4 ms·

I like this quote, because it seems to be something that TSLA bulls and bears can mostly agree on and thus gets to the heart of the actual empirical disagreemen

I like this quote, because it seems to be something that TSLA bulls and bears can mostly agree on and thus gets to the heart of the actual empirical disagreements between them. For my part, I'm a Tesla skeptic because my evaluations on the likelihood of those clauses are: > "most cars are powered by electricity in 10 years" Unlikely. The average age of a car on the road is about 11.5 years (source: http://news.ihsmarkit.com/press-release/automotive/average-age-vehicles-road-remains-steady-114-years-according-ihs-automotive http://news.ihsmarkit.com/press-release/automotive/average-a...), so even if electric vehicle sales went to 100% tomorrow (and they won't), this wouldn't be true. It's possible fuel prices will skyrocket in the meantime and get people to scrap their ICEs, but with fracking and other deep extraction, I wouldn't bet on it. > "most of these cars are made by Tesla" Unlikely. Even if Tesla becomes a healthy and established carmarker, I can't imagine a situation where they are the only one selling electric cars in the late 2020's. Everyone else is getting their electric cars onto the road, and outside the HN bubble, most people are not so enamored with Tesla that they would refuse to even consider buying something else. > "if Tesla can make those cars with sufficient margin and quality control" Possible, but I think it's unlikely. Despite year after year of promises by Musk, Tesla still struggles with both margins and quality control, and I haven't seen any evidence that it's getting better (and there's every reason to believe it will get worse as they seem a bit desperate to scale up production) > " if Tesla can raise additional capital sufficient to cover a $3 billion annual cash drain and another billion to service its debt." I don't know enough about financial markets to make a solid guess here, but this seems iffy to me in light of all the other givens about Tesla, especially if markets tighten in the next few years (up until now, Tesla has had the good fortune to need cash-raising in an era of low interest rates, cheap money and bull markets. That may not be the case the next time they need capital) Hence, I'm a bear. I don't necessarily think Tesla will go out of business, but I think their current valuation is absurd.

deleted 8y ago
[deleted]
simo7 8y ago
> ...thus gets to the heart of the actual empirical disagreements between them. I'm not sure the disagreement (between bears and bulls) is necessarily to be found in a different outlook on the future. One can conclude all those conditions are likely to be met in the future and yet be bearish on the stock. I'm overall optimistic on Tesla as a business, yet it seems my optimism is already fully factored in...no real upside, which is surprising given the risks.
durkie 8y ago
>> "most cars are powered by electricity in 10 years" > Unlikely. The average age of a car on the road is about 11.5 years (source: http://news.ihsmarkit.com/press-release/automotive/average-a... http://news.ihsmarkit.com/press-release/automotive/average-a...), so even if electric vehicle sales went to 100% tomorrow (and they won't), this wouldn't be true. It's possible fuel prices will skyrocket in the meantime and get people to scrap their ICEs, but with fracking and other deep extraction, I wouldn't bet on it. I think this is extremely likely, but let's clarify: it might not be that most existing cars in 10 years will be powered by electricity, but I feel strongly that EVs will dominate new car sales. As a caveat, your 11.5 year number refers only to US cars. Oil price fluctuations are basically irrelevant at this point: EV battery pack prices are only decreasing, ranges are only increasing. Aside from that, EVs win on cost of ownership (maintenance, electricity costs), noise, and power. >> "if Tesla can make those cars with sufficient margin and quality control" >Possible, but I think it's unlikely. Despite year after year of promises by Musk, Tesla still struggles with both margins quality control, and I haven't seen any evidence that it's getting better (and there's every reason to believe it will get worse as they seem a bit desperate to scale up production) Tesla's margins from Models S and X are healthy (mid 20%s). Their spending is almost entirely from capex -- which would be expected from scaling up a battery plant and new model line. Operating costs Q12018 were 1.05B (model 3 at 2k/week), operating costs Q12017 were 925M (model 3 not in production). "Every reason to believe that [quality control] will get worse as they seem a bit desperate to scale up production" doesn't make sense?
pavs 8y ago
Another point that I don't see that is often discussed. I think future of cars are autonomous cars that you pay monthly subscription fees to drive you around. Yes, autonomous cars still have some way to go. But since we are talking about the 10-year timeline here - it's not unreasonable to assume that fully autonomous cars will be ready by 10 years time. If anyone, where to ask who are the top 10 autonomous carmakers, is, Tesla wouldn't be even on the top 10, because what they are selling is driver assist and ALL serious autonomous car project has LiDAR, except for Tesla. Elon is kinda hell-bent on LiDAR not needed, side of the argument. At top of the autonomous car companies, Waymo is very far ahead of the rest of the crowd and most car companies have some kind of series side project and working on their own solutions. There is a common consensus among (most) car manufacturers is that autonomous cars will kill the personal car industry - or at least severally constrain it. I actually think this to be true. Most car companies will find a way to adapt to this changing industry by deploying their own solution or partnering with the market leader (like Waymo). Car companies that are already struggling financially, like Tesla, will be severely affected when this change comes along. Tesl's biggest selling point is their battery (EV), and there is nothing magical going on that other manufacturer cannot replicate a similar performance. The reason jumping on EV bandwagon right away (almost all of them have projects that are 2-3 years away if not more), is because the demand is minuscule compared to the overall market share. There are more that one way that Tesla future doesn't look that good. They need a lot of things to go right for them to survive in the next 10 years.
- sliken 8y ago
  I don't see it mattering. Seems reasonably likely that 75% of the population will want to commute during rush hour, thus no large decrease in the number of cars needed. So sure volume will go down, but duty cycle will go up. So instead of $35k cars that last 150k miles on average we will end up with $70k cars that last 300k or more miles. You can be sure that in today's litigious society (at least in the USA) that unreasonable safety standards (think of the children) that will be very expensive to meet. Notice that every tesla crash is "news", yet tow trucks are quite busy with accidents of non-telsa, and ICE car fires are hardly rare. I suspect even at 10x as safe as human drivers that people will be actively asking for more regulation and higher standards. Seems strange that people will push for higher standards, which means higher prices, which means fewer cars, which means more road deaths. But that seems to be where we are today.

