4 ms·

Why would you compare with Apple, though, instead of other auto companies?

by xyzzyz 6y ago

DamnYuppie 6y ago
I think for many investors the large appeal of Tesla is in the batteries and infrastructure put in place for charge stations.
- xyzzyz 6y ago
  If it's about batteries, why isn't then Panasonic stock booming? Panasonic is the one that's actually supplying the technology and building the Tesla's battery factories. However, Panasonic's market cap is less than 5% of Tesla's, and batteries are not even its main business. It seems that the investors value Panasonic's battery technology and expertise at something like 1% of Tesla's market cap. I'm not sure what exactly you mean by "infrastructure put in place", but I can't imagine running charge stations to be hugely profitable business: gas stations most certainly aren't. They might still be pretty good business, but they clearly are not so good to account for hundreds of billions in valuation.
  - yazaddaruvala 6y ago
    Your information is a little out of date. Panasonic will now manufacture TSLA designed batteries, but TSLA will also be contracting other firms and build manufacturing facilities itself. https://electrek.co/2020/12/27/tesla-tsla-4680-battery-cell-produced-panasonic-report/ https://electrek.co/2020/12/27/tesla-tsla-4680-battery-cell-...
    - xyzzyz 6y ago
      It does seem to be out of date, but doesn't change the thrust of my argument. With the advancements of battery technology by Tesla, would you say that Tesla's battery business (which is mostly IP and research labs) is worth more than entire Panasonic's business? I say that's highly unlikely: building a good research lab and coming up with a good new battery design is worth a lot, but not tens of billions of dollars. Even if it was worth as much as entire Panasonic, it would still be <5% of Tesla's market cap. As such, I can't see how Tesla's battery business would explain its huge market cap.
      - yazaddaruvala 6y ago
        Oh, I don't know. I'm not able to predict anything about Tesla, and I'm not trying to. My bad for seeming like I was contradicting your argument, I have no opinion on that. I was just clarifying some of the facts.
ar_lan 6y ago
Because Tesla is only kind of a car company
11thEarlOfMar 6y ago
In terms of base tech, Tesla is more like Apple + BEV than like GM + BEV. Said another way, a Tesla is a supercomputer you can drive around. A GM is a car with an electric motor. Also, Tesla sales growth is 40% annually over the last 3 years and will likely continue for 5-10 years. GM's might be 1%. Keep in mind, GM is fighting to retain market share. Tesla is taking it away from the incumbents. They really cannot be compared in this analysis. Apple is the closest as a proxy for future P/E. If the legacy autos spun out their BEV business, that would be the closest comparable.
- itsoktocry 6y ago
  >Said another way, a Tesla is a supercomputer you can drive around. A GM is a car with an electric motor. They have an awesome software experience, but they buy off the shelf parts and assemble them into cars, just like everyone else. Nothing about that makes it a supercomputer on wheels. >Tesla is taking it away from the incumbents Competitors are already taking EV share back in some markets. Won't be as easy as you seem to think.
  - 11thEarlOfMar 6y ago
    I was referring to this supercomputer: https://heartbeat.fritz.ai/computer-vision-at-tesla-cd5e88074376 https://heartbeat.fritz.ai/computer-vision-at-tesla-cd5e8807...
    - itsoktocry 6y ago
      I don't see a "supercomputer" in that article anywhere.
- xyzzyz 6y ago
  If Tesla keeps growing 40% for 10 more years (which would be hugely amazing achievement), in 2030 it will become the biggest car producer in the US, selling something like double the number of the next biggest competitor, GM. I'm not going to speculate on likelihood of this, but consider this: if the optimistic scenario is that future revenues are expected to be twice that of GM, wouldn't you expect Tesla's value to be something like twice of value of GM, additionally discounted by time needed for these revenues to materialize? Alas, the market cap of Tesla is >10x that of GM. Moreover, the market cap of the biggest car companies have been relatively stable over last 10 years, as the market cap of Tesla was soaring. If the expectation is that the Tesla will eat the automotive market (as it well might), wouldn't you expect the market cap of other companies fall accordingly? As of right now, it seems like the market expects insane increase in revenues of entire industry, not just Tesla, which doesn't seem likely to me: Tesla's growth is almost certainly mostly predicated upon cannibalizing sales of its competitors. I think Tesla is great company, and I think Elon Musk is exactly the kind of person we need more of, if we want to have bright future instead of stagnation or degeneration. My only point is that Tesla's market cap seems to be greatly inflated, by factor of at least 5x, and possibly even 20x.
useful 6y ago
because they can sell 10k of software upgrades? Tesla is worth like 700/share in 4 years if everything works out with their factories and expansion. If they hit the lottery and magically figure out self driving, then they will 2x-3x, because they can have better than software company margins. I don't fault the crowd for thinking they will have self driving cars in a few years. I don't see it really happening outside of a few really well managed cities.
- xyzzyz 6y ago
  And Toyota can sell higher "trim" version of their vehicles, which also has extremely good margins (as higher trim are not significantly more expensive to manufacture than base, just like software upgrades). But the issue is not about margin on some specific upsell, rather the question is about the entire margin on the whole business. Can Tesla make as good or better cars as competition for lower prices, and keep this advantage for a while? Very much possible. Will their advantage be 10x, like the current market cap suggests? In my opinion, highly unlikely.
  - useful 6y ago
    I have no idea. But you can also sell an aftermarket 10k upgrade of "trim". I don't think toyota can offer that. I don't think the bull case is very strong. But I do think the previous bear cases of "they cant run a factory", "they cant scale production", etc are all mostly disproven. I would describe myself as bearish on their self-driving future as something I could trust to sleep or do work in. The recent videos are impressive and exciting. I hope they succeed.
    - xyzzyz 6y ago
      Of course Toyota could offer that. There are plenty of independent car shops that will do all kinds of stuff to your ride, from visual trim replacement, repainting, mechanical tuning, engine swaps, aftermarket parts etc etc. Toyota doesn't bother, because there isn't much money in it. An independent tuning shop can make $1M/year in revenue, and a thousand of such shops can make a total of a $1B. But $1B/year of extra revenue is paltry change for Toyota. Anyone can offer 10k aftermarket upgrade, but the real question is how many will buy it. > But I do think the previous bear cases of "they cant run a factory", "they cant scale production", etc are all mostly disproven. Yes, I'm very bullish on Tesla, mostly because I have great trust in Musk's ability to run business. However, my bullishness doesn't extend to valuing Tesla today more than next five of biggest auto makers combined.

