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> "The list goes on in terms of growth & profitability" It better. Tesla has a market cap of 4x that of VW, a car maker with €256bn revenue and ~€17bn profit i

> "The list goes on in terms of growth & profitability" It better. Tesla has a market cap of 4x that of VW, a car maker with €256bn revenue and ~€17bn profit in 2019. It is beyond me why anyone would buy this stock over VW, let alone pay 4x the price for it. Even if Tesla could put out 900K cars in a quarter instead of the current 90K, they'd still not come even close to the competition is terms of financial success. Tesla would need to utterly dominate the car market to live up to its current valuation. Dominate as in market share, not relative quarter-to-quarter growth.

adventured 6y ago
> It is beyond me why anyone would by this stock over VW, let alone pay 4x the price for it. The better answer is that nobody should buy VW either. Their business has zero potential upside and a huge downside risk in the transition to EVs; along with the inevitable rise of China's domestic automakers, which will eat a very large amount of market and sales away from the old giants. VW's position is its weakness, it has everything to lose and nothing to gain from the peak they've reached. Which also isn't the same as saying that Tesla should be bought at its present absurd valuation.
- philwelch 6y ago
  > The better answer is that nobody should buy VW either. Their business has zero potential upside and a huge downside risk in the transition to EVs VW is an EV manufacturer and is investing heavily in the transition to EVs themselves. And they’re already at a much larger scale than Tesla in terms of distribution and manufacturing the rest of the car.
  - brianwawok 6y ago
    To some extent, the 1900s distribution model of dealerships is a burden. When you buy a tesla, tesla gets 100% of the revenue. When you buy a VW or a ford, what % cut does the dealership take? How much does it cost to have 800 cars sitting on a lot, vs order on demand? Auto industry is ripe for innovation, glad we have someone innovating. I will hopefully never need to talk to a car salesmen or do the dealership thing again.
    - philwelch 6y ago
      Tesla also has to operate local showrooms and sales outlets throughout the world. In order to match a full scale manufacturer, they would need outlets in every medium-sized rural town in the US. It’s not an issue for Tesla now because they have outlets in big city tech hubs, but that won’t be sufficient unless they’re content staying a high end luxury brand. Dealerships run on lower and lower margins these days so there isn’t really that much to gain. It’s effectively the same reason that restaurant and fast food chains almost universally adopt a franchise model.
  - protastus 6y ago
    Too many automakers have claimed to be investing in EVs yet delivered nothing of merit or long-term value. Tesla's market cap is crazy, but is a reflection of having actual products.
    - philwelch 6y ago
      VW is going all-in and is converting over their existing factories for EV’s, and since electric drivetrains are simpler than diesel or gasoline, having existing manufacturing that can be converted might give them a leg up compared to a company that needs to build out that capacity from scratch. And they’re well on their way in Europe.
- ckastner 6y ago
  > VW's position is its weakness, it has everything to lose and nothing to gain from the peak they've reached. I think that’s a very reasonable argument to make. However, Tesla is not even close to this peak VW might have reached, and is valued (roughly speaking) at 4x that. VW might lose its peak, Tesla never had it in the first place.
kelnos 6y ago
It's speculation, and irrationality, neither of which is new to the stock market. People think the stock will go up, because it's a hot company with a lot of press, so they buy it. More people buy it, and it becomes a self-fulfilling prophecy: the stock goes up. Eventually Tesla will either find their groove and be a breakout success, or the stock price will fall. It's just a matter of time, and depends on when people get tired of waiting. Remember also that VW is, comparatively, a super boring company. These are all bad reasons for Tesla's stock price, but they are reasons.
qeternity 6y ago
For bulls, TSLA isn’t a car company. It’s the climate change company. They are the best bet right now to upend the entire power mix. I’m not saying I agree with this. Even if achieved, the amount of future success being priced in today is extraordinary. Combine that with a stock that’s become “cool” to own with retail, and the huge short interest...and well it starts to make sense. TSLA price action at the moment is really down to a lack of sellers. Shorts have been bent over in a way not seen at this scale since (ironically) VW. Simply put: everyone who has said TSLA is overbought has paid dearly. The bubble will burst, but it’s never shorts that pop bubbles.
- thecopy 6y ago
  >It’s the climate change company What does this mean? ELI5 pls
  - darawk 6y ago
    It means that all the dollars that people expect to eventually spend fighting climate change will largely be captured by Tesla.
  - WJW 6y ago
    They mean that in the mind of "the general public", Tesla is the foremost company "doing stuff" about climate change. Therefore, by owning Tesla stock you can get warm glowy feels about making a difference. You might also gain coolness points by mentioning that you are "a Tesla investor" to people that care about such matters.
    - qeternity 6y ago
      There’s an element of this amongst retail but I’m talking about professionals. A diversified portfolio has to have some aggressive do or die growth stocks. TSLA is (or was) probably the best of this breed. So if you’re going to own a change-the-world-or-die-trying stock, TSLA is the go to for many.
    - ncallaway 6y ago
coliveira 6y ago
Everyone investing on Tesla is counting on it becoming a kind a Facebook for Cars, using the power of its stock to kill and buy competitors. That reasoning is not far from a possibility given the aggressiveness, bordering on the illegality, practiced by the company in its dealings with governments and the stock market.
