4 ms·

All good points but, I think you're missing one (extremely unlikely) scenario, which is the bet that Tesla to cars will be like Apple was to phones. Not just su

All good points but, I think you're missing one (extremely unlikely) scenario, which is the bet that Tesla to cars will be like Apple was to phones. Not just supplanting existing phone manufacturers, but redefining what the market means and how big it is. Nokia was a $90b phone company in 2007. The best-case scenario for a new phone company could in 2007 be expressed as a topping out at Nokia's size (Toyota in your example), but it'd be a moonshot. It'd more likely be an Ericson or Motorola, whose phone divisions weren't half as big as Nokia's. So the best case scenario is $90b, and more likely to be around $30b. And that would've made sense, until you figure Apple drove a market cap approaching $900b, mostly on the basis of its phones, all within 10 years of 2007. So there's something to be said about the possibility that Tesla doesn't just supplant Toyota to become the car company, but also redefining cars and the size of its market, just like with smartphones. I see some people making that bet. That having been said, I personally think the chance of that happening approaches zero. The points you make are very apt. Self-driving cars means we can increase utility rates of cars (which sit still for 90% of the day) from 10% to say 90%, and that will completely destroy sales volume.

Gustomaximus 8y ago
This thought crossed my mind too but then remembered an old stat. The difference is Apples margin. At one point they had something like (these are estimates as I couldn't find on a quick google) 20% smartphone market share for 90% of the profits made from the market. Tesla is unlikely to take that margin or share of profit from the market. I feel the bet on Tesla is Elon Musk. And I recognise there is a cult following but consider, how many people in the world have a better chance of opening a new multi-billion dollar category within their company from scratch? If you are going to be on someone, he's not a bad choice.
plopz 8y ago
I'm not sure how that last part plays out. If you need 100 cars active at rush hour and 10 active the rest of the day, then sure those 10 might have 90% utilization but the other 90 wont.
- IkmoIkmo 8y ago
  Well, suppose you have a fleet of 100 cars. In the morning and evening, 100 people travel for 1 hour to work and back during rushhour. That's 2 hours in total, or 100% utility of the fleet during 8% of the day. Now suppose that every hour of the rest of the day, there's only 10 people making a trip of 30 minutes. That means there's only 10% of the traffic volume compared to rushhour on the road. But you're seeing 22 hours of two groups of 10 people making a trip every hour. That's 440 trips. Now suppose that the two groups of people, rush and non-rush, all used their own cars. You'd have 100 cars for the rushhour group and 440 cars in the non-rushhour group. You get to 540 cars needed. Now suppose the two groups shared vehicles. You just need 100 cars still to make the same amount of trips. Under these (made up) assumptions, you can reduce the amount of cars needed by 5x. Then there's the notion that you can get dynamic pricing, e.g. look at Uber, but for semi-public transport. This incentivises people and companies to distribute their travel in a better manner, which also allows a system where producers of congestion pay for it. Thereby you can distribute load better, increase utilization, decrease the number of vehicles needed even further. But indeed, you're unable to get to 100% utilization because demand fluctuates during the day. But even increasing it from 10% to 20%, or 30%, would introduce massive changes to the market size.
dx034 8y ago
The problem with this is that for many people, cars are already one of the biggest expenses and they're at their limit with what they can spend on their car. Apple's success was possible because a lot of people afforded the extra $600-800 every 1-2 years. You cannot really expect people to spend an extra $50,000 every few years, that won't work for most.

Gustomaximus 8y ago

This thought crossed my mind too but then remembered an old stat. The difference is Apples margin. At one point they had something like (these are estimates as I couldn't find on a quick google) 20% smartphone market share for 90% of the profits made from the market. Tesla is unlikely to take that margin or share of profit from the market. I feel the bet on Tesla is Elon Musk. And I recognise there is a cult following but consider, how many people in the world have a better chance of opening a new multi-billion dollar category within their company from scratch? If you are going to be on someone, he's not a bad choice.

plopz 8y ago

I'm not sure how that last part plays out. If you need 100 cars active at rush hour and 10 active the rest of the day, then sure those 10 might have 90% utilization but the other 90 wont.

IkmoIkmo 8y ago
Well, suppose you have a fleet of 100 cars. In the morning and evening, 100 people travel for 1 hour to work and back during rushhour. That's 2 hours in total, or 100% utility of the fleet during 8% of the day. Now suppose that every hour of the rest of the day, there's only 10 people making a trip of 30 minutes. That means there's only 10% of the traffic volume compared to rushhour on the road. But you're seeing 22 hours of two groups of 10 people making a trip every hour. That's 440 trips. Now suppose that the two groups of people, rush and non-rush, all used their own cars. You'd have 100 cars for the rushhour group and 440 cars in the non-rushhour group. You get to 540 cars needed. Now suppose the two groups shared vehicles. You just need 100 cars still to make the same amount of trips. Under these (made up) assumptions, you can reduce the amount of cars needed by 5x. Then there's the notion that you can get dynamic pricing, e.g. look at Uber, but for semi-public transport. This incentivises people and companies to distribute their travel in a better manner, which also allows a system where producers of congestion pay for it. Thereby you can distribute load better, increase utilization, decrease the number of vehicles needed even further. But indeed, you're unable to get to 100% utilization because demand fluctuates during the day. But even increasing it from 10% to 20%, or 30%, would introduce massive changes to the market size.

dx034 8y ago

The problem with this is that for many people, cars are already one of the biggest expenses and they're at their limit with what they can spend on their car. Apple's success was possible because a lot of people afforded the extra $600-800 every 1-2 years. You cannot really expect people to spend an extra $50,000 every few years, that won't work for most.