Whoa, for a second I thought what of kinda PDF looks like this and then realized my Chrome updated so it must be its new PDF viewer, looks very different with the thumbnails and all.
So we're taking out regulatory credits but leaving in the CEO award, right? I guess if you cherry pick your one time items you can make any number appear.
This company is worth a trillion dollars, is barely growing, makes no money and is starting to lose share in some markets. I don't think I'm the one that has to do the cherry picking.
It's fair to exclude vulnerable non-recurring revenue such as regulatory credits to get a better picture of a companies health. But if you do that, you also need to exclude vulnerable non-recurring expense as well -- aka the stock-based compensation which has no impact on cash and will disappear if the company stops growing.
Would we expect Tesla to optimize for profitability ex-regulatory credits? It seems like they know what they'll get from that, and they invest in building out new gigafactories based on the total net income they have, or they pass the savings onto customers (which leads to more sales). What makes ex-regulatory credit profitability a metric that anyone should care about?
I didn’t interpret the comment that way. If a company is trying to be cash flow neutral, they could (very roughly) consider the net income to be the amount left over for capex.
Of course not, finance people make a bunch of spreadsheets and then the factories poof into existence. The regulatory credits factor into those spreadsheets.
Tesla just announced they were profitable for the full year of 2020. What's the compliant about top line income? They make money from sales and from credits because governments want to incentivize the sale of electric cars.
My point is that the relevant thing seems to be unit economics. They seem to make a profit on most models, and the ones that aren't profitable at the point of sale, seem to have the price of the credits factored in. What value would anyone get from looking at profitability ex-credits?
Why are tiny unit economics so important? Are you one of these people who believe that they will own 50% market share?
The automotive world is competitive, as seen by Tesla fighting for share as we speak. They need to make money sooner than later. Building cars is expensive, you can't scrape by. They should be crushing it right now, with little competition.
These financials don't look good to me, all I'm saying. YMMV.
Well their competitors are benefiting from unpriced externalities. I could also say "Another quarter, another profit for Toyota ex-externalities".
They're also going to optimise their pricing around the existence of credits. The pricing that maximises the equation margin*volume will differ with and without credits.
Ideally we do away with the credits and get straight to the point by taxing carbon directly.
Revenues of $10.7bn are a notable improvement. However, even if one would add a zero to that number, it would be less than VW's and Toyota's combined revenue, yet Tesla is valued almost three times as much as those companies combined.
There's one paragraph on FSD, basically an empty statement of "we're iterating". That sounds realistic.
Back in April 2019 (Autonomy Day), Musk predicted that they will have a million robotaxis on the road in 2020.
Solar deployments up 18% to 205MW, which is totally negligible. Total new solar in 2020 globally was projected to be around 140GW.
Well it should. Market cap is meaningless for companies with a lot of debt (industrial companies typically). And if you don't understand that you will make a lot of meaningless comparisons.
Also, if you believe in efficient markets (and lets admit this is a hard week to do that) then you know that companies are valued based on future profits, not future revenues. Google and Ford had very similar revenue in say, 2019. But there enterprise values were completely different because of gross margins and profits.
You have to be careful when making a blind comparison, though, because a lot of debt VW and Toyota have is related to their financial service divisions. They're going to receive lease payments to service it.
If you were evaluating a bank that had $1tn in deposits and issued $800bn of home loans and had $200bn in cash, the $800bn figure of debt minus cash just doesn't mean that much, and people don't typically calculate EV for banks.
So say Tesla buys that bank - does their EV double to ~$2tn?
IMO, the only meaningful way to compare EVs is to unwind the financial divisions valuing them like financial companies, then compare what's left.
It's not all rosy, though, because even after unwinding financial services from these companies they've still got a lot of debt. And EVs do pose a risk that the value of the leased ICEs cars will plummet. If it happens very rapidly, that could well be an existential threat.
That's a great example. They have $1T in debts (the deposits), and $1T in assets (the cash + home loans owed them). To simplify our example, let's assume that some of those home loans are in trouble so the "continuing business" part of the company is worth $0, that the expected profit from those loans exactly balances the expected interest expenses on their deposits. So their market cap is $0.
Market cap is $0, EV is $800B. So is the company worth $0 or $800B? *Both answers are right*. You have to specify worth to who before getting an answer. To the economy it has almost a trillion dollar impact, to an investor it's worthless.
