Tesla estimates that $125 - $150B of remaining CapEx is required to get to 20M veh/yr and 1 TWh of scale. Why isn’t this getting more attention?
Why did Tesla give exclusive access to Wall St on Investor Day?
Yeah, yeah, I'm gettin' to it...
Mostly, because its really two parts, and requires some analysis.
So first, your statement that Telsa could easily earn the ~$150B remaining CapEx is sound. On vehicles alone, if we assume $30K ASP, 20M Units, and 20% g.m. then that's already $120B in gross profit (likely falls mostly to the bottom line if Tesla can remain debt-free and continues funding growth from FCF.
The second part of this is why did Tesla give exclusive access to Wall St on Investor Day? Is Tesla planning to borrow money to get to their stated targets by 2030? Could this be bonds, equity, or private capital? Was retail (ie: Gali) punted b/c they don't have $150B in their back pocket (and can't keep a secret when PATREON is at stake?) So many questions:
Well, we just don't know. But
we can do a simple projection of CapEx requirements based on exponential growth in 3 steps (capacity built-out in stages from the existing 2M/yr, to 8M/yr, to arrive finally 20M/yr in time for 2030):
- the S3XYplants will expand from 2M/yr to 4M/yr out of FCF, while continuing to toss off 10% profit:
- ASP $40k, g.m. 20%, 3m/yr avg = $24B/yr FCF or $168B over 7 years
- discounted cash flow at 4% (Tesla's 10-yr borrowing rate) values current FCF at $127B) which is already enough FCF to fund Tesla's growth plans
- Gen 3 (Giga Monterrey + 1 other?) will go from 0 to 4M/yr and cost $10B over 2 yrs ($20B in 4 yrs?)
- it's already obvious that existing S3XY factories produce enough FCF to fully fund Gen 3 w/o incurring addtional debt (so why was Wall St. given front row seats on I.D.?)
- 2nd wave Gen 3 plant (yet-to-be-announced) will go from 4 to 8M/yr and cost another $10B to $20B
- ASP $25k, g.m. 20%, 4m/yr avg = $20B/yr FCF or $100B over 5 years
- discounted cash flow at 4% (Tesla's 10-yr borrowing rate) values current FCF at $82B)
- 1st wave Gen 3 will easily pay for 2nd wave out of their FCF (how does debt figure in?)
- Telsa generates $210B in discounted FCF out of just S3XY plus 1st wave Gen 3 by 2030. This is easily enough of a business case to justify any loans that Tesla may choose to pursue with Wall St banks
- 2nd wave of Gen 3 (likely the Robotaxi fleet) let's Telsa create the "Tesla Network" (TN) beginning in 2027 out of FCF from 1st wave Gen 3 plants. FSD is very likely to be ready for deployment by then (2 yrs w. 100x the N.N. training power available vs. current level; 10x in 2023, another 10x in 2024)
- Tesla potentially keeps their Robotaxi production (alternative is to keep proportion of production matching the g.m. achieved on the hardware, ie: 40% g.m. lets them buy 40% of RTs out of margins)
- this potentially allows Tesla to grow a 4m unit/yr self-owned Robotaxi fleet as follows:
- $0.50/mi income @ 30k paid miles/yr/robotaxi = $15k/robotaxi/yr (conservative)
- 4m robotaxis produces $60B/yr annual income, compounding w. production as follows:
- 2028 1m taxi's (operated w. a net loss while they shake out the system)
- 2029 2m taxi's break even for the first time
- 2030 4m TN taxi's on the road $30B net income
- Fleet sales to 3rd-parties begins (income sharing neglected below)
- 2031 8m TN taxi's produce $90B in net income
- 2032 12m TN taxi's produce $150B net
- 2033 16m TN taxi's produce $210B net
- notice that TN earnings gowth start at about 67% and trends to 40% over time so this justifies a EPS mulitple of what 20x? 40x? (Pick a number)
- EPS contribution just from TN reaches $70/share by 2033. So that's maybe $2,000 share valuation just for TN by then (discounted to today @ 15%) the current value of TN is ~$500 per share addtional for TSLA, growing to $2K/sh in 10 years.
My conclusion on the question of the day is, Wall St. money may be needed if Robotaxi tech isn't ready yet by 2030. I view this a risk mitigation from Tesla, not a likelihood. Wall St. needs to have some skin in the game if they want the company to grow. A lot of this is simply public support, and dealing with FUDsters and Hedgsters...
Robber Barons Ron Baron, did I get this about right?
Cheers to the Longs!
P.S. the above is just for
TESLA NETWORK. So another 2x for the auto and energy business, and then 2030s AI and Robotics is all bonus cash. So+ wot? (10x < A.I.bots < 100x) for that?
Moar Mars? So potentially wot then? Over $6,500 net present value for a Tesla share?
P.P.S. Not selling on Monday morning...