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I wish Tesla would cut the crap about self driving tech (which is probably driving up their margins and their stock value) and bring more affordable mass market

by tthun 5y ago

I wish Tesla would cut the crap about self driving tech (which is probably driving up their margins and their stock value) and bring more affordable mass market cars to market. Clearly selling high margin cars is good for business but one can hope.

smsm42 5y ago
Why would they do that? Being a luxury brand has a lot of advantages. No reason for them to dilute it with cheap offerings - others could pick up that market, if they want to.
arcticbull 5y ago
I strongly suspect that would be a disaster for their stock price. They remain priced at $837B market cap (even after a dramatic recent rout where Elon sold the top and is now under SEC investigation for doing so), while Toyota has a $300B market cap. Toyota makes ~8M cars per year [1]. Tesla made 400K cars last year [2]. Toyota made 20X more cars and has a market cap just 36% of TSLA. There's a few ways cultists (err, sorry, investors) justify this valuation gap. 1. Self driving cars. 2. High margins. If you give up on self-driving and you start making lower-margin cars, you start to look an awful lot like a car company, which would mean you'd have to reduce their stock price to just 10-20% of where it's at right now. From $800 to $80-160. And that's generous, leaving room for some of their fun pet projects like the always-next-year solar roof tile [3]. [1] https://www.statista.com/statistics/267272/worldwide-vehicle-production-of-toyota/ https://www.statista.com/statistics/267272/worldwide-vehicle... [2] https://backlinko.com/tesla-stats https://backlinko.com/tesla-stats [3] https://electrek.co/2022/02/02/tesla-supply-chain-issues-extend-to-solar-roof-stops-scheduling-installation/ https://electrek.co/2022/02/02/tesla-supply-chain-issues-ext...
- bluGill 5y ago
  The other auto makers are also in self driving '.they are only doing quiet R&D, but if you are betting on automation Tesla isn't the best long term bet even before you look at potential upside.
  - arcticbull 5y ago
    Yeah, Uber had this realization a few years ago too. If you recall, they were also developing self-driving technology in hopes of reducing their cost basis. However, they abandoned the project after an internal report leaked indicating that it wouldn't get them more than, IIRC, a 5% uplift - for exactly the reason you say. Once one company has it, the rest will not be far behind.
- Retric 5y ago
  Tesla seems overpriced when you look at their Solar/EV/battery sales, on the other hand Toyota is still pushing Hydrogen fuel cells which suggests active mismanagement to many investors. As far as I am concerned the majority of the auto industry is a dumpster fire of incompetence. I don’t think Tesla is a good investment at this point, but a significant growth premium is perfectly reasonable IMO.
  - syshum 5y ago
    Like Toyota, I am still not convinced that our battery Tech is really there. We are starting to see more and more horror stories about Tesla battery Replacement costs on used vehicles, and recalls from major manufacturers. The Resell value of battery cars may drop to Zero if very purchase is a $20,000 gamble if you will have have to replace the battery. Personally I think hydrogen fuel cells is the better long term tech, but more than Toyota will need to adopt it
    - Retric 5y ago
      There are two different issues here. Assuming it’s a random risk you would expect car dealerships to offer some from of insurance/extended battery warranty. However, if the batteries need to be replaced every say 12 years spending 16,500$ onto replace a 75kWh battery is less than gas prices over that time span. Further the labor is only 2,300 to replace a battery so falling battery prices could easily make that a pricey but expected repair that’s worth doing once. Of course that’s assuming a full replacement is needed, the other option is to add capacity to adjust for reduced range. A 75kWh battery that lost 40% capacity only needs an additional 30kWh of batteries to be back to full capacity. An initial design leaving a void and appropriate hookups largely solves the problem of battery degradation.
      - dclusin 5y ago
        A majority of Americans cannot afford an unexpected expense of $1,000, let alone $16,500. The fact that its cheaper than the amount of gas you'd pay over that lifetime is irrelevant considering most Americans are not rich enough to shop comparatively like that. It's expensive to be poor.
- dashmeet 5y ago
  I think you misread the article. Tesla produced over 930,000 vehicles last year (2021). The link you sited was for the first 8 months of the year. Source: https://ir.tesla.com/press-release/tesla-q4-2021-vehicle-production-deliveries https://ir.tesla.com/press-release/tesla-q4-2021-vehicle-pro...
  - arcticbull 5y ago
    Ah good catch, thank you. Doesn't really change much of my analysis though.
    - Dylan16807 5y ago
      Well, 300k a quarter is 3x as much as 400k per year, so if you keep everything else the same it turns your estimate into $240-480 a share and that would be a much more survivable drop.
- grecy 5y ago
  The stock market doesn't value a company solely by what it's doing today, but also by what people think it could do tomorrow. Toyota is rock solid and stable. In 10 years you can bet they'll be making the same number of low margin cars they do today (same as 10 and 20 years ago) and making the same amount of money. (again, same as 10 and 20 years ago) Their stock price is reflective of that - there is essentially no plan or path to "growth". Tesla is growing MASSIVELY. It's basically a certainty they'll be making 2+ Million high margin cars by 2023, likely up to 5 Million in the next 5-10 years. The stock price reflects that massive growth. It's gambling, and people are betting that Tesla is going to grow massively, and that Toyota is going to stay more-or-less constant.
  - vagrantJin 5y ago
    > Tesla is growing MASSIVELY Tesla is a good company. But Toyota can't really grow much more because most of humanity has ridden or owned or knows someone who owns a Toyota. Short of selling Toyotas to alien civilizations, "GROWTH" here comes off as a weak shill for TLSA stock.
  - arcticbull 5y ago
    > Tesla is growing MASSIVELY. It's basically a certainty they'll be making 2+ Million high margin cars by 2023, likely up to 5 Million in the next 5-10 years. The stock price reflects that massive growth. So 5-10 years from now they'll still produce half as many cars as Toyota. Assuming they can do so without reducing their margins, and that in the interceding decade, not a single other mainstream automaker will produce a competitive vehicle. That's quite an assumption. Based on their growth trajectories, they won't reach Toyota's production rate until about 10 years from now - in spite of being valued the same as the entire rest of the auto industry put together today. There really is no justification.
    - grecy 5y ago
      > That's quite an assumption Saying that makes no more sense than saying "putting $100 on that horse to win is quite the assumption." It's got nothing to do with assumptions, it's gambling plain and simple. Right now, evidently, plenty of people are taking the bet that Tesla is going to do very well in the future.
- kragen 5y ago
  3. Growth. It makes sense to value Tesla at 3 times Toyota if starting three years from now Tesla is selling four times as many cars as Toyota at the same margin. Might not happen, but I think that's what a lot of investors were betting on. Not to say there aren't a lot of cultists too...
novok 5y ago
Self driving is a marketing side show, they are really just focused on manufacturing scaling right now and opening factories ASAP to meet demand. And because they are having a hard time meeting demand, they have no need at the time to make cheaper market versions, which will make their demand problem worse. They announced recently that they are not focusing on new models this year, just scaling. They are in mega scaling mode. IMO the key competitive advantage they have in the us/can market is their supercharger network and how they are ahead tech wise, making them %20 better cars than current competitors.