- almost_usual 6y ago
  Meatspace is a lot harder to control and profit off of than the digital world.
bryanlarsen 6y ago
VW has over $200 Billion in debt, and are spending $100B on the transition to electric. Buying VW at this point is crazy risky. There are currently ~10 major automakers outside of China and India. In a decade, there will be less than 10. The only one I am confident that will be sticking around is Tesla. The others have a difficult transition to electric ahead of them and possibly a difficult transition to self-driving and will possibly have to deal with strong Chinese competition. Not everyone will successfully transition. Perhaps spending heavy on the electric transition like VW is the right approach. Perhaps letting everybody else take all the risks and swooping in late like Toyota is the right approach. I don't know. The only manufacturer that I'm confident of being around in 10 years is Tesla. Some of them will transition well and will likely sell more cars than Tesla and have an enterprise value larger than Tesla in 10 years. And some of them will go bankrupt or be swallowed cheap like FCA-PSA. That being said, I significantly reduced my holdings in Tesla this year. I'm pro-Tesla, but not at current prices.
jedberg 6y ago
Tesla doesn't just make cars. They are really a battery company that happens to make cars that use their batteries, but they also make whole home batteries, which include recycling the ones from the cars, as well as solar panels to charge those batteries and charging systems that can be deployed to charge those batteries. I'm not saying the valuation makes sense, but to compare them to a car company doesn't make a ton of sense.
- DanCarvajal 6y ago
  Nonsense. Tesla doesn't even make batteries, they pay Panasonic to make their batteries with some Chinese batteries on the side.
  - jedberg 6y ago
    They designed the batteries that Panasonic makes exclusively for them and they are building their own cells in Fremont.
    - DanCarvajal 6y ago
      Neither of these things are true, they're at best modified off the shelf cells. They don't make cells at Fremont, at best the pack them into packs. There's no regulatory filings for cell production at Fremont. The whole argument is that they could use off the shelf materials at scale to attain profitability, since that hasn't happened the goalposts keep being moved by Musk, rumors, and myths.
      - jedberg 6y ago
        https://electrek.co/2020/02/11/tesla-building-pilot-battery-cell-manufacturing-line-fremont/ https://electrek.co/2020/02/11/tesla-building-pilot-battery-... "Now we’ve learned that Tesla is building a battery cell pilot production line in Fremont" "Tesla currently buy cells from Panasonic made in Japan for Model S and Model X, as well as cells made by Panasonic at Tesla’s Gigafactory 1 in Nevada for Model 3. The automaker used those cells, which they help design, to make their own modules and battery packs, but they have never produced their own cells."
lazyjones 6y ago
VW is shrinking, its leaders are not innovative and their suppliers are dying while VW is scrambling to bring component development back in-house. Estimates for Q2 2020 are around -3,2 € per share (EPS) for Volkswagen while Tesla posted a profit.
hedora 6y ago
Tesla will probably own a good percentage of the $92B roofing market in a few years. They’re likely to own a big chunk of the market for electricity generation and storage equipment. Also, people hate dealerships and CO2 so much that I think the general assumption is that Tesla will be one of a very small number of car manufacturers left standing in a decade or so. Finally, I think people assume Tesla will be like Amazon, and keep doubling down on their bets until they’ve run out of industries to take over.
downvoteme1 6y ago
Tesla is in a spot similar to where Apple was in 2009. The iPhone was a well established product that differentiated itself from a sea of similar looking androids. The world was coming out of a big recession and the iPhone catapulted Apple into a trillion dollar market share in the next 10 years. This is what Tesla investors hope for Tesla’s future. That ten years from now, there would be Tesla and all other car manufactures looking to emulate Tesla by producing a couple of electric models that would lack the features or refine of Tesla . Tesla has a first mover advantage similar to what AWS had for the first 5 or so years.
- ssharp 6y ago
  Apple also managed to mostly stave off competitors from eating away at their incredible margins while still staying within price bounds that make their products accessible to the mass market. I'm not sure Tesla can do the same. There is a big difference between paying the Apple premium on a $2000 computer or $800 phone and paying the Tesla premium on a car. You're dealing with a premium upwards of $10,000. The Model Y, a compact SUV, starts at $53,000. That is wildly out of bounds for most people. Factor in the low price of gas right now, the unreliability of Teslas, and tax credits that are going away and you really erode away the savings that put a dent into the Tesla's value equation. You're left with a vehicle that competes on value moreso against a smaller luxury compact SUV class. The big question is if Tesla can continue to see gains from scale that either allows them to address a larger market while still keeping margins at an industry leading level. All that while managing to stay ahead of the influx in competition that will be coming from all the major auto manufacturers as they increase their EV and battery capabilities.
HALtheWise 6y ago
There's a difference between dominating a market by market share and dominating by profit margin. Apple certainly doesn't sell the majority of phones, but they do make more money than anyone else on phones by a lot. Similarly, Tesla looks to me like the only company positioned well to ever make large margins selling significant numbers of cars. If you buy that analogy, and realize that the automobile market is about 4x the smartphone market, Tesla could be worth 4x Apple, discounted by however likely you think that future is.

