A possible mistake in your assumption is that you revert back to a 50% growth rate after two years of 100% growth. That may be too optimistic, as 50-50-50-50-50 cannot simply be replaced by 100-100-50-50-50. More likely is something like 100-100-40-40-30.
Maybe, but not necessarily. After two years (2017-2018) of massive unit and revenue growth, 2019 and the first half of 2020 were spent building capacity without much of a production ramp. As production ramps in 2H 2020 through 2021 it is highly likely that annualized unit and revenue growth will be far higher than 50%. In that context, a resumption of 50+% average annual growth rates in both revenues and units in 2022-2025 is consistent with Elon's projections. It is also not hard to imagine growth at that level given the products in the pipeline as well as likely future products, even without fully functional FSD.
Note: Tesla (Elon) is not guiding for an average of more than 40-50% compounded growth over the next five years. His predictions on FSD may be off, on total production he is more accurate: Elon was spot on when in 2015 he predicted production of 500,000 cars in 2020.
Elon has repeatedly guided for at least 50% growth in both units and revenues. In the past year or so, he has mentioned 50-100% growth (Q2 2019 call quoted in my previous post), and also repeated the projection for over 50% growth for both units and revenues on multiple occasions since.
While people commonly use the shorthand of 40-50%, that's not really accurate, or at least lacks important context.
For example, on the Q1 2020 call, Elon reiterated the 50% growth target yet again. Significantly, he specifically rejected 40% as being "more realistic." He said 50% probably was "the likely number." 40% growth was described as a lower boundary or worst case scenario, not a target.
Speaker 1: (23:33)
Thank you. Now let’s go to questions from retail investors. Question number one, Elon has mentioned a 50% compound annual growth target for Tesla in the past. Is this still in line with Tesla’s ambitions for the next 5 to 10 years? This would 4 million vehicles in 2025 and more than 20 million vehicles in 2030. Is 40% a more realistic target?
Elon Musk: (23:57)
Well, it’s always difficult to predict what the macro situation is going to be. I think very few people would have predicted the unexpected sort of roundhouse that Covid came up with that sort of came out of nowhere. I think in the absence of some massive force majeure event, like quite massive, I think probably 50% is the likely number. It’s possible that it’s 40%. I would be very shocked if it’s less than 40%, even with a force majeure, short of World War Three. Tesla (TSLA) Q1 2020 Earnings Call Transcript - Rev
Thank you. Now let’s go to questions from retail investors. Question number one, Elon has mentioned a 50% compound annual growth target for Tesla in the past. Is this still in line with Tesla’s ambitions for the next 5 to 10 years? This would 4 million vehicles in 2025 and more than 20 million vehicles in 2030. Is 40% a more realistic target?
Elon Musk: (23:57)
Well, it’s always difficult to predict what the macro situation is going to be. I think very few people would have predicted the unexpected sort of roundhouse that Covid came up with that sort of came out of nowhere. I think in the absence of some massive force majeure event, like quite massive, I think probably 50% is the likely number. It’s possible that it’s 40%. I would be very shocked if it’s less than 40%, even with a force majeure, short of World War Three. Tesla (TSLA) Q1 2020 Earnings Call Transcript - Rev
I think it is worth getting this straight. There is a lot of confusion around the topic of Elon's growth estimates and it probably doesn't help that some of the transcripts badly butcher this quote to read as though Elon is suggesting a 40% growth rate going forward. The transcript quoted above matches what Elon actually said on the call.
While we are on the subject it is also worth correcting an error Rob Maurer recently made on this subject in claiming that Elon's >50% growth rate estimates are in the context of units not revenue. It is more correct to say that Elon has estimated growth rates for both auto units and total revenues to exceed 50%.
In 2015 Elon estimated 50% or greater annual revenue growth through 2025. Elon Musk's 'insane' call: Tesla is worth $700 billion
On the Q4 2019 call Elon reiterated this 50+% revenue growth target:
Elon Musk -- Co-Founder and Chief Executive Officer
Yeah. I think a few years ago, I said I -- yes, I think on our [Indecipherable] a few years ago, I said in my estimate, for us is that, Tesla would grow at an average compound annual rate -- average rate of in excess of 50%. I still hold to that belief.
Tesla, Inc. (TSLA) Q4 2019 Earnings Call Transcript | The Motley Fool
Yeah. I think a few years ago, I said I -- yes, I think on our [Indecipherable] a few years ago, I said in my estimate, for us is that, Tesla would grow at an average compound annual rate -- average rate of in excess of 50%. I still hold to that belief.
Tesla, Inc. (TSLA) Q4 2019 Earnings Call Transcript | The Motley Fool
It's of course fine to discount Elon's estimates, but I think it's important to be clear about what he has actually said on the topic.
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