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Was oil a "boring commodity business"? Many oil companies made very high profits.
by croddin 8y ago
Was oil a "boring commodity business"? Many oil companies made very high profits.
- xkjkls 8y agoIt's really about moats. What is the major moat you have around a battery production business? If batteries produced from Tesla versus any other competitor are almost indistinguishable, what is unique about Tesla that those market forces wouldn't suck out all of its profit? In oil, even though it is a "commodity", in that one barrel of crude oil is mostly indistinguishable from another, oil companies can have huge competitive moats by having integrated refining, the ability to distribute, or the fact they can have large monopolies on the resources of very specific areas. Batteries don't have quite the same sort of easy complementary businesses.
- xapata 8y ago> What is the major moat you have around a battery production business? https://www.tesla.com/gigafactory https://www.tesla.com/gigafactory
- xkjkls 8y agoIs that really going to be competitive against Panasonic, LG, or Samsung? All of those are in countries with better access to Lithium and cheaper engineering resources? I'd bet on those guys producing way more batteries.
- bllguo 8y agoIn fact, a lot of the gigafactory tech is Panasonic's. They lead the battery cell manufacturing at the factory.
- davrosthedalek 8y agoTo add to your argument, there is a relevant probability that batteries in 10 years will be based on different chemistry. I don't think Tesla is in basic battery research, so there is a chance that whoever who comes up with a better mouse trap makes Tesla's battery knowledge obsolete quickly.
- maxerickson 8y agoOil companies make large profits by operating huge businesses. They don't make particularly outstanding profits as a percentage of revenue.