative margin so they can gain market share. They will keep lowering prices until no player in the marketplace makes money, then they start cheating by using worse materials or lower quality control to squeeze out some profit that way. Unless the Chinese EV companies adopt Tesla's culture, they won't be able to compete with us. Apple doesn't make the "best" or most cost-effective smart phones but every Chinese wants an iPhone if they can afford it. Tesla will be the same way.

Sorry for my ranting. It just irks me everytime i see these "OMG look at what China is doing!" comments. It's like see a white guy saying how exquisite Chinese cusine is when he's eating fried rice and chow mein in a Panda Express.

Please.

I'm not American. I have frequently been to China. I've seen both sweatshops there and high tech knowledge workers and everything in between. Some of the best innovation I have seen is/was in China. Cultural obedience is breaking down. Cheating has always been dependent/contingent on other factors and shunned by some and in any case is not unique to China (you should read the history on US practices most esp in the pre/post WW2 period). Not all Chinese want Apple, some won't touch it with a barge pole and prefer Xiaomi. Whilst I recognise a lot of what you say you are (imho) being overly uniform in your description.

I'm not sure that CCP and Xi Jinping can keep a lid on things. Some of the cultural ferment that is going on in China cannot but help but bleed across into the political arena (I've seen that directly) but irrespective of that it is bleeding across into innovation and that is what matters here.

In any case I learnt my Chinese cuisine from my amah and the cook .

Rant over.

 

[Singuy]

Please.

I'm not American. I have frequently been to China. I've seen both sweatshops there and high tech knowledge workers and everything in between. Some of the best innovation I have seen is/was in China. Cultural obedience is breaking down. Cheating has always been dependent/contingent on other factors and shunned by some and in any case is not unique to China (you should read the history on US practices most esp in the pre/post WW2 period). Not all Chinese want Apple, some won't touch it with a barge pole and prefer Xiaomi. Whilst I recognise a lot of what you say you are (imho) being overly uniform in your description.

I'm not sure that CCP and Xi Jinping can keep a lid on things. Some of the cultural ferment that is going on in China cannot but help but bleed across into the political arena (I've seen that directly) but irrespective of that it is bleeding across into innovation and that is what matters here.

In any case I learnt my Chinese cuisine from my amah and the cook .

Rant over.

Talking about smart phones, apparently Chinese branded smartphone sales are dropping like a rock to the point when the Iphone 5 was introduced. Apple and Samsung gained market share in EU while India is looking to ban multiple of Chinese cell phones due to security issues.

Lets even assume that all of these China branded EVs don't go bankrupt, the result could be similar as they peak in sales before even having any kind of meaningful adoptions overseas.

 

[StealthP3D]

Please go back and read the responses to others on exactly this which includes this and other points during the last couple of days. Especially (but not only) see #368,611 and a series of discussion with @StealthP3D and some other good thoughts by other people.

I'm not sure how it helps @printf42 to review what's already been written when I've read the entire discussion and still don't think you have a factual basis for projecting that China competition will drop Tesla sales by 25%. I assume @printf42 feels you have made some unjustifiable assumptions in your analysis, just as I think you have.

Accurate analysis is more likely when one avoids making assumptions without factual basis. Just because Chinese automakers might have good success in the global auto market does not imply that Tesla's goal of 20M vehicles by 2030 is not realistic. Assuming the global auto market tracks much as it did before COVID, it will be 80M or more annually. Perhaps as much as 120M. Even if it flatlines at 80M, Tesla's goal of 20M will be no more than than 25% of that. So Chinese makers could have stunning success in the global market by 2030, produce even more than Tesla, and still leave plenty of room for Tesla to hit their stated goal. No one knows how this will play out, but I don't find your reasoning convincing.

I actually agree with one of your conclusions, I think it's more likely than not that Tesla will miss their 20M goal by 2030 but, if they do miss, I don't think it will be because of Chinese competition. It would more likely be due to difficulty scaling production that large in such a short period of time. However, I'm looking for a much smaller miss than you, probably only 10% or less.

 

[TheTalkingMule]

What are the odds Chinese demand would start being questioned and SP crushed 2-4 weeks before the S-curve starts hitting the books?

I tell ya.....watching TSLA is quite an exercise is extraordinary coincidence!

You folks are overthinking this thing. This is the phase where you just use your eyes.

 

[dm28997]

Teslas used in movies and series. Blacklist with James Spader in season 9(maybe other seasons) has Teslas and even a humanoid robot. Episode 13 has the robot. It does seem like bad guys drive them slowly. Advertising?
I won't give details to spoil the plots

 

[petit_bateau]

I'm not sure how it helps @printf42 to review what's already been written when I've read the entire discussion and still don't think you have a factual basis for projecting that China competition will drop Tesla sales by 25%. I assume @printf42 feels you have made some unjustifiable assumptions in your analysis, just as I think you have.