But in the case of a car company owning a bank, neither market cap or EV are good answers for comparison. The first lets debt cloud the intrinsic value of the manufacturing operation, and the second dumps the value of six months worth of production onto the calculation for no real reason.
VW has 133 billion euros of receivables for its leases. If we talk about Tesla's worth in comparison to VW by comparing EV, we're essentially discarding that line item - worth double the market cap of GM.
And as I said above, if Tesla buys this $0 market cap $800bn EV bank, why should it change the relative value of the car companies to each other? Using your method, it does.
To put it another way, when Tesla took on $500m in debt to offer Model 3 leases - did the business really change in any material way? If they financed $10bn 3/Y leases this year - would the value of the company bump up by 1% compared to if they used a leasing partner?
I was indeed referring to market cap, but even acknowledging the sibling comments and going by enterprise value, the situation still appears incredulous for a company that is, as of yet, an emerging car manufacturer, a possible FSD contender, and an energy niche player.
Yea... but what exactly are sound fundamentals? (Not directed at you, just topical).
Is Apple at 40x P/E (which is a very simple and over-used metric) still fundamentally sound? Amazon? I think the rule of thumb was always 12x. Ok so what company is that? Intel?
I think what we're seeing is the result of excess capital. Items like accredited investor definitions lock people out of the VC space so if you can't buy a house because they are too expensive or sold before they hit market... what else are you going to do with your money? Some return looks a lot better than no return...
Granted, Tesla does have an extremely high valuation but, well, who cares? I think that's the general sentiment. It's a speculative investment.
* Disclaimer I own a small amount of Apple and Tesla shares and have a positive outlook on the future of both companies. Use your own judgement when investing or considering things you read on the Internet
Funny because honestly 10 years ago people said very similar things about Apple under Jobs that people say today about Tesla under Musk. One big difference is that Twitter exists, so now you get to hear directly from certain CEOs outside of highly polished and rehearsed presentations, whereas 10 years ago the public never got that chance.
And don't get me started about what people said about Amazon's profitability and fiscal stability 10-15 years ago. Amazon's PE ratio was around 4000 whereas Tesla's is 1500.
My speculation, and that's all it is, speculation, is that for the most part people invest in companies that they want to see succeed and by investing in it, they become a kind of participant in the future growth and success of the company. It's mostly a place for people to park their money in a venture that they want to see flourish. There is no magic formula you plug into an Excel spreadsheet and get out a perfect stock price, there is no metric that can reliably be used to press a button to invest. You see a company working in an area you are interested in and that has a chance to succeed in, you have a positive feeling about the company, its products, its people, then you invest.
Good luck finding a stable, fiscally responsible and reliable company that ticks off all the fundamental indicators, a CEO who is a rock who never offends anyone or anything, and has a stock that does more than barely beat the rate of inflation and maybe pays out a measly 1-2% dividend.
The reality is that if the degree to which you value a stock is based on its PE ratio and other naïve but nice sounding metrics, then to be blunt you're no more sophisticated an investor than the people blowing their money on GME.
Actually the same group of people (r/wallstreetbets) was crowding Tesla before it went up. Anyways I'm watching GME all the time, having a lot of fun and hoping for at least 1 bankrupcy.
> Good luck finding a stable, fiscally responsible and reliable company that ticks off all the fundamental indicators, a CEO who is a rock who never offends anyone or anything, and has a stock that does more than barely beat the rate of inflation and maybe pays out a measly 1-2% dividend.
You mean like every single, successful startup ?
Almost all of whom are run by CEOs who act professionally, are careful about their public statements and don't have the net worth to keep paying out SEC fines.
> The reality is that if the degree to which you value a stock is based on its PE ratio and other naïve but nice sounding metrics, then to be blunt you're no more sophisticated an investor than the people blowing their money on GME.
Or, the stock market is in a huge, 1929-style bubble and that's why the P/E numbers don't make sense. People don't want to even consider that though, because of what it'd do to their investments. Considering how many people have the money in the markets nowadays, this collective magical thinking can go on for some time. At some point though the value of the stock becomes detached from the actual company and its profits, and the stock becomes just a fiat token that people trade, like crypto.
