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Tesla is a growth company that could be a giant. BMW is a stable old blue chip. Different market values entirely. At the individual car level, Tesla S is price

by beat 11y ago

Tesla is a growth company that could be a giant. BMW is a stable old blue chip. Different market values entirely. At the individual car level, Tesla S is priced to match mid/high end sedans from BMW, Mercedes, and Audi, so that's the quality level they need to hit. And such quality isn't about reliability so much as fit and finish. Tesla is doing extremely well against very established competition in that regard.

encoderer 11y ago
Check out the PEG ratio, which factors in growth. Rapid and sustained growth is not guaranteed and bad press can inhibit it. But you need that growth to justify the valuation. Priced for perfection.
- toomuchtodo 11y ago
  Priced to be the supplier for every other vehicle company that needs batteries, every utility that needs utility scale battery storage, and possibly even an Uber competitor. Properly priced.
  - encoderer 11y ago
    Right. So when tesla appears to stumble on this path, that is going to impact the share price more severely than it would a company whose value is more inline with its peers.
    - toomuchtodo 11y ago
      But Tesla hasn't stumbled on this path, its stumbled on its vehicles. The vehicles have simply been a method to bootstrap their Supercharger network and Gigafactory, which are both on schedule. Arguably, once enough vehicle manufacturers were producing electric cars, Tesla could close up their vehicle manufacturing business if they were so inclined (and exist solely to provide battery packs).
      - encoderer 11y ago
        So their success in these new markets is a foregone conclusion at this point and stumbling in their most significant product doesn't affect it? Ok. I don't buy that but it's a perfectly reasonable assertion. Buy the dips if you believe that.
        toomuchtodo 11y ago
        > Buy the dips if you believe that. I do!
  - makomk 11y ago
    When it comes to batteries, Tesla are more of an integrator than a manufacturer - they package up commercially available, off-the-shelf cells into batteries with some cooling and a mostly off-the-shelf battery management solution (based around a Texas Instruments IC marketed specifically for battery management in electric cars, the BQ76PL536A). That's not a high-margin business to be in because there's not much of a barrier to entry for new competitors.
- cma 11y ago
  Isn't PEG just based on their existing growth within the luxury market, whereas they have publicized plans of entering mass market?
  - encoderer 11y ago
    No, it's their PE ratio divided by their growth rate.
    - deleted 11y ago
      [deleted]
tdees40 11y ago
Tesla' market cap is $30B. GM is $53B. Ford is $61B. If you're buying Tesla, you have to believe that they will become a huge player, and soon. They can't just be bigger, they have to be huge or else you're radically overpaying for a niche producer.
- beat 11y ago
  I want to play the game where we can make a fortune on high-growth stocks without any risk.
  - jarsin 11y ago
    Become a bank and issue IPO's :)
- jkestner 11y ago
  Don't forget batteries. Rolls-Royce did well with jet engines, probably better than cars.
  - VLM 11y ago
    Agreed and don't forget licensing. OK so TSLA makes squeeky sunroofs, who cares, they can sell batteries and controllers and motors to ... construction crane companies or something. You know all the weird details of making a tow truck, cool, here's the parts to make it electric. Happens all the time in the automotive industry. The first "american" hatchback car I ever drove had a nice VW engine. Ironically it was something to do with low emissions.
    - semi-extrinsic 11y ago
      Well, Tesla buys their batteries from Panasonic. And the motor is a standard induction motor, not very different from what the actual (Nikolai) Tesla invented back in 1887. I agree that their control system is going to be fairly complicated, since induction motors require the AC frequency to be a function of the torque as well as the RPM. But then most applications outside "quick 0-60 pure electric car" use brushless DC motors instead, where the controllers are simpler. Even the insane McLaren P1 hybrid, which eats Teslas for breakfast, uses a brushless DC motor. So I'm not sure there is as much of a market for Tesla's expertise as you'd think.
kpil 11y ago
Tesla is showing what a car can be - Excellent UX, a nontraditional but really nice drivetrain, a good UI for the secondary systems with frequent software upgrades, etc. It's not hard to see the trend - it's been coming for the last 15 years at least. All drivetrains will be electric, and connected to a battery and optionally a range extender of some sort. The control panel will be all big screens and apps. Meanwhile, the existing manufacturer are perfecting the ultimate gearbox. They are in at least partial denial now, but they will soon need to dismantle those investments and some others to stay alive. Ex, Audi that has kept a really complicated gearbox instead of doing what Mitsubishi did, using a fixed gear system and a serial hybrid approach. (To be fair, they have nothing to gain from these changes, they just want to stay slightly better than the rest.) The bet against them is that some of them will not be able to reinvent themselves and then wither out into obsolescence. I think that this risk might not be fully included in the price right now.
- avn2109 11y ago
  >> "The control panel will be all big screens and apps." Noooo - tactile feedback is so important in vehicle subsystem control! [0] Please do not take away my knobs and dials. [0] http://www.ecnmag.com/article/2014/01/keeping-feel-automotive-touch-controls http://www.ecnmag.com/article/2014/01/keeping-feel-automotiv...
  - oldmanjay 11y ago
    Not to ruin your day, but they're taking away your knobs, dials, and control of the vehicle.
    - avn2109 11y ago
      Honestly I might not mind being unable to control the vehicle as long as I could adjust the temperature with a hardware control.
      - TeMPOraL 11y ago
        I think the endgame of a car is an artificial womb - moving you around, self-adjusting for maximum personal comfort - but with you being the one that tells it where to go.

