TSLA Market Action: 2018 Investor Roundtable

[ZachF]

Actually EVs are at 1.7% market share now and growing 69 percent year over year. It's only a matter of 3 to 4 years to hit 10 percent. Global August Sales: Model 3 Dominates, Tesla #1 Overall

EVs should be about 2% of the market here in the US this year (~310k/16,800k). Next year they'll probably be 3%.

ICE car sales probably peaked here in the US in 2015/2016.

 

[Remus]

Do you remember in 2007, Steve Jobs said it would be awesome if the iPhone captured 1% of the market, because that would be 10 million phones... 10 years and 1 billion phone sales later...

ICE cars have a finite life, because there is only about 50 years of oil remaining at current consumption levels. That's an inevitability, not up for debate.

Tasha Keeney from ARK Invest today made the point that Tesla is 3 years ahead in battery tech, 3 years ahead in autonomous hardware AND data (because they're the only ones with actual cars on the road). The Model 3 has the highest gross of any car in the US market RIGHT NOW. Other auto makers have to both catch up with Tesla AND maintain their current manufacturing and sales in ICE cars, so they don't give up that market to one another. That's going to be really hard for them to do... VW need to try and sell a $25k 'Golf'-like car, because VW drivers love them. That's going to be really hard to do.

Tesla don't have to worry about legacy. Like Apple, they can just look forward and not be concerned with history. ICE manufacturers have to transition people from the Ford Focus to the Ford EV, at the same price, with the same infrastructure for the average Joe/Josephine. Ugh... that's not going to be easy for them.

I've been resistant to the Apple parallels for about a year - but the similarities are uncanny. High margins, the best applied technology (it's no good having the best stuff in the labs) and a slightly crazy CEO (yes, it's the crazy ones that change the world).

BTW, she said Tesla stock is destined for $4,000... she also said they factored in a $10bn to $20bn equity based cash raise.

Bullish? Yes. Entirely off the wall? Maybe not...

What happened to the cautious and sometimes skeptical Wooloomooloo that I know? You hacked his account?

 

[RobStark]

Then after battery cost is viable, create affordable nameplate to give the death blow to Ford/GM. This is more organic way to grow for Tesla and EV.

1)Electric powertrain cost reaches cost parity with ICE powertrain at $100/kWh.

Tesla should be there within the year.

2) Ford and GM make over 70% of their profits from full sized trucks and full sized truck based SUVs that cost between $27k-$100k. They don't make much, if any, money on $25k Malibus or $18k Foci.

 

[RobStark]

EVs should be about 2% of the market here in the US this year (~310k/16,800k). Next year they'll probably be 3%.

Tesla should have over 1% US Market Share in 2018.

 

[DragonWatch]

Indeed, and note that it's even worse than just 'margin compression', because global average margins are around 6%:

Key automotive manufacturers' profit margin worldwide 2016 | Statistic​

But even a 10% cut in the price (which would bankrupt 90% of the carmakers) wouldn't make them competitive with EVs!

The only basis the overwhelming majority of ICE models can compete on is availability and minimum price (affordability). Only 10-20% of the market can afford a $50k Model 3, but around ~50% will be able to afford a $35k Model 3.

Once that happens the highest margin ICE sales will convert to Model 3's and in 2 years SUV sales convert to Model Y's.

Only, and I say again, only after I get my Tesla Pickup!

 

[ZachF]

Tesla should have over 1% US Market Share in 2018.

And probably >2% in dollar terms.

Next year it'll probably be just under 2% in numerical terms and ~3.5% of the US market in dollar terms.

 

[UncaNed]

Exactly. And this inflection point will seem to come out of nowhere.

When I said this earlier-

"Has anyone considered how fast ICE sales will die the day the first poor owner of a late model BMW tries to trade it in and learns used ICE cars are as worthless as great grandma's fine bone china?

That day will be here very soon, and this is a powerful selling point against buying anything other than a Tesla."

I was mostly thinking of the owners of the kind of high-end cars whose market share Tesla is mopping up; while EVs might be only 1% of all vehicles, Tesla is or will be taking a huge proportion of those high-end models. And the situation will likely be noticed and talked about by that relatively influential clientele.

 

[tinm]

As of this moment, Business Insider still hasn't deleted their tweet about the article, which asserts Musk was "booted off the board." That's too click-worthy for them to change, I guess.

Looks like they changed the headline... a$$holes...

 

[Off Shore]

I used to think this... but I'm not so sure.. I think that for premium car makers you are correct, but for Ford/GM, they have their target customer, who prob will remain an ICE buyer for some time. Plus there just isn't enough profit at low price point. I think this is fine for Tesla. Let Tesla continue to capture market share in premium segment, hopefully become #1 globablly. Then after battery cost is viable, create affordable nameplate to give the death blow to Ford/GM. This is more organic way to grow for Tesla and EV.

IMO this otherwise clear analysis leaves out the visceral experience of being in a Tesla. As long as Tesla (or others) have no offerings below ~$35K, cheaper ICE vehicles will sell to increasingly bitter and disappointed people who've ridden in their neighbor's Tesla. Not an attractive business to be in.

 

[mongo]

And probably >2% in dollar terms.

Next year it'll probably be just under 2% in numerical terms and ~3.5% of the US market in dollar terms.

You may be underestimating slightly.
17.25 million vehicles sold in 2017. 2% = 350k = 7,200k per week × 48 weeks (ignoring exports, Model 3 rate above 5,200, and increase in market size). 2k S/X +5.2k 3 per week

 

[EVNow]

When I said this earlier-

"Has anyone considered how fast ICE sales will die the day the first poor owner of a late model BMW tries to trade it in and learns used ICE cars are as worthless as great grandma's fine bone china?