Accurate analysis is more likely when one avoids making assumptions without factual basis. Just because Chinese automakers might have good success in the global auto market does not imply that Tesla's goal of 20M vehicles by 2030 is not realistic. Assuming the global auto market tracks much as it did before COVID, it will be 80M or more annually. Perhaps as much as 120M. Even if it flatlines at 80M, Tesla's goal of 20M will be no more than than 25% of that. So Chinese makers could have stunning success in the global market by 2030, produce even more than Tesla, and still leave plenty of room for Tesla to hit their stated goal. No one knows how this will play out, but I don't find your reasoning convincing.

I actually agree with one of your conclusions, I think it's more likely than not that Tesla will miss their 20M goal by 2030 but, if they do miss, I don't think it will be because of Chinese competition. It would more likely be due to difficulty scaling production that large in such a short period of time. However, I'm looking for a much smaller miss than you, probably only 10% or less.

You and I disagree on a point, and neither of us has a crystal ball. And we both think it is valid to figure out whether it is material.

But @printf42 first raised one issue (which he/she then dropped when queried on it), and is now raising the exact same point as you already have, again. So no point me typing the same response again.

 

[ZachF]

It sounds like your assessment of Xi has a strong western bias to it. The surveillance state has been there for decades, and despite that, China's tech innovations have flourished.

Xi is widely respected in China for massively lifting those in poverty into economic prosperity. He is also much more politically savvy than his contemporaries, as well as in comparison to the leadership of the countries that China are allied with (Russia, NK , etc).

China's economic and military might is finally to the point where the west can't push them around anymore, and that has been frustrating for the west. This was most evident when the US stood idle while China played war games over Taiwan post-Pelosi visit. Stark contrast to 1996. This is another source of pride for the Chinese, after being bullied by western forces for over 200 years and seen as the 'sick man of asia'.

Xi didn’t lift people out of poverty. Deng Xiaoping and Hu Jintao did with economic liberalization.

The economy has been increasingly stagnant if under Xi as he has been undoing a lot of the reforms that lifted China out of poverty in the first place. Xi’s “reforms” to their tech sector have been an utter disaster.

The surveillance state really took off under Xi too, as part of his consolidation of power.

The two pillars that were the foundation of China’s growth the last ~40 years were demographics and economic liberalization. Demographics in that China had ~1/4 of the world’s labor force, and they moved from subsistence farming in the countryside to urbanized and industrialized. China’s urban labor force was growing 4-5% per year from 1980 to about 2010. This is ending though. China’s share of the world labor force will decline from about 1/4 of the world in the 2010s to ~12% in 2050 and perhaps as low as 6% in 2100.

The other pillar of growth, economic liberalization, is being undone *rapidly* by Xi. No country has ever passed the middle income trap without achieving a certain level of economic and political freedom. (For more on this subject, see “Why Nations Fail”). Ironically, Xi’s biggest obstacle to China’s ascendance is looking him in the mirror every morning.

 

[StarFoxisDown!]

Talking about smart phones, apparently Chinese branded smartphone sales are dropping like a rock to the point when the Iphone 5 was introduced. Apple and Samsung gained market share in EU while India is looking to ban multiple of Chinese cell phones due to security issues.

Lets even assume that all of these China branded EVs don't go bankrupt, the result could be similar as they peak in sales before even having any kind of meaningful adoptions overseas.

This is the likely scenario. Combined with what I would call Anti China subsidies in the US when it comes to EV’s (IRA). Chinese EV makers are destined to just be relevant to China. Without the subsidies they currently get in China combined with the consumer appetite for cars (as in not Chinese branded/style of cars), they won’t be nearly as competitive as they are in their native country

 

[MC3OZ]

If China achieves "strategic autonomy" from the West, where are they going to copy and steal IP from?

