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Without selling cheaper cars, Tesla could also: * Overcome their poor reputation for both interior & exterior quality. If the luxury car price starts coming wi

Without selling cheaper cars, Tesla could also: * Overcome their poor reputation for both interior & exterior quality. If the luxury car price starts coming with luxury car fit & finish they will widen their market * Overcome people's concerns about electric car range, by expanding charging networks, increasing charging speeds, or making cars with greater range.

adventured 5y ago
The primary problem Tesla faces isn't whether they can sell a lot of vehicles or sell a lot of nice vehicles (who knows if they'll ever get around to improving the quality problems). It's that the global market for vehicles in the $30,000+ range is not rapidly expanding. It's never going to be rapidly expand. Tesla is taking market share from other auto makers to do what they're doing right now. They have to kill a BMW to become a BMW. There's nothing particularly special about being an EV maker vs an ICE maker, when it comes to margins or total addressable market, such that they should be valued so differently. Tesla isn't going to magically produce $80 billion in operating income on $200 billion in sales, that margin doesn't exist in the EV market. Tesla also isn't going to own the global auto market, which is what their present valuation suggests (it suggests they need to end up as equivalent to four Toyotas). If they're lucky they end up the size of one Toyota, that's just about the best case scenario. ~$30 billion in profit, if everything goes extraordinarily well for the next two decades. Why should anyone pay 30-40 times for future earnings that are so far away? Obviously it's nothing more than speculation on the part of some investors, betting that TSLA will just go higher yet, it has little to do with being rational about the long-term. The future best-case outcome is already very far over-priced into Tesla's stock.

adventured 5y ago

The primary problem Tesla faces isn't whether they can sell a lot of vehicles or sell a lot of nice vehicles (who knows if they'll ever get around to improving the quality problems). It's that the global market for vehicles in the $30,000+ range is not rapidly expanding. It's never going to be rapidly expand. Tesla is taking market share from other auto makers to do what they're doing right now. They have to kill a BMW to become a BMW. There's nothing particularly special about being an EV maker vs an ICE maker, when it comes to margins or total addressable market, such that they should be valued so differently. Tesla isn't going to magically produce $80 billion in operating income on $200 billion in sales, that margin doesn't exist in the EV market. Tesla also isn't going to own the global auto market, which is what their present valuation suggests (it suggests they need to end up as equivalent to four Toyotas). If they're lucky they end up the size of one Toyota, that's just about the best case scenario. ~$30 billion in profit, if everything goes extraordinarily well for the next two decades. Why should anyone pay 30-40 times for future earnings that are so far away? Obviously it's nothing more than speculation on the part of some investors, betting that TSLA will just go higher yet, it has little to do with being rational about the long-term. The future best-case outcome is already very far over-priced into Tesla's stock.