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

[Buckminster]

VW prototype gets 4.5 stars! - car designed around the HUD. Reminds me of TMC - circa 2016....
Volkswagen ID 3 2020 review | Autocar

Looks like BMW and Mercedes should follow suit for another 5 years also:
Bloomberg - Are you a robot?

 

[Green Pete]

So, you think rental car companies will pivot to becoming something like an Uber/taxi business with the Tesla’s?

One big reason why Tesla doesn’t give an option to buy out the car is because the RV is set so low on the 3 leases. The 3 lease terms are one of the worst I’ve ever seen for cars in this price range. Also the MF is high and they don’t pass through the tax credits. Total cost of a 3-year lease is more than 50% of the car’s price BEFORE even tax credits factored in. How many Tesla’s do you see selling for <= 50% after 36 months?
The numbers work out that Tesla could make more money if they leased a 3 and then sold it through their preowned car program afterwards than selling it outright to begin with.

I think if they are wise they would. I’m guessing you’ll be able to rent and on demand car in addition to just a taxi. Land at the airport, summon a Tesla and book it for 3 days (costs more obviously). Then when you get out at the airport it drives off to the next customer. The only way I see rental car companies staying afloat in that situation in my mind is to own the cars, use their existing infrastructure for cleaning, charging - they would need to add charging to their lots obviously - etc.

I don’t see a place for them with the current business model in the future. Optimally they prove themselves of worth to companies manufacturing robo taxis for a symbiotic partnership.

I would think them buying Tesla’s now would be in their interest considering how well they hold value anyway. If robo taxis happen in 2 years they’ll already have a massive fleet. If they don’t they have a bunch of cars they can resell for for an excellent price.

 

[NicoV]

Excellent post!

As a shorthand for anyone who asks me about what I mean about the underlying cash generation of Tesla I usually just point them to the trailing 12 month EBITDA figure, as its usually easy to find on most finance apps/sites. While it doesn’t include all of what you mention above, I think it is a good easy quick starting point.

(For those wondering, EBITDA = Earnings Before Interest Tax Depreciation & Amortization)

View attachment 426605

EBITDA is also known as ‘earnings before bad stuff’

 

[NicoV]

Looks like BMW and Mercedes should follow suit for another 5 years also:
Bloomberg - Are you a robot?

As FSD projects are the first of their kind, I think the development schedule will be like Word for Windows 1.0: It took Microsoft 5 years to develop, had an initial schedule of 1 year, and their estimate of when it would be released was only correct 3 months before the actual release.
Now we’re talking here about schedules of 5 year instead of 1 year, and adding major reorganisations due the the decisions mentioned in the article. I expect these projects to end with severely watered down features at best, and total cancellation at worst.

Speaking about watered down features, my colleague stated proudly that his new BMW would also have ‘summon’: his car can redo the last 50 meters before parking in the opposite direction autonomously. That’s poor man’s autonomy and a complete joke!

 

[Artful Dodger]

As FSD projects are the first of their kind, I think the development schedule will be like Word for Windows 1.0: It took Microsoft 5 years to develop, had an initial schedule of 1 year, and their estimate of when it would be released was only correct 3 months before the actual release.
Now we’re talking here about schedules of 5 year instead of 1 year, and adding major reorganisations due the the decisions mentioned in the article. I expect these projects to end with severely watered down features at best, and total cancellation at worst.

Speaking about watered down features, my colleague stated proudly that his new BMW would also have ‘summon’: his car can redo the last 50 meters before parking in the opposite direction autonomously. That’s poor man’s autonomy and a complete joke!

I expect that VW doesn't have a serious autonomy program of any type. I think they plan to BUY autonomy from a vendor like Intel/Mobileye 5 years from now.

I bet they won't like the license agreement. Why would a vendor let a simple carmaker get rich from their world beating, Trillion-dollar IP?

That's why Tesla is uniquely positioned in the autonomy space. Its also why Adam Jonas/MS is trying/lying so hard to spin off the FSD program away from Tesla.

