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Imagine that today is July 1, 2020. Looking back I see three scenarios. 1) It's clear now that the company is a sham and Musk is a snake-oil salesman. It's all
by panarky 8y ago
Imagine that today is July 1, 2020. Looking back I see three scenarios.
1) It's clear now that the company is a sham and Musk is a snake-oil salesman. It's all smoke, mirrors, bubblegum and baling wire. After hitting 5000 cars per week one time, they never reached that level again. The company had to do a punishingly dilutive capital raise just to get 6 months more runway, and the company's market cap is now $6 billion (down 90% from 2018).
2) The company has continued to stumble from failure to failure with just enough successes to delay the day of reckoning. Musk is still sleeping in the factory trying to iron out kinks in the manufacturing process and automation. They're producing 3000 cars per week, but the quality is so poor that 30% of cars must be returned to the factory for rework. Competitors are likely to match Tesla's battery technology in the next 3 years, and the company's market cap is down by 50% from 2018.
3) After many delays and billions of dollars of cost overruns, Tesla has perfected the "machine that builds the machine". It's producing 40,000 cars per week in three factories in the US, Europe and China, and a fourth factory in South Korea opens next year. Tesla is cash-flow positive and the company's market cap is $600B (up 10x from 2018). In hindsight, all the delays people anguished about in 2018 proved to be nothing but amusing anecdotes in the company's history.
I assign probabilities of 10%, 50% and 40% to these scenarios, which equates to an expected market cap of $250B in two years. At $60B today, it looks like a bargain.
- SEJeff 8y agoMusk's future compensation directly hinges on your third scenario (well market cap of $650 billion, but close enough!): http://fortune.com/2018/03/22/elon-musk-compensation-tesla/ http://fortune.com/2018/03/22/elon-musk-compensation-tesla/
- shafyy 8y agoYou think there is a 10% chance that Musk is snake-oil salesman and a sham?
- panarky 8y agoIs that too high or too low?
- Latteland 8y agoThere's a 0 percent chance he's a snake oil salesman. There a reasonable chance his company won't succeed because of a problem making the cars cheap enough. But still they are awesome cars. Pretty soon they will be the only company in the US that has sold enough EVs that the tax credit runs out. That will really piss off the tesla haters who will have one less reason to claim it's all a gyp or whatever.
- saas_co_de 8y agoNot to mention his mental state and admitted drug abuse. Cocaine may be a hell of a drug but not sure it really helps in the boardroom.
- justinpombrio 8y agoAre you referring to the tweet that was almost certainly a joke, coming from a man who "only occasionally drinks"? https://www.entrepreneur.com/article/279270 https://www.entrepreneur.com/article/279270
- jacquesm 8y agoI know people that never drink but are high as a kite on most days.
- unclebucknasty 8y agoAssuming the standard meaning of the phrase "snake-oil salesman", I think the odds that this is all an elaborate sham to knowingly dupe people into buying a product that doesn't exist converge on zero. But, the case can certainly be made that he is prone to hyperbole and "exuberant optimism".
- wellboy 8y agoHe's not a snake oil salesman, but he could be over his head in this one.
- gizmo 8y agoWhy should Tesla be worth 600B if they produce 2 million cars a year? Toyota makes 10M cars per year and has a market cap of less than 300B. Future growth is already baked into Tesla's current valuation of 60B. They're not making any money today (in fact they're losing billions) but they have a high market cap because they might become profitable years from now. Once (if) they become a mature car manufacturer their valuation multiple will go way down. They'll be judged on their profit margin and FCF like any other car manufacturer. Your best case scenario of Tesla growing their market cap by 550B in the next 2 years is completely unrealistic. Even Facebook didn't grow that quickly, and their profit margin is second to none.
- slg 8y agoTesla's best case scenario is much more than an automaker. They also have hopes of being an energy company, a battery company, a transportation company, and a logistics company. There is still a lot of debate whether any of those will actually become profitable (and I think 2020 is a very aggressive timeline for any of this to happen), but there are huge potential revenue streams for Tesla that simply don't exist for other automakers like Toyota.
- TAForObvReasons 8y agoToyota or Ford or any other car company can enter any of those fields, either directly or through investment. That they choose not to probably indicates that the risk/reward doesn't make sense for them, and they probably aren't worth that much if Tesla manages to pivot. They chose not to play in EVs until recently, for example, because the market appetite wasn't there
- sremani 8y agoThe third scenario seems 40% until you realize that 2 million Model 3s per year @ average price of 45K are being sold. I am not a car market place expert, $45K cars do not usually move in those numbers. edit: For reference, check the number of cars moved. https://www.statista.com/statistics/276419/best-selling-cars-in-the-united-states/ https://www.statista.com/statistics/276419/best-selling-cars...