deleted 8y ago

[deleted]

simo7 8y ago

> ...thus gets to the heart of the actual empirical disagreements between them. I'm not sure the disagreement (between bears and bulls) is necessarily to be found in a different outlook on the future. One can conclude all those conditions are likely to be met in the future and yet be bearish on the stock. I'm overall optimistic on Tesla as a business, yet it seems my optimism is already fully factored in...no real upside, which is surprising given the risks.

durkie 8y ago

>> "most cars are powered by electricity in 10 years" > Unlikely. The average age of a car on the road is about 11.5 years (source: http://news.ihsmarkit.com/press-release/automotive/average-a... http://news.ihsmarkit.com/press-release/automotive/average-a...), so even if electric vehicle sales went to 100% tomorrow (and they won't), this wouldn't be true. It's possible fuel prices will skyrocket in the meantime and get people to scrap their ICEs, but with fracking and other deep extraction, I wouldn't bet on it. I think this is extremely likely, but let's clarify: it might not be that most existing cars in 10 years will be powered by electricity, but I feel strongly that EVs will dominate new car sales. As a caveat, your 11.5 year number refers only to US cars. Oil price fluctuations are basically irrelevant at this point: EV battery pack prices are only decreasing, ranges are only increasing. Aside from that, EVs win on cost of ownership (maintenance, electricity costs), noise, and power. >> "if Tesla can make those cars with sufficient margin and quality control" >Possible, but I think it's unlikely. Despite year after year of promises by Musk, Tesla still struggles with both margins quality control, and I haven't seen any evidence that it's getting better (and there's every reason to believe it will get worse as they seem a bit desperate to scale up production) Tesla's margins from Models S and X are healthy (mid 20%s). Their spending is almost entirely from capex -- which would be expected from scaling up a battery plant and new model line. Operating costs Q12018 were 1.05B (model 3 at 2k/week), operating costs Q12017 were 925M (model 3 not in production). "Every reason to believe that [quality control] will get worse as they seem a bit desperate to scale up production" doesn't make sense?

pavs 8y ago

Another point that I don't see that is often discussed. I think future of cars are autonomous cars that you pay monthly subscription fees to drive you around. Yes, autonomous cars still have some way to go. But since we are talking about the 10-year timeline here - it's not unreasonable to assume that fully autonomous cars will be ready by 10 years time. If anyone, where to ask who are the top 10 autonomous carmakers, is, Tesla wouldn't be even on the top 10, because what they are selling is driver assist and ALL serious autonomous car project has LiDAR, except for Tesla. Elon is kinda hell-bent on LiDAR not needed, side of the argument. At top of the autonomous car companies, Waymo is very far ahead of the rest of the crowd and most car companies have some kind of series side project and working on their own solutions. There is a common consensus among (most) car manufacturers is that autonomous cars will kill the personal car industry - or at least severally constrain it. I actually think this to be true. Most car companies will find a way to adapt to this changing industry by deploying their own solution or partnering with the market leader (like Waymo). Car companies that are already struggling financially, like Tesla, will be severely affected when this change comes along. Tesl's biggest selling point is their battery (EV), and there is nothing magical going on that other manufacturer cannot replicate a similar performance. The reason jumping on EV bandwagon right away (almost all of them have projects that are 2-3 years away if not more), is because the demand is minuscule compared to the overall market share. There are more that one way that Tesla future doesn't look that good. They need a lot of things to go right for them to survive in the next 10 years.

sliken 8y ago
I don't see it mattering. Seems reasonably likely that 75% of the population will want to commute during rush hour, thus no large decrease in the number of cars needed. So sure volume will go down, but duty cycle will go up. So instead of $35k cars that last 150k miles on average we will end up with $70k cars that last 300k or more miles. You can be sure that in today's litigious society (at least in the USA) that unreasonable safety standards (think of the children) that will be very expensive to meet. Notice that every tesla crash is "news", yet tow trucks are quite busy with accidents of non-telsa, and ICE car fires are hardly rare. I suspect even at 10x as safe as human drivers that people will be actively asking for more regulation and higher standards. Seems strange that people will push for higher standards, which means higher prices, which means fewer cars, which means more road deaths. But that seems to be where we are today.