BTW one scenario that can play out in the upcoming years is that the inflation finally catches up with the money printing, which increases the nominal profits of companies (as the dolar value of every product they sell increases), and the P/E numbers will again normalize. No idea how likely that is though.
I think you’re right but just to put another spin on the point we are also in a zero to negative interest rate environment. Where’s all that would be bond money gonna go if not Apple.
You would've made the same comparison between Apple and Nokia back in 2008. If you've ever driven a Tesla, you'll realize that it is a paradigm shift just like the iPhone was back in 2008 relative to Nokia.
Or Blackberry/RIM but the same. Basically the market has priced in that while existing car manufacturers have more sales, they are essentially dying and they need to come up with a car that is competitive to the Tesla electric offerings to compete. And so far they haven't shown the ability to do that.
And who are they going to sell them too? The people who buy Teslas are Tesla fanbois not generic EV customers. And a car company like Honda cannot generate the kind of hype theater that Tesla can, especially not in the US.
Other car manufacturers cannot replicate Tesla's success because their customers are different and generic EVs are not a good value preposition for most of these customers.
I would be interested in hearing how you reason to the statement that the "Other car manufacturers customers are different."
As I see it, there are just "car customers." And they are a diverse population, from those who need maximum reliability and economy to those for whom their vehicle is an extension of their need for attention. But as diverse as they are, they form a single set, known in marketing parlance as the "total addressable market."
When you write, "The people who buy Teslas are Tesla fanbois ..." it reminds me when people would say "The people who buy a computer for their home are nerds ..." I expect that both of these statements were solidly true at one point, and then became less and less true over time as the diversity of people who felt the product in question was the right choice increased.
So what I see in Tesla's results, and their history, is that they created a niche product that many people didn't understand the need for. But over time, as more and more have been shipped, more people can see the benefit.
For example, here is a real anecdote. As an anecdote it means nothing of course, but for me it felt significant. My neighbor just bought a model 3. They had been in the camp that these things were a fad, a toy, a ridiculous idea, and "what about the range, and who wants to wait an hour to fill up?" kind of things. But another neighbor has one as well and has had it for a couple of years now. And we all talk and that neighbor was chuckling that they didn't even know the price of gas anymore since they hadn't been to a gas station in over a year! In those discussions, the range of the model 3 was such that they charge at home, and even on very "busy" days never have to plan to stop at a charging station. That is because in "real life" they never drive more than 200 miles in a day, and they never cannot fully recharge over night. Once the lightbulb went on about the reality of this, my other neighbor got their own Model 3.
It was, for me, seeing one of the general pool of customers switch over from "only gas is okay" to "this could work for me." And that was instructive.
Given the volume ramp reported by Tesla, I would not be surprised if this "conversion" experience were happening at an accelerating pace.
> Basically the market has priced in that while existing car manufacturers have more sales, they are essentially dying
Please. They're not even close to dying.
> and they need to come up with a car that is competitive to the Tesla electric offerings to compete
And they are doing exactly that. VW alone already has $86bn spending committed to its EV lineup.
You associate the existing manufacturers with a Blackberry/RIM situation, but that is simply not the case.
This is more of an Apple/Android type of situation. Apple triggered this paradigm shift, and dozens of others (Samsung, Motorola, etc.) followed suit almost immediately.
Sure, it's going to take existing car manufacturers a few years to catch up. Just as it will take Tesla a few years to ramp up production to competitive numbers.
Also Porsche Taycan is better in almost every single way than a Tesla: 800V architecture, driving dynamics, interior/exterior design, polish etc. Likewise the VW ID 3/4 is very much on par with a Model 3.
Have you? Because Audi EV might look like luxurious hotel when stationary, but start driving and you quickly realize its EV for the old people made to feel like petrol car.
Yes I have, it’s actually pleasant to drive and steer, it handles like a luxury sedan and it feels like one unlike a Tesla which feels cheaper than what Prius did 15 years ago.
Just to be sure we are both talking about e-tron suv, right? It handles like a modern work truck, or almost 20 year old weakest spec Cayenne after loading it up with !500 kg! of bricks. Its great if you are an older gentleman and your main requirements are nice soft plushy seats, think American land yachts (Cadillac) in the 70-80s. Infotainment also takes me back 20 years - Voice control doesnt understand the name of second biggest city in a central European country, and is unable to plot a 300 km route from the capital to the second biggest city (after entering it manually with on screen keyboard, it wouldnt work otherwise) on half a charge, gives up looking for chargers claiming there are none. We are ~1000km from the place the car is manufactured, and it doesnt recognize mayor cities and is unable to direct me to a charger.
