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Tesla is a technology company that also happens to make cars. Ford is an automotive company, that also happens to make technology. Lets talk about models - Tes

by Aloha 9y ago

Tesla is a technology company that also happens to make cars. Ford is an automotive company, that also happens to make technology. Lets talk about models - Tesla doesnt make a mass market car - even their basic sedan, starts at 35k - I can buy a nicely equipped Taurus, Fusion, Malibu , Impala, Camry or Avalon for less than that - and from a size perspective its far closer to a Prius or Volt (23k or 33k starting respectively). Secondly, Brand Cachet - Tesla appears to be positioning itself from a branding perspective closer to where BMW or Audi does. I'm more hopeful for Ford figuring out technology, than I am with Tesla figuring out how to be a really good mass market car company. The reason I consider Tesla overvalued has to do with potential market share, as well as the traditional margin on cars - if they try to be a mass market manufacturer, I don't see Tesla capturing more than 10% of the (very crowded) marketplace nor do I see them easily besting the historic 5% margin most (mass market) automakers have, if they decide to be more like BMW or Audi - their margin could go up by a rather large amount - but their volume would go down by an almost an large amount... they might however have a bright future as a technology licensing company - that remains to be seen. In short however, if you measure it by the "car company yardstick" its drastically over overvalued - if you measure it by the "technology company yardstick" however the numbers start to look a little friendlier. Consider though that the technology company yardstick seems to be mostly based on hype, rather than actualized returns basis. Consider for a moment that Tesla isnt pioneering a new market here, it's trying to produce a better dohicky (thats really cool, but not revolutionary) in an already crowded market - this alone says that the technology yardstick shouldn't apply - you should instead measure it like its peers in that industry.

