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>There is also the significant risk that you are wrong. I haven't seen this mentioned; maybe it's obvious and you've considered that aspect too. Yes! This is m

>There is also the significant risk that you are wrong. I haven't seen this mentioned; maybe it's obvious and you've considered that aspect too. Yes! This is maybe the most likely outcome! However, to date I have not heard a good reason why Tesla should be valued higher the the other leading car companies combined. There is no moat for them. Anything they are doing, all of the other car companies can easily retool to do ... they don't because not everyone wants an electric car.

marvin 6y ago
I can give it a shot. Maybe you've heard some of these before, it's just a list of claims. Tl;dr is there's a probability Tesla will become a tech behemoth with a tech moat that's Google/Apple/Amazon oligopoly-level unassailable. Not just in cars, but also in autonomous driving and maybe energy distribution. Dunno if I'd invest at the current valuation, but it's not obviously insane. Established automakers are structurally incapable of competing, due to innovator's dilemma. BEVs will eventually get cheaper than fossil vehicles due to decreasing drivetrain cost (li-ion battery++), but this tech will not be a commodity for at least a decade after this point - requires billions of R&D. Means established automakers are under an existential threat they aren't facing. Their best shot at competing BEV models with inferior price/performance make this abundantly clear. Production capacity of enough & the right batteries & motors requires both capital investment and R&D that won't materialize out of thin air just due to demand; existing manufacturers won't be able to source these at competitive price and performance. Development must be in-house at scale. Takes years, no one else is trying. Tens of billions investment. Capital is dirt cheap, so established industry's coffers does not protect them. Tesla now has 15 years lead on another startup trying the same. Superior battery tech at such scale also has unquenchable demand from solar energy industry. As long as no one can compete on price & performance, margins are huge. Will eventually be a commodity, but that's two decades away. Might also be network effects at play here. Must also consider fully-loaded cost of established industry -- meaning enterprise values that consider their debts & pension obligations, not just market cap. Autonomous driving is an industry-defining strategic advantage. Autonomous driving means Uber is obsolete. It's like landing used rockets on a barge. Established industry won't be able to just lease this capability for less than their entire profit margin. Harder than making cars. Waymo approach makes centimeter-level manually curated maps of their entire area of operation; not scalable & not compatible with inclement weather. Computer vision necessary. No one but Tesla has a real-world fleet gathering data at scale any time soon. Might be a strategically critical advantage. But even if multiple autonomous approaches succeed at the same time, established automakers are over a barrel here. Software is eating the world, established automakers don't have the culture for it. UX & software integration increasingly important both for a good driving experience & economics of maintaining a vehicle fleet. Recently saw VW slide bragging about how many lines of code they're making. It shows. Structurally incapable of competing there. Coronavirus pandemic accelerates Tesla's advantage, as the entire established industry gets its profit margins crushed far into unprofitable territory. Lots of misc. points: Dealer network doesn't like EVs due to lower maintenance costs, so established automakers have a sales problem there. Charging network availability for long trips is an obvious UX problem that no one else is handling at scale. It's hard when you don't have batteries to even out load spikes; competitors without cheap multi-kWh batteries in their charging stations will get screwed by energy distributors and be prohibitively expensive. This is also abundantly clear from existing industry dynamics. Etc.
- fomine3 6y ago
  > Software is eating the world, established automakers don't have the culture for it. I remembered that WeWork was evaluated as Software company but not. For Tesla?
  - marvin 6y ago
    If that's the worst criticism you find in my rather speculative wall-of-text, I actually find that pretty promising :P But yes: Autopilot/autonomous driving, data collection & curating for this, OS controlling all actuators & sensors in the cars, car UX, OTA updates of this, management of fleet sensor data for health monitoring/preventive maintenance of common problems, custom software controlling manufacturing hardware and supply chain, charging station software (local & fleet level), software management of stationary battery systems, battery packs in cars, motors +++. Doesn't compare to hooking up tenants to a desk space.

marvin 6y ago

I can give it a shot. Maybe you've heard some of these before, it's just a list of claims. Tl;dr is there's a probability Tesla will become a tech behemoth with a tech moat that's Google/Apple/Amazon oligopoly-level unassailable. Not just in cars, but also in autonomous driving and maybe energy distribution. Dunno if I'd invest at the current valuation, but it's not obviously insane. Established automakers are structurally incapable of competing, due to innovator's dilemma. BEVs will eventually get cheaper than fossil vehicles due to decreasing drivetrain cost (li-ion battery++), but this tech will not be a commodity for at least a decade after this point - requires billions of R&D. Means established automakers are under an existential threat they aren't facing. Their best shot at competing BEV models with inferior price/performance make this abundantly clear. Production capacity of enough & the right batteries & motors requires both capital investment and R&D that won't materialize out of thin air just due to demand; existing manufacturers won't be able to source these at competitive price and performance. Development must be in-house at scale. Takes years, no one else is trying. Tens of billions investment. Capital is dirt cheap, so established industry's coffers does not protect them. Tesla now has 15 years lead on another startup trying the same. Superior battery tech at such scale also has unquenchable demand from solar energy industry. As long as no one can compete on price & performance, margins are huge. Will eventually be a commodity, but that's two decades away. Might also be network effects at play here. Must also consider fully-loaded cost of established industry -- meaning enterprise values that consider their debts & pension obligations, not just market cap. Autonomous driving is an industry-defining strategic advantage. Autonomous driving means Uber is obsolete. It's like landing used rockets on a barge. Established industry won't be able to just lease this capability for less than their entire profit margin. Harder than making cars. Waymo approach makes centimeter-level manually curated maps of their entire area of operation; not scalable & not compatible with inclement weather. Computer vision necessary. No one but Tesla has a real-world fleet gathering data at scale any time soon. Might be a strategically critical advantage. But even if multiple autonomous approaches succeed at the same time, established automakers are over a barrel here. Software is eating the world, established automakers don't have the culture for it. UX & software integration increasingly important both for a good driving experience & economics of maintaining a vehicle fleet. Recently saw VW slide bragging about how many lines of code they're making. It shows. Structurally incapable of competing there. Coronavirus pandemic accelerates Tesla's advantage, as the entire established industry gets its profit margins crushed far into unprofitable territory. Lots of misc. points: Dealer network doesn't like EVs due to lower maintenance costs, so established automakers have a sales problem there. Charging network availability for long trips is an obvious UX problem that no one else is handling at scale. It's hard when you don't have batteries to even out load spikes; competitors without cheap multi-kWh batteries in their charging stations will get screwed by energy distributors and be prohibitively expensive. This is also abundantly clear from existing industry dynamics. Etc.

fomine3 6y ago
> Software is eating the world, established automakers don't have the culture for it. I remembered that WeWork was evaluated as Software company but not. For Tesla?
- marvin 6y ago
  If that's the worst criticism you find in my rather speculative wall-of-text, I actually find that pretty promising :P But yes: Autopilot/autonomous driving, data collection & curating for this, OS controlling all actuators & sensors in the cars, car UX, OTA updates of this, management of fleet sensor data for health monitoring/preventive maintenance of common problems, custom software controlling manufacturing hardware and supply chain, charging station software (local & fleet level), software management of stationary battery systems, battery packs in cars, motors +++. Doesn't compare to hooking up tenants to a desk space.