Yes, the trim quality is excellent, doesnt change the fact its "EV for the old people made to feel like petrol car". Its a Nokia https://en.wikipedia.org/wiki/Nokia_N82 industry leading finish quality, outdated specs.
I don’t know what you drove by I drove the 2020 Audi sportback in the UK and it didn’t feel like an old man’s car.
As far for the navigation system again no issues, a 1000km from where the car was manufactured could be anywhere in Europe form rural Portugal to Bratislava that has no baring on the quality of the vehicle itself.
2019. Did they finally added one pedal mode in 2020? Cars for old people feel nice to sit in, but bad to drive. etron is a heavy pig. It feels like any other luxury petrol car. Navigation is an issue if you are selling car in EU while it cant navigate there, talks in broken localization and doesnt understand basic commands.
Tesla stock price is high, but compared to the other car manufacturers they look quite good:
- Tesla increased their revenue in a year where Toyota and VW saw a significant decline in their revenue.
- Tesla can produce 1M electric cars at the end of this year.
- Ford, BMW, MBZ, GM, and Fiat are not going to produce any meaningful number of electric cars this year.
- Japanese car manufacturers are completely missing (They have great hybrid models, but not pure BEVs).
- The only serious competition is the Chinese manufacturers, VW and Hyundai / Kia. VW will have to deal with the cannibalization of their own business by BEVs. Same with Hyundai / Kia.
- Tesla is taking business not only from auto manufacturers, but also from dealerships, gas stations, and insurance (this is a very small part, but it will increase).
- Most of the Tesla killers failed to make a significant dent. I don't expect 2021 to be the year of the Tesla killer, although there is a slight possibility that ID.3 and ID.4 will sell enough to endanger Tesla.
>> VW will have to deal with the cannibalization of their own business
Great point. Tesla revenue will grow substantially, VW et al will maintain sales, except for the portion of their sales lost to Tesla. Also, it's a major capital investment for VW that they otherwise wouldn't have to make.
This is one of several reasons why it's not meaningful to compare their stock prices.
The Model S and Model X have both had their long awaited interior refreshes. Live on the configuration pages. Looks like a drastic improvement overall.
Not sure if refreshing the interior is going to be enough to combat declining sales.
Most car companies would have refreshed the exterior design at least a couple of times in the same 10 year timeframe to avoid it looking stale and dated.
There were a lot of people waiting for the refresh for one-two years now... they are going to be production limited for a long time on the new S and X.
I don't think most people avoiding an S or X purchase are doing so because they think the exterior is stale and dated. Primarily it would be price, but interior may be playing some role. When compared to luxury vehicles I have seen Tesla's interior criticized in the past. Exterior form less so, but panel gaps yes.
Without regulatory credits they would lose 130M in Q4. This is relevant because government money is not scalable. If they grow revenues by 1000% and don't improve efficiency, they will lose money. Ridiculous for a company with P/E = 1700.
Energy generation and storage has a gross profit of -$30M. But "they're not just a car company".
Edit: Why the downvotes? Is it because this is a skeptical view that goes against the crowd?
The downvotes are because “If they grow revenue by 1000% and don’t improve efficiency then...”.
That is a fundamentally unsound premise.
They expect to grow at 50% CAGR which means 1000% in about 6 years. Which in and of itself would be an insane growth trajectory to achieve at this scale.
But at the end of those same 6 years you would reasonably need to model some significant efficiency improvements.
Tesla has predicted their battery costs, for example, will be reduced by 50% in that time frame.
There will also be significant efficiencies achieved elsewhere in the manufacturing line beyond just their tech roadmap for structural batteries, but certainly I would assume not quite a full halving of the cost to produce the entire car.
Ok, that's a fair point, although it was not implied that Tesla will not improve efficiency, it was just a quick illustrative calculation.
They've been cost-cutting very aggressively so I assume there are few low-hanging or middle-hanging fruits left.
The big picture is that their business is currently not profitable without government money, which doesn't scale linearly with revenue. Sure, I guess they will slowly improve their margins in the future. But my point is that it's unlikely that their car manufacturing business will become a massive cash cow as the market seems to think.
