No surprise, Elon seems to be cutting to the bone right now. Maybe to juice the stock price? But it does not seem like Tesla is investing in the future right now. On the contrary, I feel like their future looks a little bleak after the most recent cuts.
Also, I get the feeling Elon's trip to China and the deal he made was out of desperation. Watch for self-driving technology, that's bug for bug identical to Tesla's, to start showing up in the Chinese EVs.
Tesla is in a valuation trap. Elon can only continue operating as he has if Tesla is valued as “not a car company.” AI, robotaxi, whatever. They are running out of runway from a valuation perspective, although Tesla would be fine going through Chapter 11 if needed. Would continue as a going concern and not be parted out imho. But Elon’s wings would melt and he’d fall back to Earth.
Do you really think Tesla is going bankrupt? 90 billion in revenue, 10 billion in profit seems healthy? In terms of market share Tesla sold more than Chevrolet, Ford and Volkswagen combined. Granted idk much about valuations just curious what people look at is it something to do with the stock price itself?
Right, it's just the stock price. The health of the underlying company is a different matter.
From a corporate financials perspective, Tesla is a very healthy company: low debt, high profit. Their stock does seem to be at risk of dramatic re-pricing, and that can have knock-on effects in the long run (harder to use stock as compensation, high performers with unvested grants may leave, etc). But certainly bankruptcy does not seem to be in the cards.
Anything is possible when an enterprise is being operated in a careless fashion. I would like to think someone would stop the bleeding before it got to that, but who knows! I think Tesla will be fine was my point, but Elon's Tesla wealth and control is in peril.
(disclosure: early TSLA investor, no current exposure because I like to sleep at night now)
That's so cool if it isn't weird to ask are there any current early stage companies you think have the potential to become like Tesla? Asking for a friend :)
Not weird, fair question. I think we're past the point of early stage investment for electric mobility based on adoption s-curve concept. You'd be chasing copycats into a market with insane capital requirements, with teams who are not as motivated as who has been successful so far. Tesla, BYD, US legacy auto combined are already moving with speed.
If you're asking very broadly "where would you invest early stage today to realize explosive investment growth due to the size or value of the total addressable market," I don't have a specific company or domain answer to that. Speculative investments have a domain expertise component (know what you're investing in), a timing component (being early or late is the same as being wrong, see Webvan circa 1996-2001 vs Amazon), and a luck component (you can do everything right and the trade moves against you through no fault of your own). Charlie Munger once said:
“You’re looking for a mispriced gamble. That’s what investing is. And you have to know enough to know whether the gamble is mispriced. That’s value investing.” ... “You should remember that good ideas are rare — when the odds are greatly in your favor, bet heavily.”
So, to maximize success, know how to spot opportunity when it crosses your path, maximize those opportunities, and maximize exposure at the opportunity. Being lucky doesn't hurt. Good luck.
(not investing advice, i am just an internet rando)
valid the big 10 traditional automakers still rule supreme in terms of total car sales but from a climate change and geopolitical POV (less reliance oil would mean less reliance on energy rich nations and adversaries like Russia and the Gulf States) wouldn't it be a safe bet to say Tesla is positioned to profit off that? even with tumultuous leadership
Definitely agreed they are in a great position to take advantage of the electric push. But if they are in tumult while the traditional auto makers are ramping up their production and refining their offerings, Tesla could lose that position.
That said, this does seem like a good move from a business perspective. They already simplified carriage construction. Single-body casting may have diminishing returns.
Lately the traditional auto makers have been ramping down their BEV production. Besides less competition, extra benefits to Tesla include battery prices going down and more income from selling regulatory credits.
I would love to see your source for auto makers ramping down BEV production.
Because according to this only a few manufacturers have had reductions in sales Q1 2024 (Tesla being one of them) and other than the most recent quarter almost all had increases:
You're getting downvoted, I see, but I agree. I'm on my third EV (two of which were Teslas) and IMO it's just a car. Happens to use an electric motor instead of gas, but still ... just a car. So I think it's fair to compare manufacturers on all sales, not arbitrarily limited in a way that makes Tesla look better.
The craziest part to me of this idea of their valuation is being a tech company not a car is that the stock jumped 20% on ... news that they're going to release an affordable car?
Which is insane, because the market priced that news as being a ~$100 billion in value. The people trading Tesla are so far removed from reality its scary.