Why would you compare with Apple, though, instead of other auto companies?

by xyzzyz 6y ago

Why would you compare with Apple, though, instead of other auto companies?

I think for many investors the large appeal of Tesla is in the batteries and infrastructure put in place for charge stations.

xyzzyz 6y ago
If it's about batteries, why isn't then Panasonic stock booming? Panasonic is the one that's actually supplying the technology and building the Tesla's battery factories. However, Panasonic's market cap is less than 5% of Tesla's, and batteries are not even its main business. It seems that the investors value Panasonic's battery technology and expertise at something like 1% of Tesla's market cap. I'm not sure what exactly you mean by "infrastructure put in place", but I can't imagine running charge stations to be hugely profitable business: gas stations most certainly aren't. They might still be pretty good business, but they clearly are not so good to account for hundreds of billions in valuation.
- yazaddaruvala 6y ago
  Your information is a little out of date. Panasonic will now manufacture TSLA designed batteries, but TSLA will also be contracting other firms and build manufacturing facilities itself. https://electrek.co/2020/12/27/tesla-tsla-4680-battery-cell-produced-panasonic-report/ https://electrek.co/2020/12/27/tesla-tsla-4680-battery-cell-...
  - xyzzyz 6y ago
    It does seem to be out of date, but doesn't change the thrust of my argument. With the advancements of battery technology by Tesla, would you say that Tesla's battery business (which is mostly IP and research labs) is worth more than entire Panasonic's business? I say that's highly unlikely: building a good research lab and coming up with a good new battery design is worth a lot, but not tens of billions of dollars. Even if it was worth as much as entire Panasonic, it would still be <5% of Tesla's market cap. As such, I can't see how Tesla's battery business would explain its huge market cap.
    - yazaddaruvala 6y ago
      Oh, I don't know. I'm not able to predict anything about Tesla, and I'm not trying to. My bad for seeming like I was contradicting your argument, I have no opinion on that. I was just clarifying some of the facts.