scient 9y ago
The scenarios you described sound like straight from "The Innovators Dilemma". Except the companies thinking this way were disrupted out of business.
- Aloha 9y ago
  What is truly disrupting about Tesla?
  - jsight 9y ago
    The biggest disruption is the quality of the electric drivetrain. We are quickly finding that a "mediocre" electric drivetrain feels better to the average driver than a very good gasoline drivetrain. That isn't what people intuitively expect, but once that expectation changes, the market is going to see major disruption. Gasoline based powertrains will not be seen as the superior choice by most people 5 years from now.
    - Aloha 9y ago
      I have no doubt that this is a factor is why Tesla is going somewhere - I don't know that this is enough to 'render all that came before obsolete'. I'm hopeful yet though - I think a transition to electric power for cars would be wonderful - there are currently many drawbacks to electric power, mostly relating to batteries yet still to be overcome.
    - Aron 9y ago
      Yeah -- and you don't lose half your fuel economy by getting the one that goes 0-60 in 4 seconds.
    - kazinator 9y ago
      > We are quickly finding that a "mediocre" electric drivetrain feels better to the average driver than a very good gasoline drivetrain. At first glance, that seems like more of a reason for low-end electric cars to disrupt Tesla.
      - Aloha 9y ago
        I'd fully expect that challenge to come from one of the established manufacturers. We're still early-days yet on electric car technology - there are still many hurdles to overcome yet to make the technology practical for most drivers - so its really hard to say what the future will hold yet - I'm excited for the potential, but I'd like to think I see the realities of it.
    - WalterBright 9y ago
      Yes, but some of us motorheads like that vibration and noise of a gas engine :-)
cbanek 9y ago
I hear very frequently that Tesla isn't a car company, it's a tech company. Mostly because they want to value Tesla stock like a tech company (very popular, high valuations, high profit margins), not a car company (cyclical sales, lower profit margins, heavily regulated). But whatever Tesla is now, eventually if it sells cars it has to turn into a car company. It has to deal with things like logistics for spare parts, repair facilities, dealers (or whatever way they choose to sell cars). The fixed costs as Tesla goes on are only going to go up because of the legacy they are creating, as cars last a while (hopefully a long while), and need to be maintained/repaired, if only because of accidents. Tech, on the other hand, usually means you don't have to worry about physical manufacturing. You don't have to worry so much about supply logistics, travel and transport costs, inventory, etc. Once you build the technology, at least with software it's easy to mass reproduce (especially with digital distribution and no physical media) at low overhead and sell at a reasonable price, sometimes direct to the user (higher profit %). Now let's talk about another case study of a consumer discretionary company that uses tech a lot, Amazon. Amazon is leveraging tech to help the front end and the supply chain, to provide lower prices and easy shopping to people. By making a great website, they encourage people to find and buy more, attacking the "browsing at the supermarket" theory of impulse buying with their own impulse buys. They are using technology to do logistics cheaper, lowering prices to gain market share. Tesla, and car companies in general, move a lot slower because people aren't buying cars every day. Do I think Tesla could turn into a great car maker? Sure. But just because there's a new space (EVs) doesn't mean that current companies will own the space going forward, or even the leader today. Tesla is using its startup-ness to try to get there, but will they get over the hump of actually turning profitable while making cars? That's the big question, and if the futures earnings are in the stock price, that's a bet I'd rather pass. (but wouldn't short either)
- hn_throwaway_99 9y ago
  > Tech, on the other hand, usually means you don't have to worry about physical manufacturing. You don't have to worry so much about supply logistics, travel and transport costs, inventory, etc. Umm, Apple?
  - 9y ago
belltaco 9y ago
>Tesla is a technology company that also happens to make cars. Ford is an automotive company, that also happens to make technology. From 2007: "Apple is a technology company that happens to make a phone. Motorola/Nokia/Palm/Blackberry are phone companies that can easily copy Apple's technology and execute better than Apple since they know all about making phones."
- dsfyu404ed 9y ago
  Apple was an established technology company with a wallet fat enough to see the iPhone through. Cars aren't a new product line, they're Tesla's only product line. If they fail, Tesla fails. History is littered with good ideas that didn't get off the ground the first time and then got bought for pennies on the dollar by an established player in the industry.
vivekd 9y ago
>Tesla doesnt make a mass market car - even their basic sedan, starts at 35k - I can buy a nicely equipped Taurus, Fusion, Malibu , Impala, Camry or Avalon for less than that - and from a size perspective its far closer to a Prius or Volt (23k or 33k starting respectively). I don't know if we're comparing apples to apples here. Volt and Prius are hybrid cars, meaning they don't have the same drive capability as a fully electric car. Tesla's model 3 is a fully electric car for the same price as your average hybrid car and for less than you can get many hybrid models. There are many electric cars out there like the Nissan leaf and chevy spark at a lower price point, but they don't have the performance of the Tesla and none of them have anywhere near the 346 km range that the Tesla model 3 is expected to have. They average out at around 150 km - which is good for most every day use, but not really useful for long trips. Tesla's long range combined with it's supercharger network makes it different. A Tesla can really compete with and likely replace the average fuel powered car in range and performance. The average American family spends 1500 on fuel per year and keeps their car for about 11.5 years, that's 17, 250.00. Further a tesla will likely need less maintenance because you don't have things like coolants or radiators or oil changes. Things makes Tesla a bargain compared to fuel powered cars. Yes Tesla has been positioning itself as a luxury brand and competing with luxury brands, but I don't think this was necessarily a choice but rather due to the fact that they can't currently make an EV cheap enough to compete with the mass market brands. Musk has always said his vision was a mass market car and I think in many ways the model 3 is what the companies real goal has always been.
- cjrp 9y ago
  > [...] you don't have things like coolants or radiators or oil changes Surely they must still require radiators/coolant for the batteries?
  - vivekd 9y ago
    Model 3 won't have a radiator, it does have a battery cooling fluid but it's not fair to think of that as automotive fluid because it doesn't have to be replenished.
- Aloha 9y ago

by Aloha 9y ago

scient 9y ago

The scenarios you described sound like straight from "The Innovators Dilemma". Except the companies thinking this way were disrupted out of business.

Aloha 9y ago
What is truly disrupting about Tesla?
- jsight 9y ago
  The biggest disruption is the quality of the electric drivetrain. We are quickly finding that a "mediocre" electric drivetrain feels better to the average driver than a very good gasoline drivetrain. That isn't what people intuitively expect, but once that expectation changes, the market is going to see major disruption. Gasoline based powertrains will not be seen as the superior choice by most people 5 years from now.
  - Aloha 9y ago
    I have no doubt that this is a factor is why Tesla is going somewhere - I don't know that this is enough to 'render all that came before obsolete'. I'm hopeful yet though - I think a transition to electric power for cars would be wonderful - there are currently many drawbacks to electric power, mostly relating to batteries yet still to be overcome.
  - Aron 9y ago
    Yeah -- and you don't lose half your fuel economy by getting the one that goes 0-60 in 4 seconds.
  - kazinator 9y ago
    > We are quickly finding that a "mediocre" electric drivetrain feels better to the average driver than a very good gasoline drivetrain. At first glance, that seems like more of a reason for low-end electric cars to disrupt Tesla.
    - Aloha 9y ago
      I'd fully expect that challenge to come from one of the established manufacturers. We're still early-days yet on electric car technology - there are still many hurdles to overcome yet to make the technology practical for most drivers - so its really hard to say what the future will hold yet - I'm excited for the potential, but I'd like to think I see the realities of it.
  - WalterBright 9y ago
    Yes, but some of us motorheads like that vibration and noise of a gas engine :-)

