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

[Remus]

Just musing on demand. There is a demand problem. There is not a demand problem. To be fair, both are right.

1. There is a demand problem. Tesla keeps dropping prices because they can’t sell all their EVs without discounting. This hurts margins. The more cars they sell, the more discounts they’ll need. They'll be forced to drop prices even more. Absolutely true.

2. There is no demand problem. Tesla is ramping up production as quickly as they can and sells cars as fast as they make them. Customers see the value, so they’re willing to pay more for a Tesla than any other car. But current prices are at the limit of affordability for the quantities manufactured so Tesla discounts to make them affordable enough at maximum production.

The first wants Tesla to be like Ferrari. Charge a premium to limited buyers, and make big margins. This puts dramatically fewer EVs on the road, which coincidentally aligns with fossil interests and short term investors.

The second wants Tesla to be like Ford circa 1910, selling to the masses. This aligns with saving the world aka the mission. Obviously bad for fossil interests.

The big picture includes one more thing, which is up selling software and services. Even if fully autonomous driving never works, Tesla’s mobile platforms aka “cars” have only started to show their full potential.

A good percentage of the market will pay extra for EAP that navigates local roads and summons and performs simple dog tricks. Tesla can add premium services to the radio and monetize app integrations like yelp. They could offer zipcar and Turo style services.

The point is that Tesla can drop prices on their cars *and* upsell software for more margins. Tesla’s integrated mobile platform, cloud, charging network, and backend compared to other cars today, is like the iPhone compared to flip phones back in the 2000s.

There's a much simpler explaination:

Tesla want to keep demand higher than production to compensate the problems in their distribution network.

 

[Cherry Wine]

Looks like they just randomly threw in those maintenance costs of $4,000 and $8,000.

My BMW going on 6 years, and my in-law’s BMW at 5 years, haven’t even cost close to $4,000 in maintenance costs. Of course our Tesla’s have cost even less. But, nothing like the discrepancy they’re trying to show.

I just looked back over records for my Subaru. It compares very well at $0.52/mile over five years, in spite of fuel costs of ~$12,000! A big part of that is resale value relative to purchase price -- it has depreciated by only about 40% due to it being a discontinued and sought-after model -- and very low financing costs.

 

[elasalle]

Looks like they just randomly threw in those maintenance costs of $4,000 and $8,000.

My BMW going on 6 years, and my in-law’s BMW at 5 years, haven’t even cost close to $4,000 in maintenance costs. Of course our Tesla’s have cost even less. But, nothing like the discrepancy they’re trying to show.

But, my parent’s 7-year old Odyssey has had less maintenance costs than our Tesla’s though because the Tesla maintenance service, just like with every other luxury automaker, is an arm and a leg compared to likes of Toyota/Honda.

After 1st 4 years of warranty, BMW is too costly to maintain ..

 

[Remus]

But, my parent’s 7-year old Odyssey has had less maintenance costs than our Tesla’s though because the Tesla maintenance service, just like with every other luxury automaker, is an arm and a leg compared to likes of Toyota/Honda.

You are lucky. 3 Odyssey owners I know had their transmission failed on them in 60k mile range. I don't know that many Odyssey owners.

 

[KSilver2000]

After 1st 4 years of warranty, BMW is too costly to maintain ..

Btw, it’s 4 years or 50k miles.
Regardless, I’m doing very well 2 years after the given maintenance. Thanks.

And my in-law’s ATS 3.6 hasn’t had any issues going on 6 years as well with maintenance nowhere even in the ballpark of $8,000.

 

[colettimj]

You have a short memory. Amazon was the street’s favorite whipping boy for many, many years. Quarter after quarter analysts would ream them for never making a profit and scoffing at them for only being able to raise money and burn through cash.

And in the early days, Amazon wasn’t even necessarily very good at distribution, which is their core competency today. In 2001 there was an analyst report ripping them about being bad at distribution noting now much money they were wasting.

You shouldn’t reason by analogy, of course, and just because Amazon is now dominant, doesn’t necessarily mean Tesla will be too.

But I take solace in the parallels. Online shopping is just better for most things than bricks and mortar, just like electric vehicles are better at most things than ICEs. In the early days, Amazon’s costs were too high and they were indeed losing a lot of money. But analysts never seem to appreciate that things aren’t static. While Amazon was losing tons of money, they were also figuring how to run an online store cost effectively. And they were building brand awareness and brand loyalty.

Kinda like Tesla bringing down battery costs, while building sustainable market share. I just bought my third Tesla, for example.

Amazon was run by a very bright guy who was committed to making Amazon work. Tesla is also run by a very bright guy committed to making Tesla work.

Along the way, Amazon realized they had built something else they could sell. AWS now runs about half the Internet by traffic volume. That’s some spin off business.

Tesla has got oodles of spin off businesses just waiting for attention. When they get big enough, they’ll be the dominant battery cell manufacturer in the world. They’ll have a much more efficient way of making cars than anyone else. They’ll have an OEM drivetrain business for any kind of vehicle.

Anyways, not an advice, as they say, since Tesla stock price could still be in the dog house for quite a while more.

Your post prompted me to go back and search the news archives. I found this article from November 1999 wondering if Amazon's build out of four automated warehouses would pay off. The last line from the article, "There's only this Christmas, and maybe a few more, to find out just how big Amazon.com can be."