I find it interesting that in America the less educated tend to discount China as an adversary but the educated tend to overrate China. I am Taiwanese-American and I grew up in Taiwan so seeing the different American opinions of China has always amused me. For example, there are people who think China is just a sweatshop that produces cheap, low quality stuff, and we also have the more educated scholars who think China will take our lunch in 10 years. If you ever been to China or seen how their companies work, you will know neither will be the case. China will produce good quality cars, because their labor is cheap and are used to work long hours in conditions Americans won't tolerate (look up 996 working hour). If we line up 100 high school educated Shanghai employees and 100 high school educated Fremont employees, I am willing to bet that the Shanghai cars will have better quality and lower cost. The perception that China makes low quality stuff isn't because they are not capable of doing so but because they lack the incentive to innovate. Compliance and obedience are built in their culture; deviating from the guideline is always frawned upon. Price is the only strategy they can think of in any business/indsutry. They won't spend their budget in innovation because they will look to run on zero or even negative margin so they can gain market share. They will keep lowering prices until no player in the marketplace makes money, then they start cheating by using worse materials or lower quality control to squeeze out some profit that way. Unless the Chinese EV companies adopt Tesla's culture, they won't be able to compete with us. Apple doesn't make the "best" or most cost-effective smart phones but every Chinese wants an iPhone if they can afford it. Tesla will be the same way.

Sorry for my ranting. It just irks me everytime i see these "OMG look at what China is doing!" comments. It's like see a white guy saying how exquisite Chinese cusine is when he's eating fried rice and chow mein in a Panda Express.

What we are realistically talking about is Chinese car makers copying Tesla for the next 5 years, being moderately innovative and making EVs that are better than ICE cars for a reasonable price.

We are also talking about the Chinese scaling battery and EV production volumes rapidly and growing international market share.

IMO the Chinese will clear both of these hurdles very easily.

The discussion was about the impact of the Chinese clearing these hurdles on Tesla margins.

IMO thst impact is mostly in China, the developing world and for entry level models in the EU and elsewhere. I can't see the Chinese having much impact on Tesla sales and margins in the US.

Overall Tesla might see a slight drop in margins off the back of much higher sales volumes while diversifying income streams.

I always thought that Tesla would have some competition and for the last few years the Chinese have emerged as the most likely competitor.

Both Tesla and China can win. If China ultimately doesn't win, then the Chinese political leadership will probably be the issue. Even if China wins, Tesla still wins.

 

[nvx1977]

Xi didn’t lift people out of poverty. Deng Xiaoping and Hu Jintao did with economic liberalization.

The economy has been increasingly stagnant if under Xi as he has been undoing a lot of the reforms that lifted China out of poverty in the first place. Xi’s “reforms” to their tech sector have been an utter disaster.

The surveillance state really took off under Xi too, as part of his consolidation of power.

The two pillars that were the foundation of China’s growth the last ~40 years were demographics and economic liberalization. Demographics in that China had ~1/4 of the world’s labor force, and they moved from subsistence farming in the countryside to urbanized and industrialized. China’s urban labor force was growing 4-5% per year from 1980 to about 2010. This is ending though. China’s share of the world labor force will decline from about 1/4 of the world in the 2010s to ~12% in 2050 and perhaps as low as 6% in 2100.

The other pillar of growth, economic liberalization, is being undone *rapidly* by Xi. No country has ever passed the middle income trap without achieving a certain level of economic and political freedom. (For more on this subject, see “Why Nations Fail”). Ironically, Xi’s biggest obstacle to China’s ascendance is looking him in the mirror every morning.

Again, I'll say that this is a very western point of view of Xi, and one that paints him in the most negative light possible. And I don't really care to get deep into Chinese politics, as I can barely handle the US as it is. I just want people to understand that there is a lot of Xi hatred from the West that isn't the case within China. And we should all strive to source our info outside the comfort of our bubbles. The post summarizes Xi's popularity in a non-biased way:

Is Xi Jinping losing popularity in China?

Shun Bot's answer: Xi’s popularity is definitely at the precipice of a great shift. I suspect that in the coming few years, he’s going to make a lot of enemies and a lot of friends. — A brief history of Xi’s popularity from 2012 to 2021 For the most part, Xi’s policies from 2012 to 2019 have b...

qr.ae

There are things happening in China that are undeniable. For example, China is producing compelling EVs. We are rapidly moving away from the days where China's primary MO was to copy others and make knock-off products (although some degree of that persists). Despite the Great Firewall, Internet tech evolved within those walls, with some innovations exceeding the rest of the Internet. Musk also knows this, and is considering revamping Twitter to be more like Chinese WeChat. The infrastructure and architecture in China (along with many Asian countries) are vastly superior than the US. All of this happened in the last decade. Among Chinese people, Xi gets the credit for modernizing the country and making it a world power.

Something else that's undeniable: In the last decade, China had the foresight to monopolize battery raw material producers around the world at a time when half of the US is still convinced climate change is a hoax. Now the world depends on China for batteries, and the US is just now starting to use policy (IRA) to establish our own battery supply chains.

