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

[lklundin]

Yeah, Model Y probably should have come first, but I think many people forget how long ago that decision was baked in. It's in the *original master plan* from when the *Roadster* was released. They were working on "Bluestar" all along. For most of that period, sedans were dominant and station wagons ("SUVs") were a smaller, niche market. I think Model 3 was much too far along in development and they were not ready to change the form factor by the time the shift from sedans back to station wagons (under the new nickname "SUVs") happened.

I think back in the Model 3 design phase, Tesla needed to be very much aware of the public's propensity for range anxiety.

So it would be natural to bring the most efficient car to market first.

Like it was done with the Model S, which was followed by the X.

 

[neroden]

2013? Aren't actuarial tables hard to make without a valid data set?

The extended warranty & extended service plan were originally comically mispriced. Anyone who knew very little (including me) could see it was too cheap. They doubled the price a couple of months later. It was still a bit too cheap.

You can project the warranty costs on a new product just based on the general warranty history for "new product" in manufacturing -- there's always going to be a number of design errors which cost you a lot which you won't figure out for a few years, and you can estimate how many and how severe they are likely to be. (So, the correct warranty pricing for a 2016 Model S after all the major design errors were found and corrected could have been a lot lower than for a 2013 Model S.) But this is a standard part of the pricing design for warranties, and Tesla just didn't do it -- they priced based on irrational optimism.

It would be nice if they don't do this with their insurance product.

I mean, I think it's very easy to get the insurance stuff right, but then I also think it's fairly easy to get the communications stuff right (which Tesla has screwed up continuously for 6 years), and I think it's extremely easy to get the audio player right (which Tesla seems congenitally unable to fix). And it's so easy to get the geographical distribution of service centers right that Elon Musk called it a "foolish oversight", and yet they still got it wrong for five years.

So Tesla does make super dumb mistakes in areas where it's easy to get it right.

The difference between the other dumb mistakes and mistakes in insurance pricing is that one year of mistaken pricing in the insurance business can kill your company completely. It's like mistakes in banking (which is what doomed SolarCity). I'm following an insurance company which had about five years of bad pricing on one product, and has been trying to dig out from under the hole that put them in for over a decade, even though everything else is doing great and they're pricing the product correctly now.

 

[DaveT]

A vision self driving system needs a supercomputer, redundancy built into the car control systems, loads of wiring for the sensors etc. Retrofit cost for a real self driving solution will be extremely expensive so very hard to get into consumer's cars. Comma.AI is 12 people working on retrofit driver assist, they do not seem to have any credible path to full self driving - i'm not sure this is even their ambition.
Waymo could choose to admit their Lidar first approach is wrong and drop everything to try to copy Tesla, but this is still extremely difficult to do if you are not a vertically integrated EV manufacturer where all systems have already been designed for redundancy and are set up to be software controlled.
Traditional auto manufacturers are also extremely slow to change their car designs, taking many many years to go from design to production. I think if Waymo/other Lidar companies were to pivot to copying Tesla's approach, it would be several years before they got the hardware rolled out into consumer's cars in significant numbers, and then they would also be very far behind in building the fleet data collection & filtering systems and other software 2.0 infrastructure Tesla has already spent years building and improving, as well as behind on building up annotated datasets/training cases for 100k+ driving scenarios.

Tesla surely has the FSD but nothing they're doing is earth-shattering or insurmountable. Others will also solve FSD... the only question the timing.

Google or Apple can design a chip... actually who's to say that Apple isn't secretly designing their own FSD chip right now?

And Google/Apple/Others can partner with a manufacturer to get cameras/sensors installed and their FSD chip/computer installed as well. Some people think this will take 5 to 10 years, but I look at it differently. If Google/Apple are motivated they can make it happen much, much quicker than that. Google (or Apple can announce a deal with Chrysler (or other company) that they're putting a google designed FSD system in one of their models, complete with FSD computer, cameras and sensors. Of course this is assuming that they've committed to a vision-focused FSD system, which I think it's possible that Google/Apple/etc already have teams working on.

 

[azaz]

Not sure FSD needs to figure out what is a store front and what is not

that's for google maps. but there are tons of driving related captchas now. it's not a coincidence.