by tthun 5y ago

smsm42 5y ago

Why would they do that? Being a luxury brand has a lot of advantages. No reason for them to dilute it with cheap offerings - others could pick up that market, if they want to.

arcticbull 5y ago

I strongly suspect that would be a disaster for their stock price. They remain priced at $837B market cap (even after a dramatic recent rout where Elon sold the top and is now under SEC investigation for doing so), while Toyota has a $300B market cap. Toyota makes ~8M cars per year [1]. Tesla made 400K cars last year [2]. Toyota made 20X more cars and has a market cap just 36% of TSLA. There's a few ways cultists (err, sorry, investors) justify this valuation gap. 1. Self driving cars. 2. High margins. If you give up on self-driving and you start making lower-margin cars, you start to look an awful lot like a car company, which would mean you'd have to reduce their stock price to just 10-20% of where it's at right now. From $800 to $80-160. And that's generous, leaving room for some of their fun pet projects like the always-next-year solar roof tile [3]. [1] https://www.statista.com/statistics/267272/worldwide-vehicle-production-of-toyota/ https://www.statista.com/statistics/267272/worldwide-vehicle... [2] https://backlinko.com/tesla-stats https://backlinko.com/tesla-stats [3] https://electrek.co/2022/02/02/tesla-supply-chain-issues-extend-to-solar-roof-stops-scheduling-installation/ https://electrek.co/2022/02/02/tesla-supply-chain-issues-ext...