I don't really care if Xi actually deserves credit for these developments in the last decade. And yes, if he takes credit for it, then he needs to take credit for the real estate bubble as well. What matters is that China has become a force to be reckoned with. Musk acknowledges this Every. Single. Time. he's asked about who realistically can challenge Tesla. It's the Chinese. Thinking Xi's actions are going to collapse China is IMO just naive.

 

[PeterJA]

My base case remains my base case. Here I am examining what happens if .... the latest China info is indicative of the future .... and if it impacts Tesla and how might that be .... and how can I isolate that difference in outcome in such a way as to understand the delta term for a shareholder.

Reminder to your readers:

Your base case assumes (1) Tesla's FSD will never reach full autonomy OR (2) Chinese carmakers will soon duplicate Tesla's FSD development (millions of cars collecting vision-based driving data, top-3 supercomputer training neural nets) even though there is no evidence of this happening.

Also, your base case assumes USA and Europe will not limit imports of Chinese self-driving cars like they have done for Chinese smartphones due to security/political concerns.

Correct?

 

[ZeApelido]

OT realization:

It’s the 1980s again. Russia is the bad guy. We have inflation, supply shocks, and rising interest rates. Electronic music is everywhere. Dudes are starting to grow mustaches and mullets. We have an old president with the same approval as Reagan. The UK has a Tory woman as PM. Top Gun is the top film and Karate Kid deeply embedded in culture.

So… what happens next?

 

[Thekiwi]

Cathie Wood's latest labor market / monetary policy video:

TD;DW - to no surprise to this group, Powell is making a big mistake and it's already starting to show in monetary supply and global economies.

She really loves doubling down on being wrong doesn’t she.

No doubt she will never admit to being wrong, no matter how many months of stubbornly high inflation we get. No doubt when finally inflation does retreat, she will give the fed zero credit for the demand reduction impact they are achieving.

Perhaps a better strategy would be not basing her entire investment philosophy on shitstocks that only thrived in an unsustainable free money environment.

 

[woodisgood]

OT realization:

It’s the 1980s again. Russia is the bad guy. We have inflation, supply shocks, and rising interest rates. Electronic music is everywhere. Dudes are starting to grow mustaches and mullets. We have an old president with the same approval as Reagan. The UK has a Tory woman as PM. Top Gun is the top film and Karate Kid deeply embedded in culture.

So… what happens next?

Um, the 90s? I thought you were smart or something.

 

[betstarship]

She really loves doubling down on being wrong doesn’t she.

No doubt she will never admit to being wrong, no matter how many months of stubbornly high inflation we get. No doubt when finally inflation does retreat, she will give the fed zero credit for the demand reduction impact they are achieving.

Perhaps a better strategy would be not basing her entire investment philosophy on shitstocks that only thrived in an unsustainable free money environment.

Good investing is boring and has a very long-term horizon IMO. Her and her team have developed a ton of insights for me to improve my understanding of things like Proteomics (which is just around the corner). It's concerning what's going on with their portfolio, but you have to give credit to them for sticking to their thesis rather than panicking.

 

[oldTAVguy]

OT

 

[wipster]

OT

That... was... awesome...

 

[bballshinobi]

Please.

I'm not American. I have frequently been to China. I've seen both sweatshops there and high tech knowledge workers and everything in between. Some of the best innovation I have seen is/was in China. Cultural obedience is breaking down. Cheating has always been dependent/contingent on other factors and shunned by some and in any case is not unique to China (you should read the history on US practices most esp in the pre/post WW2 period). Not all Chinese want Apple, some won't touch it with a barge pole and prefer Xiaomi. Whilst I recognise a lot of what you say you are (imho) being overly uniform in your description.

I'm not sure that CCP and Xi Jinping can keep a lid on things. Some of the cultural ferment that is going on in China cannot but help but bleed across into the political arena (I've seen that directly) but irrespective of that it is bleeding across into innovation and that is what matters here.

In any case I learnt my Chinese cuisine from my amah and the cook .

Rant over.

The Chinese people who want Xiaomi over Apple are ones who are brainwashed with nationalism by the CCP. When they buy Xiaomi they are not buying Xiaomi phones, they are buying badges of patriotism. I know, because my father-in-law is one of those people lol.

There will never be a Chinese name brand to the Chinese consumers, because Chinese people simply don’t trust their own countrymen when it comes to business ethics and product integrity. There are reasons why Chinese companies would set up shell companies in foreign countries like US and Australia so they can label products as foreign brands. People in China won’t even buy domestic baby formula if they can afford American/European brands.

Tesla doesn’t need to have 80% of the market share. Those Chinese companies can sell their cars at breakeven or negative margin all they want. Tesla can do what Apple has accomplished with the iPhones - 20% market share but 80% of the industry’s profit.