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All those companies can pretend that they are part of the "new economy" where valuations are not bound by mere fundamentals like revenue and profit. Tesla, on

by pakitan 10y ago

All those companies can pretend that they are part of the "new economy" where valuations are not bound by mere fundamentals like revenue and profit. Tesla, on the other hand, can't do that. They manufacture a tangible product and have a lot of established competition to which they can be easily compared. Currently Tesla's market cap is 150% that of Renault's. A company that sells millions of vehicles, has factories all around the world and makes a very healthy profit for its shareholders. So, Tesla, instead of trading at a discount to reflect the risk involved, is traded as if it's already a successful company 1.5 times the size of Renault. So, if you think Tesla is valued "fairly" now, please, tell me what should be its market cap when it actually starts making profit? $300B? $3T?

tcoppi 10y ago
If Tesla is successful in their vision, the entire transportation(and potentially energy) industry will be completely different and hence incomparable with existing car company valuations, since they will have created a completely new slice of pie to eat from. If they are not successful and only end up as a middling premium electric car company they are probably extremely overvalued. You're comparing the valuation of horse and buggy companies in the 1910s to Ford.
- pakitan 10y ago
  > You're comparing the valuation of horse and buggy companies in the 1910s to Ford. You mean there are no other companies selling electric vehicles? And clearly, if, say, Mercedes, doesn't have electric model now, it's absolutely impossible that they have one in 5 years, just like a horse & buggy company, right? But forget about Mercedes, how about Nissan Leaf, which exists now and is the world's best selling electric car? Shouldn't Nissan be valued at similarly crazy valuations? Or they won't be part of this new brave world and don't get to eat from the "new slice of pie"?
  - tcoppi 10y ago
    You're right, Tesla should just pack it in right now. They have no competitive advantage or product that anyone wants, and Nissan has far better prospects than Tesla ever had.
    - FireBeyond 10y ago
      That's just snarky and completely misses the point. No-one said that. But you -did- say that Tesla is working this "completely new slice of the pie". Which they're not. Unless you artificially constrain it to a segment where only Tesla exists. Whilst the current Tesla models might well be "luxury electric", the upcoming stuff is entirely in the same segment as Nissan, hence the reply to you.
      - tcoppi 10y ago
        I replied to snark with snark. Tesla is not just a car company. They are going to be the largest li-ion battery manufacturer, distributed energy provider(with the solarcity acquisition), energy storage provider, supply grid stabilization services(important when more of the generation is not base-load), and compete in the autonomous car sector. Its fine with me if people don't think those other areas are going to be profitable for Tesla, but thinking of them as just a car manufacturer is kind of missing the point. And those other areas I mentioned do make up a largely untapped pie that Tesla is poised to tap into.
        FireBeyond 10y ago
        How is battery manufacturing an untapped pie? How is solar power an untapped pie? Energy storage provider is "battery at a bigger scale", similar with supply grid stabilization. And as far as I am aware the PowerWall has been a commercial failure, even among Tesla owners. I'm not sure how that will magically do a 180 now that Musk is going from "influential adviser" to "owner".
        tcoppi 10y ago
        You are correct that the Powerwall isn't doing that well currently. The Powerwall is the home product, and its usefulness is directly tied to solar panels. The tie-in with SolarCity there should help with demand. There is the other side of Tesla Energy, which is the Powerpack. The Powerpack is the commercial/utility-scale product, available in quantities suitable for grid-level storage. They had over $1b worth of orders[1] for the Powerpack as of late last year, far more than they are capable of manufacturing currently. The Gigafactory opened slightly early to start producing those packs using Samsung cells, but eventually those will move to Panasonic cells as well. There is huge untapped demand just in batteries here that is only starting to surface and be fulfilled. Grid supply stabilization has more to do with smart grids/smart inverters applied to solar panel + battery installs. SolarCity has detailed it in some of their more recent town halls[2]. 1. http://fortune.com/2015/08/10/tesla-grid-battery/ http://fortune.com/2015/08/10/tesla-grid-battery/ 2. http://www.ustream.tv/recorded/87401050 http://www.ustream.tv/recorded/87401050