I don't feel that Europe or the USA is where any growth can come from, aside for Cybertruck, which is North America only. Anyone middle class would have had one by now and poor people are not customers.
In China they are getting crowded out by brands that better understand the local market, for example rear leg room at the cost of vehicle length/handling. They also have lots of self driving solutions that have no chance of making it to the West any time soon.
Chinese people also like Chinese brands. American does not mean better. The honeymoon for Western brands is over. With PCs, why would a sensible Chinese person buy some HP or Dell thing when Huawei have that extra touch of quality to them at a better price? Tesla along with GM's Buick, VW and the others making e-cars have this problem.
Public CEO compensation is financed by shareholders, not by the company. His Tesla salary is likely zero.
You would need to convince the shareholders to give stock compensation to the employees and convince the employees to be paid in stock instead of dollars.
This is not correct, although there is a distinction between cash compensation and shares/options. While the money doesn't come out of Tesla's bank account, stock-based compensation goes down on the balance sheet as a loss, exactly as if it were cash.
Startup people are primed to think that cash accounting is what's actually important for a company in terms of doing things, going bankrupt, etc. It largely is for startups. For large companies, however, it's actually the opposite: cash accounting is a sort of boring task left to the accounting department, whose job is usually to keep a minimum amount of cash lying around, and your balance sheets and income statements are actually what determines your access to business opportunities.
>While the money doesn't come out of Tesla's bank account
So whats your point? Because regular employee pay sure as shit does.
You said it's incorrect, and then in the next sentence stated how it is correct.
Yes, Tesla has shares on it's balance sheet. Yes, giving out those shares is a loss in assets. But doing mark-to-market and calling it cash is a bit of woo-woo because no, shares are not cash and they don't become cash until shareholders hand over that cash.
Here is a thought experiment: Tomorrow investors just decide to stop buying Tesla stock, and the price goes to zero. Mass brain control or something. The share price just sits at zero. No buy orders anywhere.
The company still sells cars. They still have cash coming in. They still can pay suppliers and pay employees. There is profit and everything. The people paid with shares though are screwed. Their compensation is zero. Why is it zero? Because shareholders aren't giving their cash for shares.
I think you will find that the company actually is quite screwed if the share price is actually at $0, even with a big pile of cash. Stock-compensated employees (Musk included) will leave, suppliers will pull their lines of credit, and people will stop buying the cars. The coffers of cash will likely be drained buying shares from annoyed shareholders, which incidentally props up the share price. That "totally fake" $0 share price will have very real impacts.
Also, the situation you just described isn't a $0 share price, it's an illiquid market. That's very different. Aside from being practically unreachable to any company with a positive enterprise value.
This isn't some sort of hypothetical libertarian fantasy land where cash is all-powerful and all other economic assets are just worthless paper that can be thrown around. Your scenario might as well say that every company is worthless because that's not cash either, and the same mass-psychosis might hit Google. Most public companies can live for about 2-3 weeks in the situation you just described, even the ones with massive cash reserves, because of how corporate finance works in the real world.
But shareholders still bear the cost of CEO compensation. Whether Elon gets paid 100 shares or 100,000,000 shares, the company still has the same amount of (actual) money to pay employees.
Yes, but cutting the number of shares given to Elon doesn't increase the amount of money available to pay employees. The people doing payroll and the managers allocating departmental budgets aren't looking at the share price to determine the numbers.
I can flip the though experiment around to "People completely stop buying all Tesla vehicles and products, but the brain damaged Muskites, swept up in his announcement of a time machine, drove the stock up to $10,000." Now there is a situation where Musk's compensation would be in the trillions, but the company itself would be cutting employees left and right.
Employees aren't paid with stock. So stop comparing stock compensation to cash compensation.
I would recommend taking a basic accounting course before commenting on how public company accounting works. It's actually a lot more complicated than "company has cash, shareholders have stock", and by trying to reduce things to simplistic scenarios where the stock and the cash are completely unlinked from each other, you are not describing real life in any way.
The practical reality for public companies is that cash and stock are pretty much fungible. You can issue shares and give them to Musk, or you can issue shares, sell them on the open market, and get cash to pay your employees. If you have excess cash, you can buy back shares from the open market. Companies actually frequently do this - most of them have a department called the "treasury" which, among other things, day trades their own stock (within limits set by public announcements) in order to get cash at a good price - but you never hear about it.
$1 of stock and $1 of cash are roughly equivalent in actual value. In both cases, the shareholders are dilluted by $1 extra.