Cheers!

EDIT: Jack's back on a Holiday!
"We discuss salvaged Tesla Model 3 repair strategies." (segment begins at 1:39:27)

 

[CorneliusXX]

This is a super interesting article for long term investors. One thing I noticed in the historical S-curve adoption is that over time the rate of adoption is higher. Older technologies used to take 50-70 years to go from 10% to 90%. Now you can expect them to take about 20 years.

In one of Clean Technica's charts they show it happening in about 10 years, which I don't think is possible given the constraints on battery production. It takes additional time to set up mines/battery plants/auto plants. Building a car is much harder than building an iPhone, and cars are more expensive and less essential than many of the other technologies on the chart.

I think 15-25 years is appropriate for EVs (to go from 10% market share in 2023 to 90% in 2043), which means that by about 2033 half the market will be EVs. Probably there will even be a hard cutoff where ICEs are banned around 2040 in many countries.

Mod: edited typo EV to ICE in last sentence above. --ggr.

Price is one factor that contributes to the speed of uptake. It's much easier for everyone to buy a 1k iPhone than a 40k Tesla

 

[Fact Checking]

Price is one factor that contributes to the speed of uptake. It's much easier for everyone to buy a 1k iPhone than a 40k Tesla

OTOH during much of its history the iPhone was a discretionary purchase that could be substituted with a ~$200 purchase that was functionally similar - with often superior hardware.

Once you objectively consider the advantages of an "EV lifestyle" Tesla cars have no substitute products, at any price.

Nor is the purchase of a car discretionary in many parts of the world - and there's over 15 million passenger cars sold at a price of $40k or higher, every single year.

I think there are two main constraints to EV adoption in the $40k+ price segment, which is about 50% of global automotive revenue:

• Form factor: $40k mid-size sedan is maybe 25-30% of the addressable market. Tesla is fixing this by covering the two other important form factors: a SUV that looks like a hatchback (Model Y), and the Tesla Pickup Truck. With those two 90%+ of the most popular form factors will be covered.
• Disinformation: the wall of disinformation started crumbling now that Tesla is adding another ~100,000 new owners every quarter.

100k new owners in the $40k price segment per quarter will have a significantly bigger effect than the 25k/quarter rate of $100k car owners that was the norm in 2016, 2017 and 2018.

Economies of scale matter not just to lower Tesla's production costs, but also to increase the strength of the grassroots efforts to counter EV disinformation with facts.

 

[PaulusdB]

I think you and others are just jumping the gun. Leopard doesn't change its stripes. Just wait for her next hit piece. i am sure it is coming.

I agree.
As mentioned before, there seems to be a bonus for 'market moving' reports. So why would a reporter piss against the wind, when it is more profitable to go with the flow?

 

[Tslynk67]

Norway, once again, shows how to do it:

Norway's $1tn wealth fund to divest from oil and gas exploration

It is a bit odd though when all the money in their fund originally comes from oil sales... Kind of a conflict of interest Norway has there, I'd say.

 

[Tslynk67]

This is a super interesting article for long term investors. One thing I noticed in the historical S-curve adoption is that over time the rate of adoption is higher. Older technologies used to take 50-70 years to go from 10% to 90%. Now you can expect them to take about 20 years.

In one of Clean Technica's charts they show it happening in about 10 years, which I don't think is possible given the constraints on battery production. It takes additional time to set up mines/battery plants/auto plants. Building a car is much harder than building an iPhone, and cars are more expensive and less essential than many of the other technologies on the chart.

I think 15-25 years is appropriate for EVs (to go from 10% market share in 2023 to 90% in 2043), which means that by about 2033 half the market will be EVs. Probably there will even be a hard cutoff where ICEs are banned around 2040 in many countries.

Mod: edited typo EV to ICE in last sentence above. --ggr.

I think there are catalysts that many other technologies didn't have helping them is regulation - ICE vehicles are progressively being banned from cities and eventually whole countries. I also feel that climate awareness is gaining traction now - perhaps thanks to luminaries like Greta Thunberg, people are beginning to realise that it is actually a thing and it will threaten their standard of living.