Batteries becoming cheaper won't directly translate to margins because of competition.
Credits are not 'government money' credits are paid by the competitors. The concept of credits is older then Tesla or EV. They will very likely go up next year, or at least stay the same.
There are a few things you are not considering. Service for example is a huge negative right now, while every other car company is making money with service. Because most Tesla vehicles are new most vehicles are under warranty. This will continue to be a negative but importantly, if Tesla would stop growing, this would turn into positive pretty soon.
The CEO package was large because of the large growth in stock price, that alone is almost as much all all the credits. This will not be this high quarter-quarter and only has to be paid if the company continues to hit milestones.
Importantly however, their automotive margin is still very good, and is looking to improve further next year, its industry leading margin. At the same time they show 40% growth every year and positive cashflow. Automotive is a business of scale and Tesla is still relatively small.
They have been building 3 massive new factories this year, covering Europe, Eastern US and expatiation in China. This is operating leverage, things you pay now that will payoff later. Those factories will not only expand production but also CAPX efficiency.
This Q4 solar and storage were also a negative margin (somewhat surprisingly) but showed massive growth too, in this area to I expect margin to jump back up after this Q4. Tesla global leader in storage and will likely continue to grow that, and with their aggressive strategy they will also likely be market leader in solar.
Additionally, Tesla has multiple new products that will allow them to continue growing not just next year but the year after that. There is huge demand for the Tesla Semi. There is huge demand for the Cybertruck. Model Y has not even started being delivered in China/Europe.
I think if you do the calculation and you believe that gross margin is staying as is or growing, the profit Tesla will get quite large, even as they continue to grow. Very few companies can have high growth and very good profitability, and I believe it is likely Tesla will achieve this in the next year.
Just look at 2019 margin, to 2020 margin, -0.3% to 6.3%. That is in a pandemic year.
Now, the current stock price is high, and even what I just said, might not justify the stock price. To defend the current stock price, you need to believe in the FSD story, at least partially. If you do not believe that story, Tesla is over-valued.
I for one believed Tesla was very under-valued early this year and bought based on the assumption of growth and margin. I since covered most of my position but still have a lot of stock. I do think Tesla has the best FSD story so I'm holding the stock for upside.
I hope this at least gives you perspective on the way somebody would hold Tesla. I think the focus on credits, is mostly distraction. I have never in my analysis cared about credits, in fact I always use margin without credits.
Not as good as I had hoped on margins, this is a bit of letdown. But I am really happy about the Solar and Storage. Overall its still pretty good. Overall 2020 was very successful, specially considering the situation.
Solar collapsed quite a bit after Solarcity and introducing the Solar roof was difficult. However it seem like now they should increase growth, they are adding their own teams and they are working with 3rd company installers. Overall 2020 doesn't look good but Q3 and Q4 look like a return to solid growth
Storage is problematic area because it requires the same manufacturing as battery packs. So Tesla always had a fight for storage and it was of secondary importance. In the long run however it could be a huge market. Doubling the mount deployed from last Q is really great.
Both Berlin and Texas are moving along very well and Model Y in China coming online only now, promises continued growth for next year. The refresh Model S should again help to drive profitability as well.
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[ 3.6 ms ] story [ 155 ms ] threadFully redesigned Model S interior pics in the PDF!
https://electrek.co/2020/05/28/tesla-elon-musk-first-tranche...
Oh look, another person making the claim capex comes off top line income.
My point is that the relevant thing seems to be unit economics. They seem to make a profit on most models, and the ones that aren't profitable at the point of sale, seem to have the price of the credits factored in. What value would anyone get from looking at profitability ex-credits?
The automotive world is competitive, as seen by Tesla fighting for share as we speak. They need to make money sooner than later. Building cars is expensive, you can't scrape by. They should be crushing it right now, with little competition.
These financials don't look good to me, all I'm saying. YMMV.
They're also going to optimise their pricing around the existence of credits. The pricing that maximises the equation margin*volume will differ with and without credits.
Ideally we do away with the credits and get straight to the point by taxing carbon directly.
There's one paragraph on FSD, basically an empty statement of "we're iterating". That sounds realistic.