That day will be here very soon, and this is a powerful selling point against buying anything other than a Tesla."

I was mostly thinking of the owners of the kind of high-end cars whose market share Tesla is mopping up; while EVs might be only 1% of all vehicles, Tesla is or will be taking a huge proportion of those high-end models. And the situation will likely be noticed and talked about by that relatively influential clientele.

But most of them are leased. Problem comes when the OEMs lose a lot of money when they re-sell the cars back from lease - and have to increase lease prices.

 

[ZachF]

Exactly. And this inflection point will seem to come out of nowhere.

This is something very few people have factored in.

When it starts to become most common knowledge that the EV is going to supplant ICE cars, the depreciation rates of non-autonomous capable ICE cars are going to get crazy. The collateralization model for financing cars is going to break down. You'll get much lower trade-in values, higher financing rates, and shorter terms. The amount of ICE car you can afford in terms of payments will collapse. many people who bought new ICE cars will be underwater. It would be even worse if autonomy comes along and all of the sudden the lower/middle incomes brackets and elderly switch over to it. (because one autonomous car can replace many)

This could actually become the source of a future financial crisis, IMHO.

 

[ZachF]

When I said this earlier-

"Has anyone considered how fast ICE sales will die the day the first poor owner of a late model BMW tries to trade it in and learns used ICE cars are as worthless as great grandma's fine bone china?

That day will be here very soon, and this is a powerful selling point against buying anything other than a Tesla."

I was mostly thinking of the owners of the kind of high-end cars whose market share Tesla is mopping up; while EVs might be only 1% of all vehicles, Tesla is or will be taking a huge proportion of those high-end models. And the situation will likely be noticed and talked about by that relatively influential clientele.

I think this scenario will play out on the market as a whole once EV adoption hits the steep part of the S-Curve.

It will be even worse if/when driving autonomy comes. Since one autonomous fleet car can replace many individually owned ones, it's not improbable that a huge glut of old ICE cars builds up very quickly.

 

[EVNow]

It would be even worse if autonomy comes along and all of the sudden the lower/middle incomes brackets and elderly switch over to it.

This could actually become the source of a future financial crisis, IMHO

This is the thing OEMs dread the most. Self-driving cars could reduce car sales by 5x. Given that even 10% drop puts the auto majors in the red, you can imagine what will happen when the volume goes down by 80%.

Not just OEMs - this can collapse the entire parts industry (which will affect Tesla too). The whole industry needs to adjust to a lower level of volume.

 

[BenPrice]

I’m off to bed.

Happy short squeeze eve.

 

[ZachF]

This is the thing OEMs dread the most. Self-driving cars could reduce car sales by 5x. Given that even 10% drop puts the auto majors in the red, you can imagine what will happen when the volume goes down by 80%.

Not just OEMs - this can collapse the entire parts industry (which will affect Tesla too). The whole industry needs to adjust to a lower level of volume.

It depends on what the market share of EVs is when autonomy takes off, and how fast people adopt the technology. If EVs are still only 20-25% of sales when it happens all the decline will fall on the ICE manufacturers hands.

It will certainly reduce car sales but the question is how much. I'm sure many will still want to individually own if you're wealthy, but you will probably just lease it for 2-3 years and then it will go to a rideshare service when you trade it in (possibly to another country even if the numbers here don't add up) since a few years of use will still have hundreds of thousands of miles of usable service.

Since EV drivetrains are capable of so many more miles than ICE cars, most of the depreciation IMHO will be from elapsed time rather than miles driven.

The US, because of cultural and economic reasons will probably have a large percentage who individually own, more than anywhere else if I had to guess... But it will likely decline greatly.

Autonomous EVs will also lower the income threshold for transportation, so some developing countries could see a large increase in EV demand even if a car can be spread amongst 3-10 people.

 

[omarsultan]

IMO this otherwise clear analysis leaves out the visceral experience of being in a Tesla. As long as Tesla (or others) have no offerings below ~$35K, cheaper ICE vehicles will sell to increasingly bitter and disappointed people who've ridden in their neighbor's Tesla. Not an attractive business to be in.

I would venture, that is going to be short window until off-lease Model 3s start hitting the market in a couple of years and start denying legacy makers new revenue: would you prefer a 2-year-old Model 3 or a brand new $whatever?

 

[MP3Mike]

I would venture, that is going to be short window until off-lease Model 3s start hitting the market in a couple of years and start denying legacy makers new revenue: would you prefer a 2-year-old Model 3 or a brand new $whatever?

I doubt there will be 2-year leases for the Model 3 to start. They have only done that once as a promotion for the S&X.

 

[tivoboy]

Auto industry will become all EVs fairly soon.

So therefore...

Define soon please?

 

[RobStark]

You may be underestimating slightly.
17.25 million vehicles sold in 2017. 2% = 350k = 7,200k per week × 48 weeks (ignoring exports, Model 3 rate above 5,200, and increase in market size). 2k S/X +5.2k 3 per week

"That's the new forecast from Cox Automotive, anyway. The Atlanta-based owner of Autotrader, Kelley Blue Book, the Manheim used-car platform and Dealertrack retail-management systems today nudged up its 2018 sales forecast to 16. 8 million units from 16.7 million units previously."

U.S. Auto Sales Forecast For 2018 Is Nudged Up Slightly By Cox, Citing First Half's Strong Economy

Forecast have been between 16-18M but most of the more respect forecasters have been right around 16.8M units for 2018.