adventured 6y ago

> It is beyond me why anyone would by this stock over VW, let alone pay 4x the price for it. The better answer is that nobody should buy VW either. Their business has zero potential upside and a huge downside risk in the transition to EVs; along with the inevitable rise of China's domestic automakers, which will eat a very large amount of market and sales away from the old giants. VW's position is its weakness, it has everything to lose and nothing to gain from the peak they've reached. Which also isn't the same as saying that Tesla should be bought at its present absurd valuation.

philwelch 6y ago
> The better answer is that nobody should buy VW either. Their business has zero potential upside and a huge downside risk in the transition to EVs VW is an EV manufacturer and is investing heavily in the transition to EVs themselves. And they’re already at a much larger scale than Tesla in terms of distribution and manufacturing the rest of the car.
- brianwawok 6y ago
  To some extent, the 1900s distribution model of dealerships is a burden. When you buy a tesla, tesla gets 100% of the revenue. When you buy a VW or a ford, what % cut does the dealership take? How much does it cost to have 800 cars sitting on a lot, vs order on demand? Auto industry is ripe for innovation, glad we have someone innovating. I will hopefully never need to talk to a car salesmen or do the dealership thing again.
  - philwelch 6y ago
    Tesla also has to operate local showrooms and sales outlets throughout the world. In order to match a full scale manufacturer, they would need outlets in every medium-sized rural town in the US. It’s not an issue for Tesla now because they have outlets in big city tech hubs, but that won’t be sufficient unless they’re content staying a high end luxury brand. Dealerships run on lower and lower margins these days so there isn’t really that much to gain. It’s effectively the same reason that restaurant and fast food chains almost universally adopt a franchise model.
- protastus 6y ago
  Too many automakers have claimed to be investing in EVs yet delivered nothing of merit or long-term value. Tesla's market cap is crazy, but is a reflection of having actual products.
  - philwelch 6y ago
    VW is going all-in and is converting over their existing factories for EV’s, and since electric drivetrains are simpler than diesel or gasoline, having existing manufacturing that can be converted might give them a leg up compared to a company that needs to build out that capacity from scratch. And they’re well on their way in Europe.
ckastner 6y ago
> VW's position is its weakness, it has everything to lose and nothing to gain from the peak they've reached. I think that’s a very reasonable argument to make. However, Tesla is not even close to this peak VW might have reached, and is valued (roughly speaking) at 4x that. VW might lose its peak, Tesla never had it in the first place.

