5 ms·

Curious to hear what the optimistic story to justify the current incredible valuation is. I mean, they seem to be doing very well now, but their market cap is

by svara 5y ago

Curious to hear what the optimistic story to justify the current incredible valuation is. I mean, they seem to be doing very well now, but their market cap is now roughly equal to all other car makers combined. [0] That's just confusing to me. Are people actually betting on them ultimately turning into the one modern energy company? The one battery company? [0] https://companiesmarketcap.com/automakers/largest-automakers-by-market-cap/ https://companiesmarketcap.com/automakers/largest-automakers...

WORMS_EAT_WORMS 5y ago
It's called speculation. You're asking for an explanation to the collective market forces driving this. If anyone here knew a fully accurate reason, they'd be a billionaire investor.
btian 5y ago
It's the same optimistic story when I invested at $8 a share. The company will grow. People will take what the company makes in EPS today and assume it will stay there forever. So in 2012, people created Tesla death watch, bankruptcy tracker etc. In 2021 people wonder why others will wait 100 years to get their money back.
- paulpauper 5y ago
  Tesla has been in my portfolio for a long time as well. NO plan to sell. The media has been saying to sell since 2013, goes to show what they know, which is not much.
  - adam_arthur 5y ago
    Yeah, if you make money on a trade it means you were right about the business. The investors in Enron were right too, until it went bankrupt. Nothing is proven until the end. I do think Tesla has a large advantage in many respects, and a visionary leader is difficult for more legacy companies to overcome. I can think of many ways they can expand their margins well beyond traditional auto. But share price does not speak to any long term truth. Just a snapshot of public expectations of the truth.
    - chillacy 5y ago
      You can get pretty close to "right and wrong" in the markets if you pick a strike price and expiration date, keeping in mind that "public expectations" are part of the game. I think Taleb puts it well: “Don’t tell me what you think, tell me what you have in your portfolio.”
NickM 5y ago
their market cap is now roughly equal to all other car makers combined Well, they currently sell far more passenger electric vehicles than every other auto maker combined, and demand only seems to be increasing even as production continues to increase exponentially. Many countries and US states have gasoline car bans set to take effect in the coming decades; if the incumbent manufacturers continue to lag behind Tesla as badly as they've done so far, it would seem Tesla is poised to eat a lot of other car companies for lunch. That alone still might not justify the current valuation, but then you add in their solar panels, solar roof tiles, stationary storage, and other things in the pipeline like insurance, renting out their EV charging network, possible AI applications and/or software licensing, etc. etc., and the valuation seems at least plausible to me.
- andrepd 5y ago
  I don't see how they "lag behind", it's clear that auto makers started seriously investing in electric 5-10 years ago and the investment is now bearing fruits: Hyundai for instances has excellent EVs at much lower prices than tesla.
  - iknowstuff 5y ago
    None of them have "much lower prices" when you compare equal trims with similar features.
- rreichman 5y ago
  That may be true in the US but not in Europe [1] and not in China [2] [1] - https://insideevs.com/news/523295/europe-plugin-car-sales-june2021/ https://insideevs.com/news/523295/europe-plugin-car-sales-ju... [2] - https://asia.nikkei.com/Spotlight/Electric-cars-in-China/Surging-EV-sales-put-China-ahead-of-government-targets2 https://asia.nikkei.com/Spotlight/Electric-cars-in-China/Sur...
  - panick21_ 5y ago
    What matters is global market. The other manufactures push every possible vehicle into the markets that require it by regulation and drop prices in order to sell there. They are one of the leading producers in all of those markets as well. What you need to monitor is BEV not 'plugin'. And some of those other cars are tiny 4k$ cars that don't really compete with a Tesla anyway. Tesla is literally selling 2x more BEV then the second best company VW Group (including all brands). And in terms of revenue from BEV and profit from BEV they are way beyond that.
jliptzin 5y ago
Look up Tesla’s debt compared to every other large auto company. They also don’t waste any money on advertising. They don’t have to deal with as many third party parts providers eating away at their profits. They’re not beholden to unions or dealer networks. All that stuff is a serious drag on profitability and market cap. Just because they make cars doesn’t mean they have to have shitty margins and high debt like the other companies.
- hn_throwaway_99 5y ago
  > Look up Tesla’s debt compared to every other large auto company. That's key. Enterprise value is essentially debt + equity, and other car makers have much more debt than Tesla.