Back in April 2019 (Autonomy Day), Musk predicted that they will have a million robotaxis on the road in 2020.
Solar deployments up 18% to 205MW, which is totally negligible. Total new solar in 2020 globally was projected to be around 140GW.
Also, if you believe in efficient markets (and lets admit this is a hard week to do that) then you know that companies are valued based on future profits, not future revenues. Google and Ford had very similar revenue in say, 2019. But there enterprise values were completely different because of gross margins and profits.
If you were evaluating a bank that had $1tn in deposits and issued $800bn of home loans and had $200bn in cash, the $800bn figure of debt minus cash just doesn't mean that much, and people don't typically calculate EV for banks.
So say Tesla buys that bank - does their EV double to ~$2tn?
IMO, the only meaningful way to compare EVs is to unwind the financial divisions valuing them like financial companies, then compare what's left.
It's not all rosy, though, because even after unwinding financial services from these companies they've still got a lot of debt. And EVs do pose a risk that the value of the leased ICEs cars will plummet. If it happens very rapidly, that could well be an existential threat.
Market cap is $0, EV is $800B. So is the company worth $0 or $800B? *Both answers are right*. You have to specify worth to who before getting an answer. To the economy it has almost a trillion dollar impact, to an investor it's worthless.
VW has 133 billion euros of receivables for its leases. If we talk about Tesla's worth in comparison to VW by comparing EV, we're essentially discarding that line item - worth double the market cap of GM.
And as I said above, if Tesla buys this $0 market cap $800bn EV bank, why should it change the relative value of the car companies to each other? Using your method, it does.
To put it another way, when Tesla took on $500m in debt to offer Model 3 leases - did the business really change in any material way? If they financed $10bn 3/Y leases this year - would the value of the company bump up by 1% compared to if they used a leasing partner?
He didn't say market cap, he said "valued" and you need to consider debt financing in making a fair comparison of market value.
It is comfortably enjoying life in the land of exuberant speculation.
Is Apple at 40x P/E (which is a very simple and over-used metric) still fundamentally sound? Amazon? I think the rule of thumb was always 12x. Ok so what company is that? Intel?
I think what we're seeing is the result of excess capital. Items like accredited investor definitions lock people out of the VC space so if you can't buy a house because they are too expensive or sold before they hit market... what else are you going to do with your money? Some return looks a lot better than no return...
Granted, Tesla does have an extremely high valuation but, well, who cares? I think that's the general sentiment. It's a speculative investment.
* Disclaimer I own a small amount of Apple and Tesla shares and have a positive outlook on the future of both companies. Use your own judgement when investing or considering things you read on the Internet
I wouldn't consider Tesla to have any of those characteristics.
And don't get me started about what people said about Amazon's profitability and fiscal stability 10-15 years ago. Amazon's PE ratio was around 4000 whereas Tesla's is 1500.
My speculation, and that's all it is, speculation, is that for the most part people invest in companies that they want to see succeed and by investing in it, they become a kind of participant in the future growth and success of the company. It's mostly a place for people to park their money in a venture that they want to see flourish. There is no magic formula you plug into an Excel spreadsheet and get out a perfect stock price, there is no metric that can reliably be used to press a button to invest. You see a company working in an area you are interested in and that has a chance to succeed in, you have a positive feeling about the company, its products, its people, then you invest.
Good luck finding a stable, fiscally responsible and reliable company that ticks off all the fundamental indicators, a CEO who is a rock who never offends anyone or anything, and has a stock that does more than barely beat the rate of inflation and maybe pays out a measly 1-2% dividend.
The reality is that if the degree to which you value a stock is based on its PE ratio and other naïve but nice sounding metrics, then to be blunt you're no more sophisticated an investor than the people blowing their money on GME.
But I enjoyed reading your comment that the comment above and think it’s good to have a healthy discussion about the topic. It’s awesome!
You mean like every single, successful startup ?
Almost all of whom are run by CEOs who act professionally, are careful about their public statements and don't have the net worth to keep paying out SEC fines.
Or, the stock market is in a huge, 1929-style bubble and that's why the P/E numbers don't make sense. People don't want to even consider that though, because of what it'd do to their investments. Considering how many people have the money in the markets nowadays, this collective magical thinking can go on for some time. At some point though the value of the stock becomes detached from the actual company and its profits, and the stock becomes just a fiat token that people trade, like crypto.