kelnos 6y ago

It's speculation, and irrationality, neither of which is new to the stock market. People think the stock will go up, because it's a hot company with a lot of press, so they buy it. More people buy it, and it becomes a self-fulfilling prophecy: the stock goes up. Eventually Tesla will either find their groove and be a breakout success, or the stock price will fall. It's just a matter of time, and depends on when people get tired of waiting. Remember also that VW is, comparatively, a super boring company. These are all bad reasons for Tesla's stock price, but they are reasons.

qeternity 6y ago

For bulls, TSLA isn’t a car company. It’s the climate change company. They are the best bet right now to upend the entire power mix. I’m not saying I agree with this. Even if achieved, the amount of future success being priced in today is extraordinary. Combine that with a stock that’s become “cool” to own with retail, and the huge short interest...and well it starts to make sense. TSLA price action at the moment is really down to a lack of sellers. Shorts have been bent over in a way not seen at this scale since (ironically) VW. Simply put: everyone who has said TSLA is overbought has paid dearly. The bubble will burst, but it’s never shorts that pop bubbles.

thecopy 6y ago
>It’s the climate change company What does this mean? ELI5 pls
- darawk 6y ago
  It means that all the dollars that people expect to eventually spend fighting climate change will largely be captured by Tesla.
- WJW 6y ago
  They mean that in the mind of "the general public", Tesla is the foremost company "doing stuff" about climate change. Therefore, by owning Tesla stock you can get warm glowy feels about making a difference. You might also gain coolness points by mentioning that you are "a Tesla investor" to people that care about such matters.
  - qeternity 6y ago
    There’s an element of this amongst retail but I’m talking about professionals. A diversified portfolio has to have some aggressive do or die growth stocks. TSLA is (or was) probably the best of this breed. So if you’re going to own a change-the-world-or-die-trying stock, TSLA is the go to for many.
  - ncallaway 6y ago

coliveira 6y ago

Everyone investing on Tesla is counting on it becoming a kind a Facebook for Cars, using the power of its stock to kill and buy competitors. That reasoning is not far from a possibility given the aggressiveness, bordering on the illegality, practiced by the company in its dealings with governments and the stock market.

almost_usual 6y ago
Meatspace is a lot harder to control and profit off of than the digital world.

bryanlarsen 6y ago

VW has over $200 Billion in debt, and are spending $100B on the transition to electric. Buying VW at this point is crazy risky. There are currently ~10 major automakers outside of China and India. In a decade, there will be less than 10. The only one I am confident that will be sticking around is Tesla. The others have a difficult transition to electric ahead of them and possibly a difficult transition to self-driving and will possibly have to deal with strong Chinese competition. Not everyone will successfully transition. Perhaps spending heavy on the electric transition like VW is the right approach. Perhaps letting everybody else take all the risks and swooping in late like Toyota is the right approach. I don't know. The only manufacturer that I'm confident of being around in 10 years is Tesla. Some of them will transition well and will likely sell more cars than Tesla and have an enterprise value larger than Tesla in 10 years. And some of them will go bankrupt or be swallowed cheap like FCA-PSA. That being said, I significantly reduced my holdings in Tesla this year. I'm pro-Tesla, but not at current prices.

jedberg 6y ago

Tesla doesn't just make cars. They are really a battery company that happens to make cars that use their batteries, but they also make whole home batteries, which include recycling the ones from the cars, as well as solar panels to charge those batteries and charging systems that can be deployed to charge those batteries. I'm not saying the valuation makes sense, but to compare them to a car company doesn't make a ton of sense.