- paulpauper 5y ago
  this times 10x. Tesla saves considerable money by not having to advertise. Other brands have to spend billions a year to differentiate themselves, to stand out. Tesla is in a class of its own.
RoboTeddy 5y ago
The valuation is easy to justify if you assume e.g.: (a) that they build robotaxis ~5 years ahead of competitors (b) they continue to sell ~50% more cars each year (they have a stated goal of 20m cars/yr by 2030) How much is a robotaxi worth? A regular taxi can drive ~100k miles/yr @ ~$2/mile. Let's say that Tesla robotaxis undercut on price by a factor of two, thus making ~$100k/yr in revenue. Let's say 50k goes to the buyer, and 50k goes to Tesla. Five years of that would be worth $250,000. Let's divide by two to be a tad more conservative. If you're selling 20m cars a year, that's $125,000*20m = 5T of value in cars in a single year. If Tesla were doing that in a single year, their market cap would be in excess of $10T]. If you think Tesla has a 1 in 10 chance of pulling off the above, then you'd expect a fair market valuation for them today of 1T — which is roughly what the market puts them at. Plus add Tesla Energy, which could be as big as the car business. Plus add Tesla Bots (labor), which is probably the largest market in the world.
- kmonsen 5y ago
  To be clear, they cannot build robotaxis 5 years ahead since there already are Waymo ones in limited capacity. As for not limited capacity, that is not happening for a long time. Also it is not as clear as you think, who washes the cars used for robotaxis etc?
Hermitian909 5y ago
Disclaimer: I work for Toyota's research division, opinions my own. I think Tesla is on track to have significantly lower manufacturing costs than the rest of the industry. They've been solving some of the really hard production line challenges[0][1] and appear to have a lot of industry standard optimizations left to implement on top of those. [0]https://electrek.co/2019/07/22/tesla-revolutionary-wiring-architecture-robots-model-y/ https://electrek.co/2019/07/22/tesla-revolutionary-wiring-ar... [1]https://www.designnews.com/automotive-engineering/teslas-switch-giga-press-die-castings-model-3-eliminates-370-parts https://www.designnews.com/automotive-engineering/teslas-swi...
- skohan 5y ago
  Do you expect Toyota and others to adopt these innovations?
- panick21_ 5y ago
  What do you think of the Megacasting? They have moved to an architecture where they have one big casting in the front, one in the back and those are linked with a battery pack that has structure from the actual cells themselves. The machines are costume orders from IDRA in Italy, there seems to be somewhat of a bottleneck in how fast they can be made, each one is massive project. Would be hard for other manufacture to replicate that process anytime soon. Other then BYD (and some research groups) nobody has attempted to make cells structural to the car yet. And BYD basically uses prismatic LFP cells that make it easier. Unfortunately they have not yet managed to do the improvements to the wiring and moving to 48V. Elon basically wants to use Ethernet and PoE for everything in the car. This seems a lot harder to do then anybody outside the automotive industry understands. Their cells and how they are produced is also quite amazing. They literally went back to 0 and rethought battery production from the ground up. The fans are trying to reproduce the process from the public video and available information (from Berlin application for example). It really seems like they simplified a lot, specially really small and difficult welding process that need to be done at high speed. They went so far as producing all their own manufacturing equipment as well, they bought companies like Hibar and have Grohmann engineering build these machines in Germany (new factory being built there as well). Will be hard for others to compete with battery production lines that can spit out 4-5x as many larger cells as a comparable 2170 line. I know Toyota is working on its own solid state batteries, and you likely can't say more then is publicly available. Toyota seems to have made no effort to produce its own 'traditional' cells so far. I'm not sure if they plan to produce their solids themselves. And I will be very interested to see when an actual mass volume 100k+ a year car gets produced with them. I would be surprised if it was before 2028 or so. At that point 'traditional' cells will have made huge advances, it will be interested to see what advantage they will have at that point. I am eagerly waiting for more information from Toyota. PS: The latest 'fun' thing Tesla seems to do (in Berlin), is to put the seats on top of the battery first and then drop the car frame on-top of it. Where the battery is the floor of the vehicle. Its almost like the old body-on-frame. I think the kind of stumbled into that because they wanted to eliminate the redundant layer in the floor and realized that the frame now has a hole in the bottom. I assume they will then manually insert the floor carpets in final assembly.