My man will say anything to avoid acknowledging that share compensation is not deducted from revenue. Anything to avoid acknowledging that shareholders pre-approved the transfer of those shares to execs.
Company revenue is in trouble? Just do an offering! Stocks = cash! Surely ownership is fine with bankrolling dead weight.
That literally is how it works, though. Companies that are in trouble literally do stock offerings. Companies that are not in trouble also do small offerings to keep their cash on hand low while paying the bills.
Also, I'm not arguing about the approval of the compensation package.
You know what companies do way more frequently when they are in trouble?
Layoffs.
But when you are CEO you can inform the board of this magic money source called offering, where you can keep bloated headcounts and not lose profits. I'm sure they will listen to you.
The term "gigacasting" is just made up by Tesla right? It's just casting?
The news uncritically letting a company just invent a new branded term for an existing technology and parroting it in their reports comes across as very weak journalism. Honestly it means I have no trust that the journalist is bringing any insight/analysis/critical reading etc.
It's not just casting. Right there in the second paragraph of the TFA:
> Tesla has been a leader in gigacasting, a cutting-edge technique that uses huge presses with thousands of tons of clamping pressure to die-cast large sections of the car’s underbody. On a typical vehicle, the underbody can consist of hundreds of individual parts.
Also, other car companies are copying Tesla.
> Japan
> In June 2023 Toyota announced that it was adopting casting technology for its electric vehicles.
> In 2023 Japanese auto parts supplier Ryobi announced plans to cast large electric-vehicle body parts and expects to reduce car body manufacturing costs by 20%.
> Volvo
> By November 2023, orders had been placed for two 9000-tonnes-force Giga Press machines for a new Volvo electric vehicle factory at Košice, Slovakia.
That's a pretty decent analogy. However, there are innovations that are correctly ascribed to TSMC (and in this case, Tesla) for their use of those new tools. Often new innovations are a combination of clever tooling and a clever way of using those tools.
Tesla does this with everything about their cars that they don't invent. The biggest example to me was the Panasonic battery cells (and battery production line) that Tesla sold for years as their own innovation.
If Tesla has been using the same design since 2017 with the stamping process, probably would run the same “gigacast” design until year 2100 to recoup the setup costs.
The quotes around gigacasting implies that the word is unfamiliar to the reader. The article explains, and implies that the name is made up by Tesla:
> Tesla has backed away from an ambitious plan for innovations in gigacasting, its pioneering manufacturing process,
> Tesla has been a leader in gigacasting, a cutting-edge technique that uses huge presses with thousands of tons of clamping pressure to die-cast large sections of the car’s underbody. On a typical vehicle, the underbody can consist of hundreds of individual parts.
The idea is to cast much larger pieces than before. Traditionally it might have been dozens of pieces. Tesla is currently doing the underbody in only three pieces, and they were trying to cast it as a single piece.
Does that warrant a new word? I don’t know. But there is an innovation here in how it is manufactured.
It's my understanding this a way to cut manufacturing costs. One wonders what impact it has on repair costs, though. Tesla isn't going to replace the entire underbody whether it's a single piece or three pieces, are they? So how easy are these pieces to repair?
Tesla is not cutting back on gigacasting; it's just sticking to its current model approach, which is one front gigacast and one rear gigacast.
They've talked about some future vehicle platform using a single gigacast, but I never heard them talk about this as a sure thing, or as replacing the manner their current vehicles are produced. Their "model 2" was always described as using the "unboxed" approach, which to me would be incompatible with the single massive gigacast approach from the beginning.
I think the article is a bit thin. They're referencing their own article from last year, which cites anonymous sources, and this article also cites anonymous sources (the same anonymous sources, different, a mix?).
It may or may not be accurate. The only thing I recall Tesla saying about their next car is using an unboxed assembly method, and I believe they said they may scale that back during the last investor call.
According to Isaacson's biography, that's exactly where the idea came from, Hotwheels and all.
Even if they don't manage it for the whole car, it does seem to have worked out for the front and back castings, since other companies have started working on the same thing.
This reminds me of the lieutenant Leary series by David Drake.
One of the minor plot points is the ease of repairability for his small ship which is made up of several hull pieces versus the unibody of the ships made by his own navy. (He acquired his ship by stealing from an enemy)
Metal casting is an established technology in use for decades ,including in automotive industry, and general part making. It has a long history dating back to 1500s; this is how coins are made…
Back when the Ford Crown Victoria was still around, there were basically two bodies - the normal one, and a long wheelbase version for taxi service. The extra room went to taxi customers who needed more room to enter/exit and sit.