cbanek 9y ago

I hear very frequently that Tesla isn't a car company, it's a tech company. Mostly because they want to value Tesla stock like a tech company (very popular, high valuations, high profit margins), not a car company (cyclical sales, lower profit margins, heavily regulated). But whatever Tesla is now, eventually if it sells cars it has to turn into a car company. It has to deal with things like logistics for spare parts, repair facilities, dealers (or whatever way they choose to sell cars). The fixed costs as Tesla goes on are only going to go up because of the legacy they are creating, as cars last a while (hopefully a long while), and need to be maintained/repaired, if only because of accidents. Tech, on the other hand, usually means you don't have to worry about physical manufacturing. You don't have to worry so much about supply logistics, travel and transport costs, inventory, etc. Once you build the technology, at least with software it's easy to mass reproduce (especially with digital distribution and no physical media) at low overhead and sell at a reasonable price, sometimes direct to the user (higher profit %). Now let's talk about another case study of a consumer discretionary company that uses tech a lot, Amazon. Amazon is leveraging tech to help the front end and the supply chain, to provide lower prices and easy shopping to people. By making a great website, they encourage people to find and buy more, attacking the "browsing at the supermarket" theory of impulse buying with their own impulse buys. They are using technology to do logistics cheaper, lowering prices to gain market share. Tesla, and car companies in general, move a lot slower because people aren't buying cars every day. Do I think Tesla could turn into a great car maker? Sure. But just because there's a new space (EVs) doesn't mean that current companies will own the space going forward, or even the leader today. Tesla is using its startup-ness to try to get there, but will they get over the hump of actually turning profitable while making cars? That's the big question, and if the futures earnings are in the stock price, that's a bet I'd rather pass. (but wouldn't short either)

hn_throwaway_99 9y ago
> Tech, on the other hand, usually means you don't have to worry about physical manufacturing. You don't have to worry so much about supply logistics, travel and transport costs, inventory, etc. Umm, Apple?
- 9y ago

belltaco 9y ago

>Tesla is a technology company that also happens to make cars. Ford is an automotive company, that also happens to make technology. From 2007: "Apple is a technology company that happens to make a phone. Motorola/Nokia/Palm/Blackberry are phone companies that can easily copy Apple's technology and execute better than Apple since they know all about making phones."

dsfyu404ed 9y ago
Apple was an established technology company with a wallet fat enough to see the iPhone through. Cars aren't a new product line, they're Tesla's only product line. If they fail, Tesla fails. History is littered with good ideas that didn't get off the ground the first time and then got bought for pennies on the dollar by an established player in the industry.

vivekd 9y ago

>Tesla doesnt make a mass market car - even their basic sedan, starts at 35k - I can buy a nicely equipped Taurus, Fusion, Malibu , Impala, Camry or Avalon for less than that - and from a size perspective its far closer to a Prius or Volt (23k or 33k starting respectively). I don't know if we're comparing apples to apples here. Volt and Prius are hybrid cars, meaning they don't have the same drive capability as a fully electric car. Tesla's model 3 is a fully electric car for the same price as your average hybrid car and for less than you can get many hybrid models. There are many electric cars out there like the Nissan leaf and chevy spark at a lower price point, but they don't have the performance of the Tesla and none of them have anywhere near the 346 km range that the Tesla model 3 is expected to have. They average out at around 150 km - which is good for most every day use, but not really useful for long trips. Tesla's long range combined with it's supercharger network makes it different. A Tesla can really compete with and likely replace the average fuel powered car in range and performance. The average American family spends 1500 on fuel per year and keeps their car for about 11.5 years, that's 17, 250.00. Further a tesla will likely need less maintenance because you don't have things like coolants or radiators or oil changes. Things makes Tesla a bargain compared to fuel powered cars. Yes Tesla has been positioning itself as a luxury brand and competing with luxury brands, but I don't think this was necessarily a choice but rather due to the fact that they can't currently make an EV cheap enough to compete with the mass market brands. Musk has always said his vision was a mass market car and I think in many ways the model 3 is what the companies real goal has always been.

cjrp 9y ago
> [...] you don't have things like coolants or radiators or oil changes Surely they must still require radiators/coolant for the batteries?
- vivekd 9y ago
  Model 3 won't have a radiator, it does have a battery cooling fluid but it's not fair to think of that as automotive fluid because it doesn't have to be replenished.
Aloha 9y ago