by svara 5y ago

WORMS_EAT_WORMS 5y ago

It's called speculation. You're asking for an explanation to the collective market forces driving this. If anyone here knew a fully accurate reason, they'd be a billionaire investor.

btian 5y ago

It's the same optimistic story when I invested at $8 a share. The company will grow. People will take what the company makes in EPS today and assume it will stay there forever. So in 2012, people created Tesla death watch, bankruptcy tracker etc. In 2021 people wonder why others will wait 100 years to get their money back.

paulpauper 5y ago
Tesla has been in my portfolio for a long time as well. NO plan to sell. The media has been saying to sell since 2013, goes to show what they know, which is not much.
- adam_arthur 5y ago
  Yeah, if you make money on a trade it means you were right about the business. The investors in Enron were right too, until it went bankrupt. Nothing is proven until the end. I do think Tesla has a large advantage in many respects, and a visionary leader is difficult for more legacy companies to overcome. I can think of many ways they can expand their margins well beyond traditional auto. But share price does not speak to any long term truth. Just a snapshot of public expectations of the truth.
  - chillacy 5y ago
    You can get pretty close to "right and wrong" in the markets if you pick a strike price and expiration date, keeping in mind that "public expectations" are part of the game. I think Taleb puts it well: “Don’t tell me what you think, tell me what you have in your portfolio.”

NickM 5y ago

their market cap is now roughly equal to all other car makers combined Well, they currently sell far more passenger electric vehicles than every other auto maker combined, and demand only seems to be increasing even as production continues to increase exponentially. Many countries and US states have gasoline car bans set to take effect in the coming decades; if the incumbent manufacturers continue to lag behind Tesla as badly as they've done so far, it would seem Tesla is poised to eat a lot of other car companies for lunch. That alone still might not justify the current valuation, but then you add in their solar panels, solar roof tiles, stationary storage, and other things in the pipeline like insurance, renting out their EV charging network, possible AI applications and/or software licensing, etc. etc., and the valuation seems at least plausible to me.

andrepd 5y ago
I don't see how they "lag behind", it's clear that auto makers started seriously investing in electric 5-10 years ago and the investment is now bearing fruits: Hyundai for instances has excellent EVs at much lower prices than tesla.
- iknowstuff 5y ago
  None of them have "much lower prices" when you compare equal trims with similar features.
rreichman 5y ago
That may be true in the US but not in Europe [1] and not in China [2] [1] - https://insideevs.com/news/523295/europe-plugin-car-sales-june2021/ https://insideevs.com/news/523295/europe-plugin-car-sales-ju... [2] - https://asia.nikkei.com/Spotlight/Electric-cars-in-China/Surging-EV-sales-put-China-ahead-of-government-targets2 https://asia.nikkei.com/Spotlight/Electric-cars-in-China/Sur...
- panick21_ 5y ago
  What matters is global market. The other manufactures push every possible vehicle into the markets that require it by regulation and drop prices in order to sell there. They are one of the leading producers in all of those markets as well. What you need to monitor is BEV not 'plugin'. And some of those other cars are tiny 4k$ cars that don't really compete with a Tesla anyway. Tesla is literally selling 2x more BEV then the second best company VW Group (including all brands). And in terms of revenue from BEV and profit from BEV they are way beyond that.

jliptzin 5y ago

Look up Tesla’s debt compared to every other large auto company. They also don’t waste any money on advertising. They don’t have to deal with as many third party parts providers eating away at their profits. They’re not beholden to unions or dealer networks. All that stuff is a serious drag on profitability and market cap. Just because they make cars doesn’t mean they have to have shitty margins and high debt like the other companies.

hn_throwaway_99 5y ago
> Look up Tesla’s debt compared to every other large auto company. That's key. Enterprise value is essentially debt + equity, and other car makers have much more debt than Tesla.
paulpauper 5y ago
this times 10x. Tesla saves considerable money by not having to advertise. Other brands have to spend billions a year to differentiate themselves, to stand out. Tesla is in a class of its own.