A front and back casting would allow more passenger space to be inserted between if there was a taxi.
65 comments
[ 0.19 ms ] story [ 133 ms ] threadFrom a corporate financials perspective, Tesla is a very healthy company: low debt, high profit. Their stock does seem to be at risk of dramatic re-pricing, and that can have knock-on effects in the long run (harder to use stock as compensation, high performers with unvested grants may leave, etc). But certainly bankruptcy does not seem to be in the cards.
(disclosure: early TSLA investor, no current exposure because I like to sleep at night now)
If you're asking very broadly "where would you invest early stage today to realize explosive investment growth due to the size or value of the total addressable market," I don't have a specific company or domain answer to that. Speculative investments have a domain expertise component (know what you're investing in), a timing component (being early or late is the same as being wrong, see Webvan circa 1996-2001 vs Amazon), and a luck component (you can do everything right and the trade moves against you through no fault of your own). Charlie Munger once said:
“You’re looking for a mispriced gamble. That’s what investing is. And you have to know enough to know whether the gamble is mispriced. That’s value investing.” ... “You should remember that good ideas are rare — when the odds are greatly in your favor, bet heavily.”
So, to maximize success, know how to spot opportunity when it crosses your path, maximize those opportunities, and maximize exposure at the opportunity. Being lucky doesn't hurt. Good luck.
(not investing advice, i am just an internet rando)
That said, this does seem like a good move from a business perspective. They already simplified carriage construction. Single-body casting may have diminishing returns.
Because according to this only a few manufacturers have had reductions in sales Q1 2024 (Tesla being one of them) and other than the most recent quarter almost all had increases:
https://caredge.com/guides/electric-vehicle-market-share-and...
Not sure why they would be reducing production. Growth is strong across the board.
None of it makes any sense.
https://www.reuters.com/technology/baidu-tesla-agree-mapping...
In China they are getting crowded out by brands that better understand the local market, for example rear leg room at the cost of vehicle length/handling. They also have lots of self driving solutions that have no chance of making it to the West any time soon.
Chinese people also like Chinese brands. American does not mean better. The honeymoon for Western brands is over. With PCs, why would a sensible Chinese person buy some HP or Dell thing when Huawei have that extra touch of quality to them at a better price? Tesla along with GM's Buick, VW and the others making e-cars have this problem.
https://en.wikipedia.org/wiki/History_of_Tesla,_Inc.#Timelin...
I think they're growing just fine. looking at the quarterly breakdown, sales stall every so often, but pick up later.
Sort of like California real estate prices. People always say it can't go on, but it does.
[1] https://m.economictimes.com/industry/renewables/why-elon-mus...
I’m surprised the stock is still north of $100.
You would need to convince the shareholders to give stock compensation to the employees and convince the employees to be paid in stock instead of dollars.
Startup people are primed to think that cash accounting is what's actually important for a company in terms of doing things, going bankrupt, etc. It largely is for startups. For large companies, however, it's actually the opposite: cash accounting is a sort of boring task left to the accounting department, whose job is usually to keep a minimum amount of cash lying around, and your balance sheets and income statements are actually what determines your access to business opportunities.
So whats your point? Because regular employee pay sure as shit does.
You said it's incorrect, and then in the next sentence stated how it is correct.
Yes, Tesla has shares on it's balance sheet. Yes, giving out those shares is a loss in assets. But doing mark-to-market and calling it cash is a bit of woo-woo because no, shares are not cash and they don't become cash until shareholders hand over that cash.
Here is a thought experiment: Tomorrow investors just decide to stop buying Tesla stock, and the price goes to zero. Mass brain control or something. The share price just sits at zero. No buy orders anywhere.
The company still sells cars. They still have cash coming in. They still can pay suppliers and pay employees. There is profit and everything. The people paid with shares though are screwed. Their compensation is zero. Why is it zero? Because shareholders aren't giving their cash for shares.
Also, the situation you just described isn't a $0 share price, it's an illiquid market. That's very different. Aside from being practically unreachable to any company with a positive enterprise value.
