At $250,000 Tesla can't make the roadster in volume because there's not a volume of buyers for a $250,000 car.
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Without comment on Roadster speculation, the price comment is not relevant simply because of highly desirable products revolutionizing price-demand precedent. There are numerous cases on point in numerous industries. Tesla itself has had multiple examples. Here are a few:
Apple Watch;
In 2019, Apple shipped 30.7 million units of Apple Watch, more than the entire Swiss watch industry.
Bringing this particular statistic into focus paints a captivating picture of the dominance of Apple Watch in the global watch industry. Against all odds, the single brand of Apple outshipped the collective might of the centuries-old, highly reputable Swiss watch industry in 2019, with a staggering 30.7 million units. Within the broader narrative of Apple Watch market share data, it sends a powerful message regarding consumer preference and technological trends. It echoes the transition from classic, mechanical timepieces to digital, multifunction smart watches, and underscores Apple’s leading role in this revolution. These numbers also speak volumes to Apple’s capacity to not only keep pace with, but outdo, traditional market players in terms of volume, quality, and consumer appeal. The immense scale of 30.7 million units alone is a testament to Apple Watch’s impressive market share as well as the potential growth and influence of the smartwatch industry.
Bentley Continental 2003;
The first generation Bentley Continental GT was named the most significant production car design at the NAIAS eyes on design awards, since then the car has won numerous awards including Grand Tourer of the Year award by Top Gear magazine, and is twice winner of the ‘Classic Car of the Future’ award from Motor Klassik magazine. It was a sales success almost overnight, propelling the brand to over 10,000 sales per year.
The notable fact is that the car was widely predicted to be a failure because the Total world market for cars above US$100,000 in price was <5,000 per year in 2002 (source: 2002 unpublished consultants report).
Following the huge success of the Bentley Continental many others followed and high price car markets soared. The clone of the Bentley was the VW Phaeton, built almost identically except for The VW badge and a lower price. It was an abject failure, but a fantastic bargain!
2013 Tesla Model S;
We all know this one, probably, but look back to 2013 and CNBC.
Compared to other luxury sedans, Tesla sells the Model S to a much higher percentage of men and those buyers are, on average, younger and wealthier.
www.cnbc.com
According to later data from securitized lease data and proprietary study done for a 'competitor', the US Tesla Model S buyers were deeply bi-modal, with huge modes around $50-$80,000 income per annum and another >$150,000 income per annum. There were smaller grouping in other classes. Partly because of that highly unusual distribution, unlike that of Mercedes Benz S class, BMW 7 series, which were then considered similar positioning.
In each of these three the fundamentnal isuue was that these three products did not just gain share from other similarly priced products.
Each created a new and different market thus defying the very notion of target addressable market, itself assuming a static market.
So, how about a seemingly really strange example that proves market size logic is usually wrong if the product is sufficiently compellin:
Cessna Citation 500
This one absolutely invented a market that did not exist previously and was thought to be impossible. It was cheap (relatively), easy to fly, and could be flown by a single pilot.
By today’s standards, the first Cessna Citation (originally named the Fanjet 500 and later rebranded as the Citation 1 and finally the Citation 500) was perhaps the ultimate entry-level business jet.
cessnaowner.org
In short, possibly the best parallel for the Tesla Model S is the Citation, because everyone tried to dismiss it but it single-handedly delivered turbojet operation for owner-pilots, somthing that had not previously happened. Then larger variants continued to expand the market.Then, when Cessna made a new one, the CitationJet 525, that was faster, flew higher and further and cost less to operate, they reinvented the market they had created. Then numerous variants have been further expanding the market.
In my firm opinion the best comparison to the Tesla SEXY really are Cessna Citations. Both defied any potential comparison, both created new markets, both rapidly made variants using the base principles.
About the, the comparison breaks down because Cessna did not really make manufacturing excellence a goal, nor did they continuously improve fundamentals. Because of that Cessna more nearly resembles Ford with Model T than it does Tesla.
As a former owner of both Tesla Models (2014 S, 3, and a 2021 S) and a very early Cessna Citation 525 SN0041) I cannot even begin to explain the quality control and constant evolution of Tesla to the laughable early 'Quality Control'/s of the Citation 525.
While Tesla has been constantly improving, some of the other examples really did not, although they all have held on well to their newly developed markets.
We now are in the midst of severe manipulation and FUD and many of us are disheartened. We should not be so pessimistic. Obviously, some retail traders are in dire straits. people who HODL see paper gains and paper losses but constant improvement in long term prospects, for Automotive, Services and Energy.
Despite global tensions TSLA still has positive net cash flow and maintains a torrid development pace for new raw material sourcing (including lithium refining), technological development (48v, stainless, structural packs, heat pumps and so much more such as Optimus, factory OS, rapidly evolving AI application taut to name a few.
Apart from, say, SpaceX, what companies have such amazing capabilities? What other company has invented so many unprecedented advances? What other has invented new markets but also invented the infrastructure to support heretofore non-existent products?
Just look at the examples above. Not one had to invent support systems for their breakthroughs. Among those examples only Apple and Tesla have developed an 'ecosystem' that spans their product line so each product builds to reinforce their customer base while increasing loyalty.
Our challenge in 2024 and future years is to understand how all this is developing and begin to appreciate the value. At the same time we need to understand that FUD and general ignorant coverage will continue and from time to time even increase. In doing so we might also think about the Apple comparison, including the oft-repeated critics that claim Apple has not competitive advantages and technology is inferior. Then we might think of two things those two companies share: First, logistics management that has very few peers. Second, an approach to customer and product interaction that yields constant evolutionary improvement in both existing and new products.
The only way all this really makes sense is to view the totality and absolutely ignore obsession to quarterly sales and even production of vehicles. When many of our own promote short term earnings and vehicle production/delivery we often cannot resist the temptations to pay attention. if we cannot there is one quarterly metric we can watch in confidence that it is relevant: Free Cash Flow.
In the meantime keep a close watch for continuing innovation in materials, logistics and manufacturing. While those three continue combined with healthy Free Cash Flow we will know all is well with our investments. All the rest is just noise!