bluGill 5y ago
The other auto makers are also in self driving '.they are only doing quiet R&D, but if you are betting on automation Tesla isn't the best long term bet even before you look at potential upside.
- arcticbull 5y ago
  Yeah, Uber had this realization a few years ago too. If you recall, they were also developing self-driving technology in hopes of reducing their cost basis. However, they abandoned the project after an internal report leaked indicating that it wouldn't get them more than, IIRC, a 5% uplift - for exactly the reason you say. Once one company has it, the rest will not be far behind.
Retric 5y ago
Tesla seems overpriced when you look at their Solar/EV/battery sales, on the other hand Toyota is still pushing Hydrogen fuel cells which suggests active mismanagement to many investors. As far as I am concerned the majority of the auto industry is a dumpster fire of incompetence. I don’t think Tesla is a good investment at this point, but a significant growth premium is perfectly reasonable IMO.
- syshum 5y ago
  Like Toyota, I am still not convinced that our battery Tech is really there. We are starting to see more and more horror stories about Tesla battery Replacement costs on used vehicles, and recalls from major manufacturers. The Resell value of battery cars may drop to Zero if very purchase is a $20,000 gamble if you will have have to replace the battery. Personally I think hydrogen fuel cells is the better long term tech, but more than Toyota will need to adopt it
  - Retric 5y ago
    There are two different issues here. Assuming it’s a random risk you would expect car dealerships to offer some from of insurance/extended battery warranty. However, if the batteries need to be replaced every say 12 years spending 16,500$ onto replace a 75kWh battery is less than gas prices over that time span. Further the labor is only 2,300 to replace a battery so falling battery prices could easily make that a pricey but expected repair that’s worth doing once. Of course that’s assuming a full replacement is needed, the other option is to add capacity to adjust for reduced range. A 75kWh battery that lost 40% capacity only needs an additional 30kWh of batteries to be back to full capacity. An initial design leaving a void and appropriate hookups largely solves the problem of battery degradation.
    - dclusin 5y ago
      A majority of Americans cannot afford an unexpected expense of $1,000, let alone $16,500. The fact that its cheaper than the amount of gas you'd pay over that lifetime is irrelevant considering most Americans are not rich enough to shop comparatively like that. It's expensive to be poor.
dashmeet 5y ago
I think you misread the article. Tesla produced over 930,000 vehicles last year (2021). The link you sited was for the first 8 months of the year. Source: https://ir.tesla.com/press-release/tesla-q4-2021-vehicle-production-deliveries https://ir.tesla.com/press-release/tesla-q4-2021-vehicle-pro...
- arcticbull 5y ago
  Ah good catch, thank you. Doesn't really change much of my analysis though.
  - Dylan16807 5y ago
    Well, 300k a quarter is 3x as much as 400k per year, so if you keep everything else the same it turns your estimate into $240-480 a share and that would be a much more survivable drop.
grecy 5y ago
The stock market doesn't value a company solely by what it's doing today, but also by what people think it could do tomorrow. Toyota is rock solid and stable. In 10 years you can bet they'll be making the same number of low margin cars they do today (same as 10 and 20 years ago) and making the same amount of money. (again, same as 10 and 20 years ago) Their stock price is reflective of that - there is essentially no plan or path to "growth". Tesla is growing MASSIVELY. It's basically a certainty they'll be making 2+ Million high margin cars by 2023, likely up to 5 Million in the next 5-10 years. The stock price reflects that massive growth. It's gambling, and people are betting that Tesla is going to grow massively, and that Toyota is going to stay more-or-less constant.
- vagrantJin 5y ago
  > Tesla is growing MASSIVELY Tesla is a good company. But Toyota can't really grow much more because most of humanity has ridden or owned or knows someone who owns a Toyota. Short of selling Toyotas to alien civilizations, "GROWTH" here comes off as a weak shill for TLSA stock.
- arcticbull 5y ago
  > Tesla is growing MASSIVELY. It's basically a certainty they'll be making 2+ Million high margin cars by 2023, likely up to 5 Million in the next 5-10 years. The stock price reflects that massive growth. So 5-10 years from now they'll still produce half as many cars as Toyota. Assuming they can do so without reducing their margins, and that in the interceding decade, not a single other mainstream automaker will produce a competitive vehicle. That's quite an assumption. Based on their growth trajectories, they won't reach Toyota's production rate until about 10 years from now - in spite of being valued the same as the entire rest of the auto industry put together today. There really is no justification.
  - grecy 5y ago
    > That's quite an assumption Saying that makes no more sense than saying "putting $100 on that horse to win is quite the assumption." It's got nothing to do with assumptions, it's gambling plain and simple. Right now, evidently, plenty of people are taking the bet that Tesla is going to do very well in the future.
kragen 5y ago
3. Growth. It makes sense to value Tesla at 3 times Toyota if starting three years from now Tesla is selling four times as many cars as Toyota at the same margin. Might not happen, but I think that's what a lot of investors were betting on. Not to say there aren't a lot of cultists too...

novok 5y ago

Self driving is a marketing side show, they are really just focused on manufacturing scaling right now and opening factories ASAP to meet demand. And because they are having a hard time meeting demand, they have no need at the time to make cheaper market versions, which will make their demand problem worse. They announced recently that they are not focusing on new models this year, just scaling. They are in mega scaling mode. IMO the key competitive advantage they have in the us/can market is their supercharger network and how they are ahead tech wise, making them %20 better cars than current competitors.