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I don't have a clue about economic realities (especially not now in late 2020), but current market value is the market's bet on possible future earnings, not cu

I don't have a clue about economic realities (especially not now in late 2020), but current market value is the market's bet on possible future earnings, not current state of affairs. Maybe the market's valuation is a lot of people betting on Tesla being able to scale up dramatically in a pace that current car manufacturers will not be able to catch up with. Not entirely unthinkable.

davedx 6y ago
Yep exactly. This is also why the "GDP vs stock market cap" graphs for different countries don't really make that much sense - or at least, they portray different things than they are designed to portray. It is definitely true that the US market cap has become "decoupled" from its current economic output, but as you say, that is a (rationalised) prediction about the state of affairs in the next year or three, it's not "oh no everything is cer-aazy!"
vesinisa 6y ago
The theory how to scale up car production is well known, and the established players like Toyota are already masters at that (lean and just-in-time manufacturing were after all invented at Toyota). It's Tesla who's having issues with scaling up production[1]. We're in the middle of a turning point in the car industry. I'd wager in 2-3 years sales of electric cars will already be a sizeable chunk of the market. Within about a decade electric personal cars will take over sales of petrol cars. But nothing suggests that VW, Toyota etc. would not be any less apt at producing electric cars than Tesla. On the contrary, the established players have a MASSIVELY superior pre-existing production capacity and expertise. [1]: https://www.reuters.com/article/us-tesla-batteryday-productivity/tesla-warns-on-challenges-of-scaling-up-production-idUSKCN26D1BN https://www.reuters.com/article/us-tesla-batteryday-producti...
- teruakohatu 6y ago
  > and they have MASSIVELY superior pre-existing production capacity and expertise. They need batteries for those cars. Are they also investing in battery production?
  - vesinisa 6y ago
    Yes, they are. Volkswagen for example is ramping up its own battery production capacity and opening factories: https://electrek.co/2019/09/23/volkswagen-battery-cell-production-electric-cars-pilot-line/ https://electrek.co/2019/09/23/volkswagen-battery-cell-produ...
  - ekianjo 6y ago
    Batteries are commodities these days. Not competitive advantages.
    - ozborn 6y ago
      Agree for 12V car batteries, AA batteries, etc... but not for EV batteries. The form has not standardized, they evolve quickly, they can not be purchased in the volume required by all producers, and a better battery and matching charging infrastructure is a major competitive differentiating factor among EV manufacturers.
- lock-free 6y ago
  The hard part of electric vehicle has never been assembly - its batteries and charging. Toyota and VW can ramp up as much as they want, but they'll probably have to buy the batteries from Tesla. Tesla is not without its problems, but I think it's a bit naive to focus on the solved problems as limiting their potential. It's also the wrong thing to look at - Tesla is concerned about dictating the future of transportation and energy, selling cars is a means to an end.
  - gostsamo 6y ago
    What Toyota and VW have is politics and that's why they are still trailing behind Tesla. Big parts of their engineers and managers have expertise and background in internal combustion engines and this means much more coupling with this technology. A turnaround in such businesses is much harder than in software, so I expect that only those of the traditional manufacturers who can rebuild their strategies and sell it to their middle management to survive the next decade or two.
  - vesinisa 6y ago
    Why would Toyota and VW need to use Tesla batteries? Patents after all expire and are circumventable. And AFAIK Tesla does not hold too much original IP on battery tech to start with.
Invictus0 6y ago
Physical products cannot scale like software or social network products. This is especially true of cars, which require billions in capex just to create the factories that produce the cars. Perhaps 15 years from now Tesla could catch up to Toyota but certainly not the sum total of the big 7.
alexmingoia 6y ago
Are future earnings relevant to people who plan to sell stock at a profit? Stock traders’ earnings come from selling the stock not from a company’s earnings. It’s greater fools all the way down.

davedx 6y ago

Yep exactly. This is also why the "GDP vs stock market cap" graphs for different countries don't really make that much sense - or at least, they portray different things than they are designed to portray. It is definitely true that the US market cap has become "decoupled" from its current economic output, but as you say, that is a (rationalised) prediction about the state of affairs in the next year or three, it's not "oh no everything is cer-aazy!"

vesinisa 6y ago

The theory how to scale up car production is well known, and the established players like Toyota are already masters at that (lean and just-in-time manufacturing were after all invented at Toyota). It's Tesla who's having issues with scaling up production[1]. We're in the middle of a turning point in the car industry. I'd wager in 2-3 years sales of electric cars will already be a sizeable chunk of the market. Within about a decade electric personal cars will take over sales of petrol cars. But nothing suggests that VW, Toyota etc. would not be any less apt at producing electric cars than Tesla. On the contrary, the established players have a MASSIVELY superior pre-existing production capacity and expertise. [1]: https://www.reuters.com/article/us-tesla-batteryday-productivity/tesla-warns-on-challenges-of-scaling-up-production-idUSKCN26D1BN https://www.reuters.com/article/us-tesla-batteryday-producti...

teruakohatu 6y ago
> and they have MASSIVELY superior pre-existing production capacity and expertise. They need batteries for those cars. Are they also investing in battery production?
- vesinisa 6y ago
  Yes, they are. Volkswagen for example is ramping up its own battery production capacity and opening factories: https://electrek.co/2019/09/23/volkswagen-battery-cell-production-electric-cars-pilot-line/ https://electrek.co/2019/09/23/volkswagen-battery-cell-produ...
- ekianjo 6y ago
  Batteries are commodities these days. Not competitive advantages.
  - ozborn 6y ago
    Agree for 12V car batteries, AA batteries, etc... but not for EV batteries. The form has not standardized, they evolve quickly, they can not be purchased in the volume required by all producers, and a better battery and matching charging infrastructure is a major competitive differentiating factor among EV manufacturers.
lock-free 6y ago
The hard part of electric vehicle has never been assembly - its batteries and charging. Toyota and VW can ramp up as much as they want, but they'll probably have to buy the batteries from Tesla. Tesla is not without its problems, but I think it's a bit naive to focus on the solved problems as limiting their potential. It's also the wrong thing to look at - Tesla is concerned about dictating the future of transportation and energy, selling cars is a means to an end.
- gostsamo 6y ago
  What Toyota and VW have is politics and that's why they are still trailing behind Tesla. Big parts of their engineers and managers have expertise and background in internal combustion engines and this means much more coupling with this technology. A turnaround in such businesses is much harder than in software, so I expect that only those of the traditional manufacturers who can rebuild their strategies and sell it to their middle management to survive the next decade or two.
- vesinisa 6y ago
  Why would Toyota and VW need to use Tesla batteries? Patents after all expire and are circumventable. And AFAIK Tesla does not hold too much original IP on battery tech to start with.

Invictus0 6y ago

Physical products cannot scale like software or social network products. This is especially true of cars, which require billions in capex just to create the factories that produce the cars. Perhaps 15 years from now Tesla could catch up to Toyota but certainly not the sum total of the big 7.

alexmingoia 6y ago

Are future earnings relevant to people who plan to sell stock at a profit? Stock traders’ earnings come from selling the stock not from a company’s earnings. It’s greater fools all the way down.