BTW one scenario that can play out in the upcoming years is that the inflation finally catches up with the money printing, which increases the nominal profits of companies (as the dolar value of every product they sell increases), and the P/E numbers will again normalize. No idea how likely that is though.
Other car manufacturers cannot replicate Tesla's success because their customers are different and generic EVs are not a good value preposition for most of these customers.
As I see it, there are just "car customers." And they are a diverse population, from those who need maximum reliability and economy to those for whom their vehicle is an extension of their need for attention. But as diverse as they are, they form a single set, known in marketing parlance as the "total addressable market."
When you write, "The people who buy Teslas are Tesla fanbois ..." it reminds me when people would say "The people who buy a computer for their home are nerds ..." I expect that both of these statements were solidly true at one point, and then became less and less true over time as the diversity of people who felt the product in question was the right choice increased.
So what I see in Tesla's results, and their history, is that they created a niche product that many people didn't understand the need for. But over time, as more and more have been shipped, more people can see the benefit.
For example, here is a real anecdote. As an anecdote it means nothing of course, but for me it felt significant. My neighbor just bought a model 3. They had been in the camp that these things were a fad, a toy, a ridiculous idea, and "what about the range, and who wants to wait an hour to fill up?" kind of things. But another neighbor has one as well and has had it for a couple of years now. And we all talk and that neighbor was chuckling that they didn't even know the price of gas anymore since they hadn't been to a gas station in over a year! In those discussions, the range of the model 3 was such that they charge at home, and even on very "busy" days never have to plan to stop at a charging station. That is because in "real life" they never drive more than 200 miles in a day, and they never cannot fully recharge over night. Once the lightbulb went on about the reality of this, my other neighbor got their own Model 3.
It was, for me, seeing one of the general pool of customers switch over from "only gas is okay" to "this could work for me." And that was instructive.
Given the volume ramp reported by Tesla, I would not be surprised if this "conversion" experience were happening at an accelerating pace.
Please. They're not even close to dying.
> and they need to come up with a car that is competitive to the Tesla electric offerings to compete
And they are doing exactly that. VW alone already has $86bn spending committed to its EV lineup.
You associate the existing manufacturers with a Blackberry/RIM situation, but that is simply not the case.
This is more of an Apple/Android type of situation. Apple triggered this paradigm shift, and dozens of others (Samsung, Motorola, etc.) followed suit almost immediately.
Sure, it's going to take existing car manufacturers a few years to catch up. Just as it will take Tesla a few years to ramp up production to competitive numbers.
You do know that the best selling EV in Europe isn't a Tesla ? https://i.redd.it/m6z20txyyvd61.jpg
Also Porsche Taycan is better in almost every single way than a Tesla: 800V architecture, driving dynamics, interior/exterior design, polish etc. Likewise the VW ID 3/4 is very much on par with a Model 3.
Yes, the trim quality is excellent, doesnt change the fact its "EV for the old people made to feel like petrol car". Its a Nokia https://en.wikipedia.org/wiki/Nokia_N82 industry leading finish quality, outdated specs.
As far for the navigation system again no issues, a 1000km from where the car was manufactured could be anywhere in Europe form rural Portugal to Bratislava that has no baring on the quality of the vehicle itself.
- Tesla increased their revenue in a year where Toyota and VW saw a significant decline in their revenue.
- Tesla can produce 1M electric cars at the end of this year.
- Ford, BMW, MBZ, GM, and Fiat are not going to produce any meaningful number of electric cars this year.
- Japanese car manufacturers are completely missing (They have great hybrid models, but not pure BEVs).
- The only serious competition is the Chinese manufacturers, VW and Hyundai / Kia. VW will have to deal with the cannibalization of their own business by BEVs. Same with Hyundai / Kia.
- Tesla is taking business not only from auto manufacturers, but also from dealerships, gas stations, and insurance (this is a very small part, but it will increase).
- Most of the Tesla killers failed to make a significant dent. I don't expect 2021 to be the year of the Tesla killer, although there is a slight possibility that ID.3 and ID.4 will sell enough to endanger Tesla.
Great point. Tesla revenue will grow substantially, VW et al will maintain sales, except for the portion of their sales lost to Tesla. Also, it's a major capital investment for VW that they otherwise wouldn't have to make.