DanCarvajal 6y ago
Nonsense. Tesla doesn't even make batteries, they pay Panasonic to make their batteries with some Chinese batteries on the side.
- jedberg 6y ago
  They designed the batteries that Panasonic makes exclusively for them and they are building their own cells in Fremont.
  - DanCarvajal 6y ago
    Neither of these things are true, they're at best modified off the shelf cells. They don't make cells at Fremont, at best the pack them into packs. There's no regulatory filings for cell production at Fremont. The whole argument is that they could use off the shelf materials at scale to attain profitability, since that hasn't happened the goalposts keep being moved by Musk, rumors, and myths.
    - jedberg 6y ago
      https://electrek.co/2020/02/11/tesla-building-pilot-battery-cell-manufacturing-line-fremont/ https://electrek.co/2020/02/11/tesla-building-pilot-battery-... "Now we’ve learned that Tesla is building a battery cell pilot production line in Fremont" "Tesla currently buy cells from Panasonic made in Japan for Model S and Model X, as well as cells made by Panasonic at Tesla’s Gigafactory 1 in Nevada for Model 3. The automaker used those cells, which they help design, to make their own modules and battery packs, but they have never produced their own cells."

lazyjones 6y ago

VW is shrinking, its leaders are not innovative and their suppliers are dying while VW is scrambling to bring component development back in-house. Estimates for Q2 2020 are around -3,2 € per share (EPS) for Volkswagen while Tesla posted a profit.

hedora 6y ago

Tesla will probably own a good percentage of the $92B roofing market in a few years. They’re likely to own a big chunk of the market for electricity generation and storage equipment. Also, people hate dealerships and CO2 so much that I think the general assumption is that Tesla will be one of a very small number of car manufacturers left standing in a decade or so. Finally, I think people assume Tesla will be like Amazon, and keep doubling down on their bets until they’ve run out of industries to take over.

downvoteme1 6y ago

Tesla is in a spot similar to where Apple was in 2009. The iPhone was a well established product that differentiated itself from a sea of similar looking androids. The world was coming out of a big recession and the iPhone catapulted Apple into a trillion dollar market share in the next 10 years. This is what Tesla investors hope for Tesla’s future. That ten years from now, there would be Tesla and all other car manufactures looking to emulate Tesla by producing a couple of electric models that would lack the features or refine of Tesla . Tesla has a first mover advantage similar to what AWS had for the first 5 or so years.

ssharp 6y ago
Apple also managed to mostly stave off competitors from eating away at their incredible margins while still staying within price bounds that make their products accessible to the mass market. I'm not sure Tesla can do the same. There is a big difference between paying the Apple premium on a $2000 computer or $800 phone and paying the Tesla premium on a car. You're dealing with a premium upwards of $10,000. The Model Y, a compact SUV, starts at $53,000. That is wildly out of bounds for most people. Factor in the low price of gas right now, the unreliability of Teslas, and tax credits that are going away and you really erode away the savings that put a dent into the Tesla's value equation. You're left with a vehicle that competes on value moreso against a smaller luxury compact SUV class. The big question is if Tesla can continue to see gains from scale that either allows them to address a larger market while still keeping margins at an industry leading level. All that while managing to stay ahead of the influx in competition that will be coming from all the major auto manufacturers as they increase their EV and battery capabilities.

HALtheWise 6y ago

There's a difference between dominating a market by market share and dominating by profit margin. Apple certainly doesn't sell the majority of phones, but they do make more money than anyone else on phones by a lot. Similarly, Tesla looks to me like the only company positioned well to ever make large margins selling significant numbers of cars. If you buy that analogy, and realize that the automobile market is about 4x the smartphone market, Tesla could be worth 4x Apple, discounted by however likely you think that future is.