by beat 11y ago

encoderer 11y ago

Check out the PEG ratio, which factors in growth. Rapid and sustained growth is not guaranteed and bad press can inhibit it. But you need that growth to justify the valuation. Priced for perfection.

toomuchtodo 11y ago
Priced to be the supplier for every other vehicle company that needs batteries, every utility that needs utility scale battery storage, and possibly even an Uber competitor. Properly priced.
- encoderer 11y ago
  Right. So when tesla appears to stumble on this path, that is going to impact the share price more severely than it would a company whose value is more inline with its peers.
  - toomuchtodo 11y ago
    But Tesla hasn't stumbled on this path, its stumbled on its vehicles. The vehicles have simply been a method to bootstrap their Supercharger network and Gigafactory, which are both on schedule. Arguably, once enough vehicle manufacturers were producing electric cars, Tesla could close up their vehicle manufacturing business if they were so inclined (and exist solely to provide battery packs).
    - encoderer 11y ago
      So their success in these new markets is a foregone conclusion at this point and stumbling in their most significant product doesn't affect it? Ok. I don't buy that but it's a perfectly reasonable assertion. Buy the dips if you believe that.
      - toomuchtodo 11y ago
        > Buy the dips if you believe that. I do!
- makomk 11y ago
  When it comes to batteries, Tesla are more of an integrator than a manufacturer - they package up commercially available, off-the-shelf cells into batteries with some cooling and a mostly off-the-shelf battery management solution (based around a Texas Instruments IC marketed specifically for battery management in electric cars, the BQ76PL536A). That's not a high-margin business to be in because there's not much of a barrier to entry for new competitors.
cma 11y ago
Isn't PEG just based on their existing growth within the luxury market, whereas they have publicized plans of entering mass market?
- encoderer 11y ago
  No, it's their PE ratio divided by their growth rate.
  - deleted 11y ago
    [deleted]

tdees40 11y ago

Tesla' market cap is $30B. GM is $53B. Ford is $61B. If you're buying Tesla, you have to believe that they will become a huge player, and soon. They can't just be bigger, they have to be huge or else you're radically overpaying for a niche producer.

beat 11y ago
I want to play the game where we can make a fortune on high-growth stocks without any risk.
- jarsin 11y ago
  Become a bank and issue IPO's :)
jkestner 11y ago
Don't forget batteries. Rolls-Royce did well with jet engines, probably better than cars.
- VLM 11y ago
  Agreed and don't forget licensing. OK so TSLA makes squeeky sunroofs, who cares, they can sell batteries and controllers and motors to ... construction crane companies or something. You know all the weird details of making a tow truck, cool, here's the parts to make it electric. Happens all the time in the automotive industry. The first "american" hatchback car I ever drove had a nice VW engine. Ironically it was something to do with low emissions.
  - semi-extrinsic 11y ago
    Well, Tesla buys their batteries from Panasonic. And the motor is a standard induction motor, not very different from what the actual (Nikolai) Tesla invented back in 1887. I agree that their control system is going to be fairly complicated, since induction motors require the AC frequency to be a function of the torque as well as the RPM. But then most applications outside "quick 0-60 pure electric car" use brushless DC motors instead, where the controllers are simpler. Even the insane McLaren P1 hybrid, which eats Teslas for breakfast, uses a brushless DC motor. So I'm not sure there is as much of a market for Tesla's expertise as you'd think.

kpil 11y ago

Tesla is showing what a car can be - Excellent UX, a nontraditional but really nice drivetrain, a good UI for the secondary systems with frequent software upgrades, etc. It's not hard to see the trend - it's been coming for the last 15 years at least. All drivetrains will be electric, and connected to a battery and optionally a range extender of some sort. The control panel will be all big screens and apps. Meanwhile, the existing manufacturer are perfecting the ultimate gearbox. They are in at least partial denial now, but they will soon need to dismantle those investments and some others to stay alive. Ex, Audi that has kept a really complicated gearbox instead of doing what Mitsubishi did, using a fixed gear system and a serial hybrid approach. (To be fair, they have nothing to gain from these changes, they just want to stay slightly better than the rest.) The bet against them is that some of them will not be able to reinvent themselves and then wither out into obsolescence. I think that this risk might not be fully included in the price right now.

avn2109 11y ago
>> "The control panel will be all big screens and apps." Noooo - tactile feedback is so important in vehicle subsystem control! [0] Please do not take away my knobs and dials. [0] http://www.ecnmag.com/article/2014/01/keeping-feel-automotive-touch-controls http://www.ecnmag.com/article/2014/01/keeping-feel-automotiv...
- oldmanjay 11y ago
  Not to ruin your day, but they're taking away your knobs, dials, and control of the vehicle.
  - avn2109 11y ago
    Honestly I might not mind being unable to control the vehicle as long as I could adjust the temperature with a hardware control.
    - TeMPOraL 11y ago
      I think the endgame of a car is an artificial womb - moving you around, self-adjusting for maximum personal comfort - but with you being the one that tells it where to go.