This is one of several reasons why it's not meaningful to compare their stock prices.
Most car companies would have refreshed the exterior design at least a couple of times in the same 10 year timeframe to avoid it looking stale and dated.
The exterior here is in fact refreshed. Chrome delete, different front end, different lights and other details.
If you see the car on the road, the outside doesn't look dated at all in my opinion.
Does it even make it to production?
Energy generation and storage has a gross profit of -$30M. But "they're not just a car company".
Edit: Why the downvotes? Is it because this is a skeptical view that goes against the crowd?
That is a fundamentally unsound premise.
They expect to grow at 50% CAGR which means 1000% in about 6 years. Which in and of itself would be an insane growth trajectory to achieve at this scale.
But at the end of those same 6 years you would reasonably need to model some significant efficiency improvements.
Tesla has predicted their battery costs, for example, will be reduced by 50% in that time frame.
There will also be significant efficiencies achieved elsewhere in the manufacturing line beyond just their tech roadmap for structural batteries, but certainly I would assume not quite a full halving of the cost to produce the entire car.
They've been cost-cutting very aggressively so I assume there are few low-hanging or middle-hanging fruits left.
The big picture is that their business is currently not profitable without government money, which doesn't scale linearly with revenue. Sure, I guess they will slowly improve their margins in the future. But my point is that it's unlikely that their car manufacturing business will become a massive cash cow as the market seems to think.
Batteries becoming cheaper won't directly translate to margins because of competition.
There are a few things you are not considering. Service for example is a huge negative right now, while every other car company is making money with service. Because most Tesla vehicles are new most vehicles are under warranty. This will continue to be a negative but importantly, if Tesla would stop growing, this would turn into positive pretty soon.
The CEO package was large because of the large growth in stock price, that alone is almost as much all all the credits. This will not be this high quarter-quarter and only has to be paid if the company continues to hit milestones.
Importantly however, their automotive margin is still very good, and is looking to improve further next year, its industry leading margin. At the same time they show 40% growth every year and positive cashflow. Automotive is a business of scale and Tesla is still relatively small.
They have been building 3 massive new factories this year, covering Europe, Eastern US and expatiation in China. This is operating leverage, things you pay now that will payoff later. Those factories will not only expand production but also CAPX efficiency.
This Q4 solar and storage were also a negative margin (somewhat surprisingly) but showed massive growth too, in this area to I expect margin to jump back up after this Q4. Tesla global leader in storage and will likely continue to grow that, and with their aggressive strategy they will also likely be market leader in solar.
Additionally, Tesla has multiple new products that will allow them to continue growing not just next year but the year after that. There is huge demand for the Tesla Semi. There is huge demand for the Cybertruck. Model Y has not even started being delivered in China/Europe.
I think if you do the calculation and you believe that gross margin is staying as is or growing, the profit Tesla will get quite large, even as they continue to grow. Very few companies can have high growth and very good profitability, and I believe it is likely Tesla will achieve this in the next year.
Just look at 2019 margin, to 2020 margin, -0.3% to 6.3%. That is in a pandemic year.
Now, the current stock price is high, and even what I just said, might not justify the stock price. To defend the current stock price, you need to believe in the FSD story, at least partially. If you do not believe that story, Tesla is over-valued.
I for one believed Tesla was very under-valued early this year and bought based on the assumption of growth and margin. I since covered most of my position but still have a lot of stock. I do think Tesla has the best FSD story so I'm holding the stock for upside.
I hope this at least gives you perspective on the way somebody would hold Tesla. I think the focus on credits, is mostly distraction. I have never in my analysis cared about credits, in fact I always use margin without credits.
Solar collapsed quite a bit after Solarcity and introducing the Solar roof was difficult. However it seem like now they should increase growth, they are adding their own teams and they are working with 3rd company installers. Overall 2020 doesn't look good but Q3 and Q4 look like a return to solid growth
Storage is problematic area because it requires the same manufacturing as battery packs. So Tesla always had a fight for storage and it was of secondary importance. In the long run however it could be a huge market. Doubling the mount deployed from last Q is really great.
Both Berlin and Texas are moving along very well and Model Y in China coming online only now, promises continued growth for next year. The refresh Model S should again help to drive profitability as well.
I'll have to look at the numbers in more detail.