- njarboe 8y agoIf these $45k cars are fully automatic (a big if for sure), then $45k will be a bargain price and would probably capture at least half the new car market.
- freeone3000 8y agoThey're not. They have the same lane keeping and autimatic cruise control as the average $45k car.
- DanCarvajal 8y agoPossibly worse given the accidents.
- MBCook 8y agoOr what you can get from Honda for around $20-25k.
- threeseed 8y agoThis is frankly delusional thinking. (a) Tesla aren't the leaders in the self driving car space. Waymo arguably is, (b) almost all of the car makers have self driving car programs and most importantly (c) why would the traditional car makers just sit back, do nothing and allow Tesla to eat up the entire market ?
- Latteland 8y agoI think Tesla is not the leader, they probably made a crucial mistake in not using the expensive lidar. But they have be far the most cars on the road with early versions of this tech that has worked pretty well in my car for 4 years.
- csomar 8y ago> I assign probabilities of 10%, 50% and 40% to these scenarios Well, the devil is in the details. Where did these numbers come from?
- whateveracct 8y agoRear end
- jamesgblaine 8y agoAlso it isn't even their battery tech, right? It's Panasonic's.
- kjksf 8y agoA mining company mines raw materials. Panasonic takes those and makes battery cells. Think AA battery. That part is done as a joint venture between Panasonic and Tesla which means Tesla contributes to the design e.g. Tesla employs people doing research into battery chemistry i.e. cell level R&D. (and so does Panasonic, to be clear). Tesla takes those battery cells and packages them into a battery modules, which they also design. That part is all Tesla. That description doesn't adequately describes how much technology and work goes into making battery modules. Cells are an important component but it's also inverters, multiple electronics boards, software to control it all. You can see e.g. https://www.youtube.com/watch?v=bNd-yJtRPhk https://www.youtube.com/watch?v=bNd-yJtRPhk TL;DR: it would be grossly misleading to say that "battery tech is Panasonic". Battery cells are important but battery packs are designed and manufactured by Tesla.
- confiscate 8y agoYour world view is too narrow. That 5000 figure is important, but it's not really meaningful in the grand scheme of things. There is a 4th or 5th scenario, where 4. other car makers trail behind Tesla more and more in terms of technology. Remember, all these car makers had DECADES of head start developing EVs before Tesla was even born. Tesla was supposed to trail them in tech, not the other way around. It's easy to assume that because a company is bigger, and have more resources and manufacturing experience, that they can move fast in developing tech. It's easy to judge a book by it's cover. Incumbents move slow ALWAYS. If moving fast was so easy, they would of done it before Tesla was born. 5. solar panels from SolarCity come into play. Tesla has already deployed Solar grids in Australia. It's not just "smoke and mirrors", it's actually in production. While the competitors are still trying to "match Tesla", Tesla has already moved on to find other areas to grow in tech advancement. Right now, solar panels are considered a "toy". It's not even on any of the car makers' radar. It's like how Tesla's first Roadster cars were not on any of the car maker's radars 5 years ago. It's a "toy" until one day, it becomes a reality, and you tout your ability to "catch up" with your "vast experience" 5 years from now, folks like you will write another article, about how GM will be able to produce solar panels to "catch up to Tesla in just one or 2 years"
- rsynnott 8y agoI don’t understand why solar panels would necessarily go with car manufacturers? They don’t seem intrinsically related at all.
- Latteland 8y agoThe batteries are what connect them. No one else will be making batteries at that rate, at least for a pretty long time. Tesla has the cheaper batteries and related tech to use them in solar power along with cars.
- rsynnott 8y agoI'd assume that the Chinese electric car and bus manufacturers, who make far more vehicles than Tesla, are making batteries at a much greater rate (or at least their suppliers are).
- philipodonnell 8y agoNot to be rude, but these scenarios and percentages are all really random as is your valuation. Its far more likely they continue to do the same thing they have for the last year or two: limp through their slowly escalating production targets until the Model 3 is just one of several electric sedans available and there is no way to justify their multiples.
- deleted 8y ago[deleted]
- s2g 8y ago600B is insanity.
- rsynnott 8y agoThere’s also option 4, which I would say is most likely; Tesla is gone; the brand is owned by someone else. In practice, 1 and 2 would likely lead to this scenario.