  - tajen 10y ago
    Nissan, Mercedes and co haven't been able to shift the market for the last 10 years. They don't get it. They don't get that the global warming needs a resolution within 10 years. They may take a part of the electric car cake, but only Tesla knows what it's doing. And concerning the next steps, it's safe to assume that only Tesla will take the right anticipations. The world is unsustainable on carbon emissions. We need to ditch the old cars and the petroleum industry altogether. It's a matter of emergency, every year now sets new global warming records. Now Tesla can leverage most of the world and lobby against legacy car makes. Volkswagen criminals first. Tesla has just changed the world, whether you realize it or not, and tables have turned against the petrol industry. The other brands have long bet the electric cars were impossible, they belong in history books together with our other guilty actions like inquisition, native americans and slavery.
    - dilemma 10y ago
      Tesla cars are powered by coal, gas, and nuclear, in varying parts depending on location. Is there evidence that they produce lower emissions than other cars?
      - JeffL 10y ago
        Our two electric cars are powered entirely by solar.
      - NotSammyHagar 10y ago
        Sure, washington state power is mostly not from coal, and you can pay a slight extra amount to use only non-renewable sources, like I do. So my ev has 0% coal, gas, nuclear. Search for green power. It costs about $10 extra per month. It's easier here, almost 50% of power uses renewable for all customers. So you pay a little extra. Anyway, there's the obvious notion that capturing pollution from one central energy source (a coal or gas plant) is far more likely to reduce pollution than trying to reduce pollution from every car.
    - planteen 10y ago
      Hasn't Nissan sold more Leafs than Tesla has Model S?
BookmarkSaver 10y ago
That's kind of the point. People (investors) think that in the not-so-distant future Tesla will be much bigger than Renault, and are extremely confident in this. It doesn't really matter to investors where Tesla is right now except as a mechanism to build extrapolations. If you are extremely confident that in 10 years Tesla will be twice the size of Renault, then you need to buy buy buy right now before other people realize it. Renault's size isn't expected to change significantly over the next decade. Tesla's is. This means that if you own Tesla shares now, 10 years later they are going to be worth a massive amount because Tesla will be much bigger than Renault, so the price naturally rises to that expectation, only abetted by the possibility that Tesla collapses. It isn't about where the company is at the moment. It is about where you think the company will be in "the future" (at whatever point that is relevant to you) reduced by the probability that you think they will fail (and most people think that chance is tiny). So when Tesla starts making a profit, its market cap probably won't have grown that much, because it was expected behavior priced into today's valuation.
- pakitan 10y ago
  If I think something will be worth $100 in 10 years I won't be paying $100 for it today. That's not how finance works. There is a risk and interest premium. Sure, if you think the risk is zero, then yes, Tesla may not be overvalued. But that's exactly my point - the risk is not zero. Neither for Tesla, nor for any other company.
  - eloff 10y ago
    Yes but that's a strawman. You also won't be paying the current value. You'll pay something between what it's worth now and what the market thinks it will be worth one day. That will be discounted for risk and for the delayed gratification.
    - pakitan 10y ago
      > You'll pay something between what it's worth now and what the market thinks it will be worth one day That sentence doesn't make sense. I think you're conflating worth/value (subjective measures) with price (objective). I can't pay more for an item than what's it worth to me
hangonhn 10y ago
The current market valuation IS what people expects Tesla to be worth when/if it makes a profit in the future -- at least according to the efficient market theorem. Right? So unless new information comes along, the current valuation already encompasses the market's expectations of success and failure.
- davidivadavid 10y ago
  According to the EMH, the current market valuation is what people expect it to be worth today, if it makes a profit in the future. But if you assume the EMH, discussing valuations is kind of pointless, isn't it?

