1) Cannibalization: Yes. Daimler already warned investors that, during the first years of EV production, their EBIT margin may shrink to 7% or 8% from currently ~9.5%. Here is hope they'll survive with only $10-12 billion profit a year. I mean, looking at worldwide sales they are building the best selling luxury sedan (and a lot more models except that certain sedan) That may help.
It seems to me that Daimler is in a better position than many of the other incumbents. However, while they get busy shrinking their profits for years, as you've already pointed out, Tesla will only be growing theirs each year. Tesla will eventually need to show that they can be profitable but at this point investors are comfortable paying for massive growth in lieu of profits. It would be short-sighted to focus on profits right now at the cost of growth, but there is obviously a balance to strike there at some point.
2) Timeframe: VW started to develop their MEB in 2015. The first cars will hit the market in early 2020. It's not like they start now and cars will arrive in 2024 or later.
The first cars may hit in 2020 but at a production level that is miniscule comparatively. Essentially, they will be putting their toes into the water while Tesla is swimming laps, faster and faster, around them. This is where the competition argument from bears seems insanely optimistic. When will actual high volume production come at a level that could actually affect Tesla's sales? This likely means somewhere around 500,000+ per year. 2024? At this point, as far as I know, none of the incumbents are planning that level of production for the foreseeable future. Where will Tesla be at in 6 years?
3) Investors: Some seem sceptical but most are aware that those steps are necessary to compete with the upstarts, meet emission targets and regulations. Also: See 1)
4) CapEx: With an equipment lifetime of maybe 10 years and owning dozens of factories, you have to retool some each year. Usually they do not have to burn them down and rebuild them from scratch. One might assume the drive train and battery pack could be major hurdles and the other stuff stays mostly the same.
Valid points. I personally don't understand the bull argument that the incumbents will struggle to convert over to being able to produce BEVs. There is a cost and a time factor, but they should be able to do it. These are still cars and they do know how to mass produce cars.
5) Battery sourcing: Teslas
known purchase obligations with Panasonic until 2022 are about $15 billion. We already know that VW sourced batteries for $25 billion and plans for another $30-40 billion until 2025. I do not know much about other manufacturers, which could be because ...
- They didn't announce them yet.
- They planned investements of a few billions and simply forgot about the batteries.
- They are not able to buy any, despite billions of cash, while Tesla has no problem at all to source 150 GWh.
- They all lied and won't build any EVs.
Personally i'd go with option 1.
This falls back to the production timeline for mass production of BEVs. If it's 2024+, as it appears to be, then battery production will probably have time to catch up. If they want to mass produce BEVs before then, which none appear to, then there is a battery supply limitation.
6) Battery performance: Why do you assume the new battery packs in cars like the I-Pace, E-Tron or the newer Leafs are performing worse? Is there any provable advantage Tesla has? That is, if we leave aside all the assumptions about the amazing things Jeff Dahn is supposed to have done. IP on Panasonics side will probably be used for whomever they produce cells.
Tesla has already become known for their battery performance, with degradation recently shown to be superior to the competition. I don't think this is debatable currently. Now, part of the reason is because there isn't much competition there. Check back in 5 or 6 years and perhaps there is no longer an edge in battery technology for Tesla. However, Tesla has poured billions of dollars and years of development into battery production via the GF. It is reasonable to expect them to achieve highly efficient production of batteries. We have not definitively seen that yet, but Tesla should be able to achieve that over the next couple of years, well before mass production of BEVs from other car companies.
7) Dealerships: I ... uhm .... *mumbles* ... i agree. The current dealership structure may become more of a problem.
Question: If you calculate ROIC as "(Net Income - Dividends) / Total Capital" and you have always had a negative net income, how can your ROIC be extremely high? Is there another definition that i'm not aware of? Are you talking about a certain part of Teslas business or are you talking about potential future ROIC? I'm a bit lost with this fact.
Return On Invested Capital - ROIC