Expect similar articles to come out if Tesla announces that they are going to start building their own battery cells. Why I think Tesla will do this is the same reason that Amazon built out warehouses; the fulfillment process/cell manufacturing is so critical to Amazon/Tesla that they can't leave it to others to handle.

 

[elasalle]

Btw, it’s 4 years or 50k miles.
Regardless, I’m doing very well 2 years after the given maintenance. Thanks.

And my in-law’s ATS 3.6 hasn’t had any issues going on 6 years as well with maintenance nowhere even in the ballpark of $8,000.

I sold my "Beemer - 328i x" around 35K miles around 5 and half years. Was fun to drive.
First issue around 5th year cost me $1100, next issue with fuel injectors was quoted at $2700. I fixed in non-bm workshop for $600.
main thing is when issue arises, it is a costly fix.
btw, there was a letter for fire hazard recall as well - and even though it has been 1 year since I sold it, I keep getting marketing calls to join some lawsuit

All the best, just basing it of my experience. ~ cheers

 

[anthonyj]

Where is Tesla POT (Plain Old Taxi) Service? Uber like App to fill the void till Robo ..

Tesla POT wouldn’t be able to compete with Uber or Lyft pricing. Uber subsidizes the ride cost, that’s why they lose money. If Tesla tried something like that, they would be in deep doo doo. Best to wait until robotaxis (I give it 5 years, I’m more bullish on EV tech than autonomy tbh)

 

[mrmage]

There's a much simpler explaination:

Tesla want to keep demand higher than production to compensate the problems in their distribution network.

Isn't that the same thing? Inventory is always imperfect, so discounting always needs to be localized. I don't think anyone offers the same discount across all countries.

 

[anthonyj]

Tesla releases Chess today. Very bankrupt

 

[powertoold]

Tesla POT wouldn’t be able to compete with Uber or Lyft pricing. Uber subsidizes the ride cost, that’s why they lose money. If Tesla tried something like that, they would be in deep doo doo. Best to wait until robotaxis (I give it 5 years, I’m more bullish on EV tech than autonomy tbh)

They could always put a premium on the rides and advertise it as, "ride-sharing in the world's safest cars." Etc.

 

[Todd Burch]

Indeed. A Toyota should need nothing more than oil/lube, tire rotations, wipers for the first five years.

Agree. My wife is on her second Camry. Very little maintenance in the first 5 years.

But God, what an awfully boring car.

(Edit: You're welcome for the Avatar change, folks. Happy weekend!)

To stay on topic: My published 5 year price target for TSLA (refer to the literature for details) of $1000 within 5 years is still intact.

 

[KSilver2000]

You are lucky. 3 Odyssey owners I know had their transmission failed on them in 60k mile range. I don't know that many Odyssey owners.

Maybe, maybe not. We’re good though.
Hard to believe you live in CA and don’t know many Odyssey owners. Do you not have kids? Only about 20% of all cars at a typical CA school drop-off/pickup are Odysseys lol.

 

[elasalle]

Tesla POT wouldn’t be able to compete with Uber or Lyft pricing. Uber subsidizes the ride cost, that’s why they lose money. If Tesla tried something like that, they would be in deep doo doo. Best to wait until robotaxis (I give it 5 years, I’m more bullish on EV tech than autonomy tbh)

This ain't gonna be Tesla's main revenue stream, just add-on.
Just allow Tesla owners to use SC for incentives and make some money on it.
Start a program to get used inventory into the Taxi program and get rid of inventory.

Set some ground rules and let some 3rd party start the service. (more charging $, reduce used inventory ) ...

 

[anthonyj]

They could always put a premium on the rides and advertise it as, "ride-sharing in the world's safest cars." Etc.

Might work in Cali, revenue probably wouldn’t be worth all of the trouble though

 

[KSilver2000]

I sold my "Beemer - 328i x" around 35K miles around 5 and half years. Was fun to drive.
First issue around 5th year cost me $1100, next issue with fuel injectors was quoted at $2700. I fixed in non-bm workshop for $600.
main thing is when issue arises, it is a costly fix.
btw, there was a letter for fire hazard recall as well - and even though it has been 1 year since I sold it, I keep getting marketing calls to join some lawsuit

All the best, just basing it of my experience. ~ cheers

Sounds like you had an unlucky ownership.
Glad you have better luck with Tesla.

 

[elasalle]

Might work in Cali, revenue probably wouldn’t be worth all of the trouble though

Forget revenue, just eat the competitions lunch

 

[dww12]

Indeed. A Toyota should need nothing more than oil/lube, tire rotations, wipers for the first five years.

Probably brakes and rotors, brake fluid change, coolant flush, maybe new 12v.

 

[KSilver2000]

They could always put a premium on the rides and advertise it as, "ride-sharing in the world's safest cars." Etc.

Sounds like a gun debate argument to be had.
It’s not the gun itself that’s a problem but the person or computer operating it that could be.
Or is it really just about the car?

 

[KSilver2000]

Probably brakes and rotors, brake fluid change, coolant flush, maybe new 12v.

Same as with a Tesla, and the cost to do it for the Tesla will be more than 2-3x $.