This will help drive the necessary personal decision and corporate investments.

 

[Tslynk67]

Jaguar announces electric car investment in UK

Jaguar Landrover to invest in the UK (Birmingham) for the production of and electric version of their XJ sedan.

From the article:

In response, the government said its focus on zero emission models had been a success, with registrations of battery electric vehicles up over 60% this year compared with the same period in 2018.

Yeah, no EV demand, Mr Fröhlich...

 

[NicoV]

Form factor: $40k mid-size sedan is maybe 25-30% of the addressable market. Tesla is fixing this by covering the two other important form factors: a SUV that looks like a hatchback (Model Y), and the Tesla Pickup Truck. With those two 90%+ of the most popular form factors will be covered.

90% of the most popular form factors, but not 90% of the number of vehicles. Certainly in Europe, a compact car is an absolute must-have in a brands car portfolio. I hope we get an update soon on Tesla’s plan for a compact car. It makes sense to build these cars in Europe, so these plans may depend on the Eurogigafactory plans.

 

[Fact Checking]

90% of the most popular form factors, but not 90% of the number of vehicles. Certainly in Europe, a compact car is an absolute must-have in a brands car portfolio. I hope we get an update soon on Tesla’s plan for a compact car. It makes sense to build these cars in Europe, so these plans may depend on the Eurogigafactory plans.

Yes, but note that I (carefully) qualified it with "$40k+ price segment":

Form factor: $40k mid-size sedan is maybe 25-30% of the addressable market. Tesla is fixing this by covering the two other important form factors: a SUV that looks like a hatchback (Model Y), and the Tesla Pickup Truck. With those two 90%+ of the most popular form factors will be covered.

Compact cars are most important in the $20k-$40k price segment.

Also note that what drives the speed of EV adoption is not "units sold" alone, but "revenue generated".

Tesla needs 10 more Gigafactories, and that's best financed through the ~25% of all units sold in the world that generate ~50% of the world's automotive revenue and generate ~75% of the margins: the $40k+ price segment.

 

[Artful Dodger]

Yes, but note that I (carefully) qualified it with "$40k+ price segment":

Compact cars are most important in the $20k-$40k price segment.

Also note that what drives the speed of EV adoption is not "units sold" alone, but "revenue generated".

Tesla needs 10 more Gigafactories, and that's best financed through the ~25% of all units sold in the world that generate ~50% of the world's automotive revenue and generate ~75% of the margins: the $40k+ price segment.

Well put, and its also a matter of priorities. There is more reduction in CO2 emissions by taking a new Ford F-150 off the market than by taking a FIAT 500 off the road. Ironically, the FIAT may deliver higher passenger seat miles in the real world than the F-150 (which is often driven with 1 occupant and an empty cargo bed).

But the 'Model 2' is coming! I look for it to be produced at Shanghai GF3/Phase 3 beginning by 2024. I expect it'll feature a 40 kwh bty that's half the size/weight of the Model 3 SR+ bty, seat 4 adults, and be cheaper to buy than a gas car ( < $28K USD).

Projected prices for battery electric vehicles vs. gasoline-driven cars | Axios Visuals

 

[NakedLong]

I think there are catalysts that many other technologies didn't have helping them is regulation - ICE vehicles are progressively being banned from cities and eventually whole countries. I also feel that climate awareness is gaining traction now - perhaps thanks to luminaries like Greta Thunberg, people are beginning to realise that it is actually a thing and it will threaten their standard of living.

This will help drive the necessary personal decision and corporate investments.

I agree there is going to be a huge demand for EVs, but Tesla is already supply constrained... that is why it's more important to look at the time it takes to ramp up battery and mining supply than looking at it from a demand perspective. The issues Tesla is having with Panasonic not supplying enough batteries, and Elon talking about getting into mining are hints that these are the things which are stopping Tesla from expanding faster. And this is with EV's only taking a few percent of the production share.

