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Tesla is a bubble that will slowly deflate

1 points by magicmouse ↗ HN
I like Elon. But there is a worldwide surplus of car factories. There is no way that Elon will take more than 25% of the world auto market. There are too many national interests which will prevent his dominating this industry. Yes he will be a big player in the car biz, but that will only be worth so much. Electric cars are easy to make. It's a battery, motor, controller, and chassis basically.

Elon has bungled the Solar City firm. SpaceX which is his pet project, is filled with great engineers stolen from Nasa and other aerospace firms. He is doing great work there. But that is a separate company, and as it is his pet project, he will give it more attention and his car firm may stumble.

Elon's dictatorial management style has its limits. In Germany, Tesla 3 is down to #3 in the EV sales charts. The other countries of the world will conspire against Tesla and limit his market share. You are delusional if you think his success in Calif. is going to be repeated everywhere. The NIU company in China will likely become a bigger firm than Tesla. The have the Chinese govt backing; Tesla will never be permitted to take big share in Asia, due to politics alone. The auto biz is the jewel of Japan's industrial empire, do you honestly think that they will just roll over?

So if you consider their endgame to be 25% of the market, their current stock price is not justifiable at all. Tesla currently has 3% of the global passenger car market and about 18% of EV market. Have you seen the Ford electric transit van? the VW ID Buzz?

Regardless of how good an US product is, it is discriminated against across the world. I lived in Brasil, and foreign cars there have a 100% import duty. By the end of 2021 Tesla will have 3 factories: Berlin, Fremont, and China operating, with Texas under construction. In the meantime there will be probably 20 competing factories operating by end of 2021 by his competitors. Kia Soul, VW Id.4, Buzz, Ford transit (2022), Mercedes, Porsche, etc.

6 comments

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nprateem
Slowly deflate? Today I think will be carnage. Lots of people who bought Tesla in anticipation of it being added to the S&P (and therefore being bought by the ETFs on Friday) will dump Tesla today.
magicmouse
It is going to take a while for people to realize that Elon doesn't have magic dust. The auto market is a great deal more complex than the cellphone market. Apple only makes a half-dozen products in the cellphone space. They are used worldwide. Autos have to meet local standards, and fit 1000 different use cases. An intrinsically complex market, which is why even Toyota only has 10% market share.
mulcahey
Two thoughts on why Tesla's ceiling should not be considered simply a reasonable marketshare of the global car market.

(1) I think you could have constructed a similar argument in ~2010 regarding the iPhone. Apple indeed did not capture a dominant market share by volume, but take the lion's share of the profits today -- converting many mid-level consumers to loyal customers of luxury goods.[1] Second to that, they are much more vertically integrated than the competition where the software, the hardware, and media are generally made by different companies. This allows them to extract more revenue from each customer. In my opinion Tesla's vehicles are well positioned to be the iPhone of cars where they widely expand the size of their addressable market.

(2) Elon has said a few times that Tesla is best though of as a collection of a about a dozen different startups as opposed to simply a new entry into the traditional auto market.[2] These "startups" would include solar, insurance, self driving, battery tech, utility scale energy storage, dealership/service network, etc.

[1] https://seekingalpha.com/article/420201-what-apple-and-starb...

[2] https://twitter.com/elonmusk/status/1274544800558014464?s=20

magicmouse
Apple has a software ecosystem that makes their phones valuable. If it were running the same Android OS as Samsung, Apple would be in deep doodo, because the Samsung Galaxy Note 20 is an incredible phone, and easily the match of the iPhone, and i bought a Note 20 this year from Google for about $400. It is the software offerings that make the iphone great.

Elon's software is self driving tech, but he foolishly is refusing to add Lidar to his cars, when all the other companies know that Lidar is essential for vision impaired driving conditions. Once he loses the self-driving race, that is when Tesla will deflate.

wsc981
Tesla could open a factory in Thailand the get rid of Thailand's import tariffs, and perhaps this would also make export to other SEA countries easier and cheaper [0].

Anyways ... do you believe Tesla will be gone in the future or do you believe the stock price is unjustified and should be a bit lower? Personally I think Tesla is here to stay and perhaps Elon can expand the company into different markets and that could increase the value of the company. If the stock price drops a bit, that I think is fine.

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[0]: https://en.wikipedia.org/wiki/Automotive_industry_in_Thailan...

magicmouse
I expect Telsa to be like Apple, a premium brand that can command a good chunk of marketshare. Apple has about 20% of the world cellphone market; Jobs was shooting for 1%. He did much better than he expected. I think 20% of the world car market is optimistic for Tesla frankly given the national priority nature of the car biz. I think they will top out at less than 10%.

But if Tesla gets 20% of the world market share (and it will be a minor miracle to do this, Toyota only has 10% share!) it should only be worth 2x of Toyota. Right now Tesla has 600 billion market cap at net even 1% of global share, and Toyota has 10% of global share with market cap of 250 billion. So Tesla is overvalued more than 10 times, as if they had already won the battle, when in fact, they are still a young company.

The numbers don't add up. If Ford which sells 120 billion worth of vehicles per year is valued at 30 billion, then Tesla should be selling 2400 billion worth of vehicles, which is preposterous. Is a dollar earned by Ford somehow less valuable than a dollar earned by Tesla?

Tesla may not have a vehicle to compare with the Ford Bronco for 5 more years. In that time span, Ford will have sold 200k/year at an avg price of $40k. The Bronco is incredibly well designed; the best new car from an American company in decades (only the Corvette is comparable in quality of design). Tesla isn't even that good at design.

Tesla fan boys are drinking the kool-aid IMHO.