This isn't some sort of hypothetical libertarian fantasy land where cash is all-powerful and all other economic assets are just worthless paper that can be thrown around. Your scenario might as well say that every company is worthless because that's not cash either, and the same mass-psychosis might hit Google. Most public companies can live for about 2-3 weeks in the situation you just described, even the ones with massive cash reserves, because of how corporate finance works in the real world.
But shareholders still bear the cost of CEO compensation. Whether Elon gets paid 100 shares or 100,000,000 shares, the company still has the same amount of (actual) money to pay employees.
This really is not difficult to grasp.
I can flip the though experiment around to "People completely stop buying all Tesla vehicles and products, but the brain damaged Muskites, swept up in his announcement of a time machine, drove the stock up to $10,000." Now there is a situation where Musk's compensation would be in the trillions, but the company itself would be cutting employees left and right.
Employees aren't paid with stock. So stop comparing stock compensation to cash compensation.
The practical reality for public companies is that cash and stock are pretty much fungible. You can issue shares and give them to Musk, or you can issue shares, sell them on the open market, and get cash to pay your employees. If you have excess cash, you can buy back shares from the open market. Companies actually frequently do this - most of them have a department called the "treasury" which, among other things, day trades their own stock (within limits set by public announcements) in order to get cash at a good price - but you never hear about it.
$1 of stock and $1 of cash are roughly equivalent in actual value. In both cases, the shareholders are dilluted by $1 extra.
Company revenue is in trouble? Just do an offering! Stocks = cash! Surely ownership is fine with bankrolling dead weight.
Also, I'm not arguing about the approval of the compensation package.
Layoffs.
But when you are CEO you can inform the board of this magic money source called offering, where you can keep bloated headcounts and not lose profits. I'm sure they will listen to you.
The news uncritically letting a company just invent a new branded term for an existing technology and parroting it in their reports comes across as very weak journalism. Honestly it means I have no trust that the journalist is bringing any insight/analysis/critical reading etc.
> Tesla has been a leader in gigacasting, a cutting-edge technique that uses huge presses with thousands of tons of clamping pressure to die-cast large sections of the car’s underbody. On a typical vehicle, the underbody can consist of hundreds of individual parts.
Also, other car companies are copying Tesla.
> Japan
> In June 2023 Toyota announced that it was adopting casting technology for its electric vehicles.
> In 2023 Japanese auto parts supplier Ryobi announced plans to cast large electric-vehicle body parts and expects to reduce car body manufacturing costs by 20%.
> Volvo
> By November 2023, orders had been placed for two 9000-tonnes-force Giga Press machines for a new Volvo electric vehicle factory at Košice, Slovakia.
It would be like, TSMC would branding a new technology while ASML is actually doing the shit.
> Tesla has backed away from an ambitious plan for innovations in gigacasting, its pioneering manufacturing process,
> Tesla has been a leader in gigacasting, a cutting-edge technique that uses huge presses with thousands of tons of clamping pressure to die-cast large sections of the car’s underbody. On a typical vehicle, the underbody can consist of hundreds of individual parts.
Does that warrant a new word? I don’t know. But there is an innovation here in how it is manufactured.
They've talked about some future vehicle platform using a single gigacast, but I never heard them talk about this as a sure thing, or as replacing the manner their current vehicles are produced. Their "model 2" was always described as using the "unboxed" approach, which to me would be incompatible with the single massive gigacast approach from the beginning.
It may or may not be accurate. The only thing I recall Tesla saying about their next car is using an unboxed assembly method, and I believe they said they may scale that back during the last investor call.
https://www.reuters.com/technology/gigacasting-20-tesla-rein...
Even if they don't manage it for the whole car, it does seem to have worked out for the front and back castings, since other companies have started working on the same thing.
One of the minor plot points is the ease of repairability for his small ship which is made up of several hull pieces versus the unibody of the ships made by his own navy. (He acquired his ship by stealing from an enemy)
https://en.wikipedia.org/wiki/Heavy_Press_Program
https://youtu.be/iZ50nZU3oG8?si=FD2PFEsRmBFtNshR
https://macrodynepress.com/hydraulic-presses/automotive-indu...
https://youtu.be/hpgK51w6uhk?si=LfornxzEdBwvJytY
Back when the Ford Crown Victoria was still around, there were basically two bodies - the normal one, and a long wheelbase version for taxi service. The extra room went to taxi customers who needed more room to enter/exit and sit.
A front and back casting would allow more passenger space to be inserted between if there was a taxi.
or a loooooong wheelbase for a str333tch limo