 

[kbM3]

Great to hear you have personal experience with the comma.ai system.

I definitely agree it's not fair to compare them to Tesla's system, which is better. However, I bring them up because there's a prevailing opinion here that Tesla's data advantage is insurmountable.

Comma.ai shows us you can get data through very simple means (ie., a cell phone mounted to the dash of your car) and it can provide quite a lot of data.

I'm not claiming that data from a dashcam system will be sufficient to surpass Tesla, but I think if you had a dashcam/camera/cellphone system on several million cars, it will provide quite a lot of data and companies like Google can use that data to speed up their FSD efforts.

My guess is that when people say Tesla’s lead is insurmountable, what they really mean is that with a two to three-year headstart in the industry, they will get a ton of money early and become the de facto standard in the business. It will be incredibly difficult for anyone else to overcome. Eventually though, I think competition will come and start a price war down.

 

[DaveT]

Bold above is a joke, right? All 100,000 of them? or just 2,000 to match Fast Charging Stations.
Why couldn't you also retrofit a used EV then too. The non-Tesla's depreciate even more than an ICEV.

You could retrofit a used EV but most of them like Nissan Leafs have such low range and no fast charging.

My point being is that the FSD will be driving be economics.

If Tesla proves there's money to be made in robotaxis, which is fairly obvious to see, then you'll have a flood of companies and people entering that field to eat away the profits.

It's just that in the autonomous transport field, it won't just be mom/pop folks but you've got the best software/AI companies in the world as well... along with a particular software/AI company that specializes in disrupting business models by offering "free" services.

 

[izemize]

It's amazing how much you guys can argue over a feature that will be deployed earliest in 18 months in the investor thread. There is a whole forum with multiple threads for this topic: Autonomous Vehicles

 

[Boomer19]

Let me put it politely: he's a distillation of the worst traits of human nature, rolled into one disgusting package, has no redeeming qualities or virtues whatsoever, represents everything I consider vile and makes me want to puke.

OT but funny

 

[lascavarian]

This is part of my point. I think until Tesla starts actually training its cars to act like defensive drivers, they aren't really working on the full robotaxi problem.

This could be further discussed. It seems to me that defensive driving is an attempt to build in a cushion that accounts for the human reaction time. It is bracketed by human limitations (organic latency). Many of the things a human can't do like looking at both side mirrors at the same time can be done more practically by the FSD sensor tech and vastly reduced latency.

I don't think we really know what is possible and how many potential issues might melt away with enhanced awareness and much reduced reaction time, if I am correct.

 

[DaveT]

My guess is that when people say Tesla’s lead is insurmountable, what they really mean is that with a two to three-year headstart in the industry, they will get a ton of money early and become the de facto standard in the business. It will be incredibly difficult for anyone else to overcome. Eventually though, I think competition will come and start a price war down.

Yes, I think that's the correct perspective. Tesla does have a 2-3 lead right now, and they have a chance to be the winner in a huge autonomous transport market. However, there are many scenarios that can play out. And I think it's far from guaranteed that Tesla has the largest autonomous transport platform in 10 years.

What I do believe is likely is that there will be a lot of competition and fierce competition, and yes there will be a price war and it will become ridiculous cheap to transport people/things. Margins will be super low and most companies will go out of business in this field. The winner in the end will win by outlasting everyone else and charging the least. I don't think it will be pretty. But in the end, whoever has the dominant autonomous transport platform will be able to monetize through all the services that can be built on and through that platform.

 

[Remus]

Tesla surely has the FSD but nothing they're doing is earth-shattering or insurmountable. Others will also solve FSD... the only question the timing.

Google or Apple can design a chip... actually who's to say that Apple isn't secretly designing their own FSD chip right now?

And Google/Apple/Others can partner with a manufacturer to get cameras/sensors installed and their FSD chip/computer installed as well. Some people think this will take 5 to 10 years, but I look at it differently. If Google/Apple are motivated they can make it happen much, much quicker than that. Google (or Apple can announce a deal with Chrysler (or other company) that they're putting a google designed FSD system in one of their models, complete with FSD computer, cameras and sensors. Of course this is assuming that they've committed to a vision-focused FSD system, which I think it's possible that Google/Apple/etc already have teams working on.