RoboTeddy 5y ago

The valuation is easy to justify if you assume e.g.: (a) that they build robotaxis ~5 years ahead of competitors (b) they continue to sell ~50% more cars each year (they have a stated goal of 20m cars/yr by 2030) How much is a robotaxi worth? A regular taxi can drive ~100k miles/yr @ ~$2/mile. Let's say that Tesla robotaxis undercut on price by a factor of two, thus making ~$100k/yr in revenue. Let's say 50k goes to the buyer, and 50k goes to Tesla. Five years of that would be worth $250,000. Let's divide by two to be a tad more conservative. If you're selling 20m cars a year, that's $125,000*20m = 5T of value in cars in a single year. If Tesla were doing that in a single year, their market cap would be in excess of $10T]. If you think Tesla has a 1 in 10 chance of pulling off the above, then you'd expect a fair market valuation for them today of 1T — which is roughly what the market puts them at. Plus add Tesla Energy, which could be as big as the car business. Plus add Tesla Bots (labor), which is probably the largest market in the world.

kmonsen 5y ago
To be clear, they cannot build robotaxis 5 years ahead since there already are Waymo ones in limited capacity. As for not limited capacity, that is not happening for a long time. Also it is not as clear as you think, who washes the cars used for robotaxis etc?

Hermitian909 5y ago

Disclaimer: I work for Toyota's research division, opinions my own. I think Tesla is on track to have significantly lower manufacturing costs than the rest of the industry. They've been solving some of the really hard production line challenges[0][1] and appear to have a lot of industry standard optimizations left to implement on top of those. [0]https://electrek.co/2019/07/22/tesla-revolutionary-wiring-architecture-robots-model-y/ https://electrek.co/2019/07/22/tesla-revolutionary-wiring-ar... [1]https://www.designnews.com/automotive-engineering/teslas-switch-giga-press-die-castings-model-3-eliminates-370-parts https://www.designnews.com/automotive-engineering/teslas-swi...

skohan 5y ago
Do you expect Toyota and others to adopt these innovations?
panick21_ 5y ago
What do you think of the Megacasting? They have moved to an architecture where they have one big casting in the front, one in the back and those are linked with a battery pack that has structure from the actual cells themselves. The machines are costume orders from IDRA in Italy, there seems to be somewhat of a bottleneck in how fast they can be made, each one is massive project. Would be hard for other manufacture to replicate that process anytime soon. Other then BYD (and some research groups) nobody has attempted to make cells structural to the car yet. And BYD basically uses prismatic LFP cells that make it easier. Unfortunately they have not yet managed to do the improvements to the wiring and moving to 48V. Elon basically wants to use Ethernet and PoE for everything in the car. This seems a lot harder to do then anybody outside the automotive industry understands. Their cells and how they are produced is also quite amazing. They literally went back to 0 and rethought battery production from the ground up. The fans are trying to reproduce the process from the public video and available information (from Berlin application for example). It really seems like they simplified a lot, specially really small and difficult welding process that need to be done at high speed. They went so far as producing all their own manufacturing equipment as well, they bought companies like Hibar and have Grohmann engineering build these machines in Germany (new factory being built there as well). Will be hard for others to compete with battery production lines that can spit out 4-5x as many larger cells as a comparable 2170 line. I know Toyota is working on its own solid state batteries, and you likely can't say more then is publicly available. Toyota seems to have made no effort to produce its own 'traditional' cells so far. I'm not sure if they plan to produce their solids themselves. And I will be very interested to see when an actual mass volume 100k+ a year car gets produced with them. I would be surprised if it was before 2028 or so. At that point 'traditional' cells will have made huge advances, it will be interested to see what advantage they will have at that point. I am eagerly waiting for more information from Toyota. PS: The latest 'fun' thing Tesla seems to do (in Berlin), is to put the seats on top of the battery first and then drop the car frame on-top of it. Where the battery is the floor of the vehicle. Its almost like the old body-on-frame. I think the kind of stumbled into that because they wanted to eliminate the redundant layer in the floor and realized that the frame now has a hole in the bottom. I assume they will then manually insert the floor carpets in final assembly.