ar_lan 6y ago

Because Tesla is only kind of a car company

11thEarlOfMar 6y ago

In terms of base tech, Tesla is more like Apple + BEV than like GM + BEV. Said another way, a Tesla is a supercomputer you can drive around. A GM is a car with an electric motor. Also, Tesla sales growth is 40% annually over the last 3 years and will likely continue for 5-10 years. GM's might be 1%. Keep in mind, GM is fighting to retain market share. Tesla is taking it away from the incumbents. They really cannot be compared in this analysis. Apple is the closest as a proxy for future P/E. If the legacy autos spun out their BEV business, that would be the closest comparable.

itsoktocry 6y ago
>Said another way, a Tesla is a supercomputer you can drive around. A GM is a car with an electric motor. They have an awesome software experience, but they buy off the shelf parts and assemble them into cars, just like everyone else. Nothing about that makes it a supercomputer on wheels. >Tesla is taking it away from the incumbents Competitors are already taking EV share back in some markets. Won't be as easy as you seem to think.
- 11thEarlOfMar 6y ago
  I was referring to this supercomputer: https://heartbeat.fritz.ai/computer-vision-at-tesla-cd5e88074376 https://heartbeat.fritz.ai/computer-vision-at-tesla-cd5e8807...
  - itsoktocry 6y ago
    I don't see a "supercomputer" in that article anywhere.
xyzzyz 6y ago
If Tesla keeps growing 40% for 10 more years (which would be hugely amazing achievement), in 2030 it will become the biggest car producer in the US, selling something like double the number of the next biggest competitor, GM. I'm not going to speculate on likelihood of this, but consider this: if the optimistic scenario is that future revenues are expected to be twice that of GM, wouldn't you expect Tesla's value to be something like twice of value of GM, additionally discounted by time needed for these revenues to materialize? Alas, the market cap of Tesla is >10x that of GM. Moreover, the market cap of the biggest car companies have been relatively stable over last 10 years, as the market cap of Tesla was soaring. If the expectation is that the Tesla will eat the automotive market (as it well might), wouldn't you expect the market cap of other companies fall accordingly? As of right now, it seems like the market expects insane increase in revenues of entire industry, not just Tesla, which doesn't seem likely to me: Tesla's growth is almost certainly mostly predicated upon cannibalizing sales of its competitors. I think Tesla is great company, and I think Elon Musk is exactly the kind of person we need more of, if we want to have bright future instead of stagnation or degeneration. My only point is that Tesla's market cap seems to be greatly inflated, by factor of at least 5x, and possibly even 20x.

useful 6y ago

because they can sell 10k of software upgrades? Tesla is worth like 700/share in 4 years if everything works out with their factories and expansion. If they hit the lottery and magically figure out self driving, then they will 2x-3x, because they can have better than software company margins. I don't fault the crowd for thinking they will have self driving cars in a few years. I don't see it really happening outside of a few really well managed cities.

xyzzyz 6y ago
And Toyota can sell higher "trim" version of their vehicles, which also has extremely good margins (as higher trim are not significantly more expensive to manufacture than base, just like software upgrades). But the issue is not about margin on some specific upsell, rather the question is about the entire margin on the whole business. Can Tesla make as good or better cars as competition for lower prices, and keep this advantage for a while? Very much possible. Will their advantage be 10x, like the current market cap suggests? In my opinion, highly unlikely.
- useful 6y ago
  I have no idea. But you can also sell an aftermarket 10k upgrade of "trim". I don't think toyota can offer that. I don't think the bull case is very strong. But I do think the previous bear cases of "they cant run a factory", "they cant scale production", etc are all mostly disproven. I would describe myself as bearish on their self-driving future as something I could trust to sleep or do work in. The recent videos are impressive and exciting. I hope they succeed.
  - xyzzyz 6y ago
    Of course Toyota could offer that. There are plenty of independent car shops that will do all kinds of stuff to your ride, from visual trim replacement, repainting, mechanical tuning, engine swaps, aftermarket parts etc etc. Toyota doesn't bother, because there isn't much money in it. An independent tuning shop can make $1M/year in revenue, and a thousand of such shops can make a total of a $1B. But $1B/year of extra revenue is paltry change for Toyota. Anyone can offer 10k aftermarket upgrade, but the real question is how many will buy it. > But I do think the previous bear cases of "they cant run a factory", "they cant scale production", etc are all mostly disproven. Yes, I'm very bullish on Tesla, mostly because I have great trust in Musk's ability to run business. However, my bullishness doesn't extend to valuing Tesla today more than next five of biggest auto makers combined.