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People often think of the electronic-nature of their cars as Tesla's key advantage. Other elements factor into share/debt cost analysis: 1. Culture — They app
by bmh_ca 9y ago
People often think of the electronic-nature of their cars as Tesla's key advantage.
Other elements factor into share/debt cost analysis:
1. Culture — They appear to still have a startup "let's solve the problem" mentality
2. Distribution — There are no networks of dealerships taking a cut
3. Marketing — They don't need to pay for it at all right now
4. Legacy — There are no pension funds and other obligations on them
5. Environmental icon — There is a lot of political support for them
Tesla is still high risk, but they have a big potential upside.
Contrast with e.g. GM:
1. Old-school Culture of "if you build it, they will come"
2. Mandatory dealerships
3. Big marketing costs
4. Pensions are underfunded and they have a huge inventory buildup (and defaulting subprime leases are mounting)
6. They have a lot of political support, but it's not for environmental reasons
That's pretty cursory, but illustrates a few factors besides just the product.
Tesla's burn rate is a marginal-risk long factor, if/when they get past their manufacturing bottlenecks.
[edit]: Newlines.
- adventured 9y ago> Pensions are underfunded That contrast issue is very weak. GM's pension was underfunded by $7.2 billion at the end of 2016. They had $24.7 billion in cash at that point. It's around 7% underfunded. It's a non-issue, particularly since GM has continued to successfully work at reducing it and has been solidly profitable since the great recession.
- bmh_ca 9y agoYou may be right, and GM's revenue remains massive so it's a fraction of revenue. The only area of concern is the growth presumptions in the pension fund. They are often around 7.5%, whereas real growth was 0.5%, putting a potential damper on the profit line (but I do not know that relative magnitude of that).