You sounded really naiive.

First they have to admit they were wrong, which is damn hard to do given all the politics going on in these companies. Apple's car projects has went through multiple re-orgs and political fights have pretty much stalled the projects for all these years, non-stop. Why do you think Google fails to catch up with Microsoft in cloud computing even when they appear superior in almost all technology fronts? because admitting one's wrong strategically means some group of people high up will lose their high paying job. landing another one in current market is not an easy feast. Currently they are trying very hard to get investors to take Waymo away from them. What do you think would happen if they suddenly admit publicly that they have been wrong all along?!

and that's only the start. they already partner with chrysler. just announced they gonna build those vans with expansive hats on top. now they change course, don't you think chrysler would take a pause?

 

[jhm]

Actually, I think there is an opinion, perhaps led by Elon, that Tesla does have an insurmountable lead. Thus, that because the main reason why he thinks the Model 3 will become an appreciating asset.

But if Tesla doesn't have an insurmountable lead, and others solve FSD as well within a reasonable amount of time, then the Model 3 has little to no chance at become an appreciating asset.

Regarding your argument that the market is giving $0 value for Tesla's robotaxi business, I would actually disagree. If Tesla had no AP/FSD at all and let's say they used another company's technology, then I think TSLA stock price would be at least 20% lower than it is now.

My personal opinion on Tesla FSD is that they are in the lead and they have an amazing chance to win in a huge market but they it won't be easy because they'll be going against the best software companies in the world who are executing at a higher level than Tesla.

Look, there is no need for Tesla to have a monopoly on robotaxis, just as there is no need for Uber to currently have a monopoly on ride hailing. You are just moving goal posts to a silly location. There is room for several robotaxi operators in the market. They would be competing with human driven taxis and private vehicles for quite a long time. So of course, there is plenty of time for Tesla or the Model 3 appreciate in value from this.

Of course, the market is giving Tesla some value for the current state of AP/FSD. That was well in place before the autonomy investor day. I am specifically talking about the robotaxi business. That has not demonstrated any substantial appreciation since the autonomy investor day, which is how I conclude that it specific value is $0.

So yes, Tesla has advantage and nothing will be easy. But is not a monopoly or nothing opportunity. There are about 2 billion cars on the road. Just to replace this fleet would require about 400M robotaxis. If they all had 1 million mile life ranges, you'd need to replace about 25M robotaxis every year just to maintain the fleet size. At that scale, they had better all be EVs. So it would be pretty sweet for Tesla to have a monopoly for these 25M AEV robotaxis per year market, but by no means is such a monopoly a requirement for Tesla to get a really awesome valuation some day.

 

[neroden]

This could be further discussed. It seems to me that defensive driving is an attempt to build in a cushion that accounts for the human reaction time.

You're incorrect. It's actually an attempt to build in a cushion that accounts for the lunacy of everyone else on the road, including the drunk drivers, the road ragers, the unlicensed drivers, the deer and the bison, the drunk pedestrians, the sloppy construction crews, the unleashed dogs, the truck driver with product spilling off the back of his truck, etc.


Those aren't going away. Though the freeway does make some of them *much* less frequent, whch is why city streets and rural roads are so much harder.


The principle I picked up from my defensive driving courses was "Assume everyone else is a maniac and will do the stupidest, most dangerous possible thing". That's the general principle.

 

[DaveT]

Look, there is no need for Tesla to have a monopoly on robotaxis, just as there is no need for Uber to currently have a monopoly on ride hailing. You are just moving goal posts to a silly location. There is room for several robotaxi operators in the market. They would be competing with human driven taxis and private vehicles for quite a long time. So of course, there is plenty of time for Tesla or the Model 3 appreciate in value from this.

Of course, the market is giving Tesla some value for the current state of AP/FSD. That was well in place before the autonomy investor day. I am specifically talking about the robotaxi business. That has not demonstrated any substantial appreciation since the autonomy investor day, which is how I conclude that it specific value is $0.