When Tesla decided to build the Gigafactory it was clear that without it Tesla could not succeed because there were simply not enough batteries being produced. So they spent 5 years ramping up the Gigafactory.

Now imagine how much more supply constrained the raw materials for batteries are going to become over the next 10 years as EVs start to become mainstream. Tesla is about to face a similar issue with the supply of raw materials as it did for battery supply. There is simply not enough global capacity for both batteries and the raw materials for batteries to support the rate at which EVs will want to grow.

I want EV's to take over the world as much as anyone, but raw materials and battery supply are on the critical path and will take a long time to ramp up (especially over the next 10 years as we enter the steep part of the S curve)

 

[Fact Checking]

Note that while the longevity of a product usually slows down adoption, for cars there's another effect: most customers can delay the purchase of a new car by 2-3 years just fine. So even if EV supply won't be able to keep up with demand, demand for ICE cars will drop significantly, which will increase the percentage of new EVs sold - which will further increase the visible speed of adoption.

BTW., I think there's some supporting evidence in Norway's car sales of how EVs are Osborning gascars over longer time periods: in 2017 there were 201,923 passenger vehicles sold, while in 2018 this dropped by -4.5% to 193,226, despite steady population growth of +37,368 people.

In particular the December 2018 car sales drop was significant: a -19% drop from December 2017, only 15,942 new cars were registered.

I believe this was clearly the "Tesla effect": it was clear the Model 3 would come to Norway and people were deferring their new car purchases.

Then in 2019 new absolute car sales records were set for recent Norwegian history: for example March 2019 was 18,375 units, +27% over the 14,401 new cars sold in March 2018.

 

[NicoV]

Tesla needs 10 more Gigafactories, and that's best financed through the ~25% of all units sold in the world that generate ~50% of the world's automotive revenue and generate ~75% of the margins: the $40k+ price segment.

But the 'Model 2' is coming! I look for it to be produced at Shanghai GF3/Phase 3 beginning by 2024. I expect it'll feature a 40 kwh bty that's half the size/weight of the Model 3 SR+ bty, seat 4 adults, and be cheaper to buy than a gas car ( < $28K USD).

I’m pretty sure when Tesla releases a compact car (aka Model 2), they will target the same 25% to 30% margin as on the Model S/X and 3. They probably won’t be able to achieve that until they have realised Alien Dreadnought 1.0 (maybe only when reaching 2.0). But when they achieve that, they will be able to build and sell an order of magnitude more of those cars than Model 3, and that will the ELE (extinction level event - Wiktionary) of the ICE age.

 

[FrankSG]

But the 'Model 2' is coming! I look for it to be produced at Shanghai GF3/Phase 3 beginning by 2024. I expect it'll feature a 40 kwh bty that's half the size/weight of the Model 3 SR+ bty, seat 4 adults, and be cheaper to buy than a gas car ( < $28K USD).

I don't know about this. Especially if they solve autonomy in the next couple of years, I think it's much more likely that the next car after the truck is a car designed specifically to be a robotaxi. I agree that it will be likely be much cheaper, but it'll also be very different from any car out there today. If 80% of robotaxi rides turn out to have <=2 occupants, it'll likely be a 2-seater for example.

 

[22522]

Thats the 2nd positive article in a row for Dana. Something feels different.

Possibilities off the top of my head (feel free too add more)
- the Q2 delivery result was the tipping point for Dana in realizing the TSLAQ trolls were actually full of sh!t. (Seeing as they were all very vocal about how Q2 was going to see worse deliveries than Q1)
- Michael Bloomberg finally heard about what some of his reporters were doing and took action
- Bloomberg has investigative reporters working on a piece about the possible fraudulent activity of the shorts.

Someone said something about bonuses for moving the market.

I think she makes money for articles aligned with market motion.

 

[Artful Dodger]

Someone said something about bonuses for moving the market.

I think she makes money for articles aligned with market motion.

That "someone" was Business Insider:

Bloomberg News Pays Reporters More If Their Stories Move Markets