by pakitan 10y ago

tcoppi 10y ago

If Tesla is successful in their vision, the entire transportation(and potentially energy) industry will be completely different and hence incomparable with existing car company valuations, since they will have created a completely new slice of pie to eat from. If they are not successful and only end up as a middling premium electric car company they are probably extremely overvalued. You're comparing the valuation of horse and buggy companies in the 1910s to Ford.

pakitan 10y ago
> You're comparing the valuation of horse and buggy companies in the 1910s to Ford. You mean there are no other companies selling electric vehicles? And clearly, if, say, Mercedes, doesn't have electric model now, it's absolutely impossible that they have one in 5 years, just like a horse & buggy company, right? But forget about Mercedes, how about Nissan Leaf, which exists now and is the world's best selling electric car? Shouldn't Nissan be valued at similarly crazy valuations? Or they won't be part of this new brave world and don't get to eat from the "new slice of pie"?
- tcoppi 10y ago
  You're right, Tesla should just pack it in right now. They have no competitive advantage or product that anyone wants, and Nissan has far better prospects than Tesla ever had.
  - FireBeyond 10y ago
    That's just snarky and completely misses the point. No-one said that. But you -did- say that Tesla is working this "completely new slice of the pie". Which they're not. Unless you artificially constrain it to a segment where only Tesla exists. Whilst the current Tesla models might well be "luxury electric", the upcoming stuff is entirely in the same segment as Nissan, hence the reply to you.
    - tcoppi 10y ago
      I replied to snark with snark. Tesla is not just a car company. They are going to be the largest li-ion battery manufacturer, distributed energy provider(with the solarcity acquisition), energy storage provider, supply grid stabilization services(important when more of the generation is not base-load), and compete in the autonomous car sector. Its fine with me if people don't think those other areas are going to be profitable for Tesla, but thinking of them as just a car manufacturer is kind of missing the point. And those other areas I mentioned do make up a largely untapped pie that Tesla is poised to tap into.
      - FireBeyond 10y ago
        How is battery manufacturing an untapped pie? How is solar power an untapped pie? Energy storage provider is "battery at a bigger scale", similar with supply grid stabilization. And as far as I am aware the PowerWall has been a commercial failure, even among Tesla owners. I'm not sure how that will magically do a 180 now that Musk is going from "influential adviser" to "owner".
        tcoppi 10y ago
        You are correct that the Powerwall isn't doing that well currently. The Powerwall is the home product, and its usefulness is directly tied to solar panels. The tie-in with SolarCity there should help with demand. There is the other side of Tesla Energy, which is the Powerpack. The Powerpack is the commercial/utility-scale product, available in quantities suitable for grid-level storage. They had over $1b worth of orders[1] for the Powerpack as of late last year, far more than they are capable of manufacturing currently. The Gigafactory opened slightly early to start producing those packs using Samsung cells, but eventually those will move to Panasonic cells as well. There is huge untapped demand just in batteries here that is only starting to surface and be fulfilled. Grid supply stabilization has more to do with smart grids/smart inverters applied to solar panel + battery installs. SolarCity has detailed it in some of their more recent town halls[2]. 1. http://fortune.com/2015/08/10/tesla-grid-battery/ http://fortune.com/2015/08/10/tesla-grid-battery/ 2. http://www.ustream.tv/recorded/87401050 http://www.ustream.tv/recorded/87401050
- tajen 10y ago
  Nissan, Mercedes and co haven't been able to shift the market for the last 10 years. They don't get it. They don't get that the global warming needs a resolution within 10 years. They may take a part of the electric car cake, but only Tesla knows what it's doing. And concerning the next steps, it's safe to assume that only Tesla will take the right anticipations. The world is unsustainable on carbon emissions. We need to ditch the old cars and the petroleum industry altogether. It's a matter of emergency, every year now sets new global warming records. Now Tesla can leverage most of the world and lobby against legacy car makes. Volkswagen criminals first. Tesla has just changed the world, whether you realize it or not, and tables have turned against the petrol industry. The other brands have long bet the electric cars were impossible, they belong in history books together with our other guilty actions like inquisition, native americans and slavery.
  - dilemma 10y ago
    Tesla cars are powered by coal, gas, and nuclear, in varying parts depending on location. Is there evidence that they produce lower emissions than other cars?
    - JeffL 10y ago
      Our two electric cars are powered entirely by solar.
    - NotSammyHagar 10y ago
      Sure, washington state power is mostly not from coal, and you can pay a slight extra amount to use only non-renewable sources, like I do. So my ev has 0% coal, gas, nuclear. Search for green power. It costs about $10 extra per month. It's easier here, almost 50% of power uses renewable for all customers. So you pay a little extra. Anyway, there's the obvious notion that capturing pollution from one central energy source (a coal or gas plant) is far more likely to reduce pollution than trying to reduce pollution from every car.
  - planteen 10y ago
    Hasn't Nissan sold more Leafs than Tesla has Model S?

BookmarkSaver 10y ago

That's kind of the point. People (investors) think that in the not-so-distant future Tesla will be much bigger than Renault, and are extremely confident in this. It doesn't really matter to investors where Tesla is right now except as a mechanism to build extrapolations. If you are extremely confident that in 10 years Tesla will be twice the size of Renault, then you need to buy buy buy right now before other people realize it. Renault's size isn't expected to change significantly over the next decade. Tesla's is. This means that if you own Tesla shares now, 10 years later they are going to be worth a massive amount because Tesla will be much bigger than Renault, so the price naturally rises to that expectation, only abetted by the possibility that Tesla collapses. It isn't about where the company is at the moment. It is about where you think the company will be in "the future" (at whatever point that is relevant to you) reduced by the probability that you think they will fail (and most people think that chance is tiny). So when Tesla starts making a profit, its market cap probably won't have grown that much, because it was expected behavior priced into today's valuation.

pakitan 10y ago
If I think something will be worth $100 in 10 years I won't be paying $100 for it today. That's not how finance works. There is a risk and interest premium. Sure, if you think the risk is zero, then yes, Tesla may not be overvalued. But that's exactly my point - the risk is not zero. Neither for Tesla, nor for any other company.
- eloff 10y ago
  Yes but that's a strawman. You also won't be paying the current value. You'll pay something between what it's worth now and what the market thinks it will be worth one day. That will be discounted for risk and for the delayed gratification.
  - pakitan 10y ago
    > You'll pay something between what it's worth now and what the market thinks it will be worth one day That sentence doesn't make sense. I think you're conflating worth/value (subjective measures) with price (objective). I can't pay more for an item than what's it worth to me

hangonhn 10y ago

The current market valuation IS what people expects Tesla to be worth when/if it makes a profit in the future -- at least according to the efficient market theorem. Right? So unless new information comes along, the current valuation already encompasses the market's expectations of success and failure.

davidivadavid 10y ago
According to the EMH, the current market valuation is what people expect it to be worth today, if it makes a profit in the future. But if you assume the EMH, discussing valuations is kind of pointless, isn't it?