So yes, Tesla has advantage and nothing will be easy. But is not a monopoly or nothing opportunity. There are about 2 billion cars on the road. Just to replace this fleet would require about 400M robotaxis. If they all had 1 million mile life ranges, you'd need to replace about 25M robotaxis every year just to maintain the fleet size. At that scale, they had better all be EVs. So it would be pretty sweet for Tesla to have a monopoly for these 25M AEV robotaxis per year market, but by no means is such a monopoly a requirement for Tesla to get a really awesome valuation some day.

I think we have a depressed valuation for Tesla's potential robotaxi business largely because of Elon's credibility problem.

 

[mongo]

The principle I picked up from my defensive driving courses was "Assume everyone else is a maniac and will do the stupidest, most dangerous possible thing". That's the general principle.

How do you get anywhere then? Especially on a two lane road where the oncoming cars could swerve into you at any moment? Or, how do you ever justify going through a blind corner? Safe against all possible cases is not feasible on the current road system.

If you can stop faster than the object in front of you, that is one level of safety. However, it is immediately negated by the stopping distance of the person behind you than you cannot control.

 

[neroden]

I think we have a depressed valuation for Tesla's potential robotaxi business largely because of Elon's credibility problem.

Elon's credibility problem is not going away. Ever, probably.

 

[DaveT]

Look, there is no need for Tesla to have a monopoly on robotaxis, just as there is no need for Uber to currently have a monopoly on ride hailing.

I think the bigger question is if the robotaxi is a winner-takes-all market or not. It appears you think it's not. But some would argue it is.

 

[neroden]

How do you get anywhere then? Especially on a two lane road where the oncoming cars could swerve into you at any moment?

Very carefully. When you see a car coming, you prepare to brake and pull over, leave extra space in your lane. Then you watch for signs that the driver is not a maniac (for instance, they're maintaining lane position, not going too fast, etc.) and if they seem OK you can relax and keep going.

Or, how do you ever justify going through a blind corner?

Honk, wait, creep.

Safe against all possible cases is not feasible on the current road system.

If you can stop faster than the object in front of you, that is one level of safety. However, it is immediately negated by the stopping distance of the person behind you than you cannot control.

You get rear-ended occasionally. The law basically says that you are never at fault if you get rear-ended (interesting, eh?)

It's true you can't eliminate all risk, but basically the attitude is "expect bad behavior and try to be as prepared for it as you can". Hence "defensive".

There have been highways -- notably in Chicago -- where the defensive driving advice was simply "don't use that road at all". I remember being advised that if there were too many bad drivers on a road, so that it was hard to defend against them all, the defensive choice was to get off and take another route.

 

[Drax7]

Tesla cars will become appreciating assets, wonder how the insurance will
Reflect that.

 

[Nocturnal]

It's amazing how much you guys can argue over a feature that will be deployed earliest in 18 months in the investor thread. There is a whole forum with multiple threads for this topic: Autonomous Vehicles

FSD or lack of is the biggest driver of future TSLA value.

Look, there is no need for Tesla to have a monopoly on robotaxis, just as there is no need for Uber to currently have a monopoly on ride hailing. You are just moving goal posts to a silly location. There is room for several robotaxi operators in the market. They would be competing with human driven taxis and private vehicles for quite a long time. So of course, there is plenty of time for Tesla or the Model 3 appreciate in value from this.

Of course, the market is giving Tesla some value for the current state of AP/FSD. That was well in place before the autonomy investor day. I am specifically talking about the robotaxi business. That has not demonstrated any substantial appreciation since the autonomy investor day, which is how I conclude that it specific value is $0.

So yes, Tesla has advantage and nothing will be easy. But is not a monopoly or nothing opportunity. There are about 2 billion cars on the road. Just to replace this fleet would require about 400M robotaxis. If they all had 1 million mile life ranges, you'd need to replace about 25M robotaxis every year just to maintain the fleet size. At that scale, they had better all be EVs. So it would be pretty sweet for Tesla to have a monopoly for these 25M AEV robotaxis per year market, but by no means is such a monopoly a requirement for Tesla to get a really awesome valuation some day.

And it's likely they will be very differentiated. There may be a company that offers ugly boxes for cheap moving of people in select cities, while Tesla Network offers visually appealing and comfortable vehicles for a slightly higher fee in all markets etc.

Elon's credibility problem is not going away. Ever, probably.

Which is silly because he has delivered on everything he has tried to do so far.