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The top ten automakers have huge amounts of debt and pension liabilities. Tesla has neither. None of them are making profitable EVs at scale. Tesla has been hit

The top ten automakers have huge amounts of debt and pension liabilities. Tesla has neither. None of them are making profitable EVs at scale. Tesla has been hitting their goal of growing at 50% per year for a decade and plans to continue until they are making 20 million cars a year in 2030. Their gross margin on cars is the highest in the industry. The next 5 years are critical for the existing players and many will shrink dramatically or go bankrupt. People already know this and that is why there is a bill in Congress that is a stealth bailout of the domestic auto industry with a $7500 tax credit on cars that have just $750 worth of batteries in them.

Aloha 4y ago
I dont think they can continue to grow at that rate and preserve their gross margin. The high end part of the market isnt large enough to sustain 20m cars a year. To give you an idea, for scale, the two largest producers made 10m each in 2019 roughly respectively - and those two are VW and Toyota. I cannot see in any way for Tesla to displace that many units and maintain their margins at the level they have them. The big three domestic manufacturers largely shed their pension liabilities to the UAW when they last went (or nearly went in the case of Ford) bankrupt in 2008.
- itsoktocry 4y ago
  >and maintain their margins at the level they have them. Tesla's margins shrunk quite a bit last earnings report, so I agree. Selling high-end cars in a niche market is easier than selling 20 million cars annually (which no one has ever done before).
  - Aloha 4y ago
    I'm skeptical that anyone can make 20m cars a year. It also doesnt surprise me that Teslas margins have shrank, I think the price of their vehicles is rendered somewhat inelastic because of the preorder-purchase contract system they use. The vehicle price is more or less fixed at the time of order based on my understanding, and while they can retroactively increase prices, it will likely result in abandonment of the order.
    - kbenson 4y ago
      > I'm skeptical that anyone can make 20m cars a year. There's just over 30m seconds in a year, that's a car every second and a half. That seems like it would take a lot of assembly lines to pull off ignoring other constraints. On the other hand, at 184.8″ for a model 3, that's like a stream of them bumper to bumper leaving a single assembly line at 6.65 Mph for the entire year. Viewed in that light, maybe it doesn't take that many assembly lines to reach a speed at which this would be achievable, ignoring other very important constraints. (Or maybe I made a mistake in my math.)
      - Aloha 4y ago
        The level of market displacement is pretty huge - its not clear to me that its possible for that to happen. The market for vehicles is pretty inelastic, like, you cant grow your way there in an organic way.
        kbenson 4y ago
        I agree, I was trying to examine how plausible it was from a very simplistic model, which is why I said "ignoring other very important constraints". It sounded implausible on the face of it, as it might require cars to be leaving the assembly line at freeway speeds, but it wasn't quite that bad in reality. There are plenty of other things which make it very unlikely/implausible though, such as market demand, as you note.
- mg 4y ago
  I heard the same arguments when Apple had a hit with the iPhone. The high end of the market is saturated, and soon the competition would bring down the prices. But the price of the iPhone continued to go up. It never stopped going up. Because it continued to offer more and more value. People already see some value in Teslas self-driving technology. And that value will continue to go up for a long time.
  - anony999 4y ago
    >> People already see some value in Teslas self-driving technology. And that value will continue to go up for a long time. Up to the point where you tell your car "Hey, go get me a pizza". You are aware that real self driving(L5) is not possible without some AI breakthroughs, right? All the promises you see from Elon are just pure BS. Your tesla has issues seeing a big truck straight in front of the driver lane so you can forget the "Hey, go get me a pizza" command. I can't really see many reasons to buy a Tesla except its propulsion technology (i.e. big batteries). I doubt that's enough to compare it with the iPhone which was really more about software than hardware. Tesla software/user experience is not significantly better than a dumb car with carplay or just an ipad fixed on board. The only way for Tesla to win more market share is for the competition to ignore/defy the wanna be EV consumers.
    - diydsp 4y ago
      > Tesla software/user experience is not significantly better than a dumb car with carplay or just an ipad fixed on boar That's only part of it. It also includes the prestige and social cache. Once upon a time, apple was the same. Me, i don't care, but all the fancy ppl around me, the multi generational wealthy and boomers, can't get enough Teslas. That desire for luxury may wax like apple... or the coming recession may sponch it.
      - anony999 4y ago
        Tesla still has an "early adopter" and tech aura(IMHO). I wouldn't say it's seen as luxury in Europe. I believe they sell well in Europe because they have the best batteries/range and little competition. I believe once (if) Mercedes and the other brands ramp up production on their electric cars Tesla will have a very hard time competing. They have to deliver either better tech or better value(price). They cannot compete on "luxury" or brand. Tesla itself markets as a tech company (to investors and everyone else). It sells the first move advantage(i.e. battery tech, economy of scale)
itsoktocry 4y ago
>The top ten automakers have huge amounts of debt They have huge amounts of debt because they run huge financing departments and therefore also have a huge number of assets on the balance sheet. >Their gross margin on cars is the highest in the industry. They have a completely different sales model, so it's apples to oranges. Most OEMs wholesale cars to dealers, of course those margins will be smaller. >Tesla has been hitting their goal of growing at 50% per year for a decade and plans to continue until they are making 20 million cars a year in 2030. Base rate fallacy, extrapolated into infinity, sure. >The next 5 years are critical for the existing players and many will shrink dramatically or go bankrupt. Some will disappear or merge, of course. But the next 5 years is also crucial for Tesla, since they are still a rounding error in global market share.
- tyree731 4y ago
  > They have a completely different sales model, so it's apples to oranges. Most OEMs wholesale cars to dealers, of course those margins will be smaller. Well yes, but they've been successful with this sales model, and sell cars all the same, so that makes them more valuable in comparison.
  - enragedcacti 4y ago
    There are a lot of costs to operating a service center and managing customer deliveries that aren't necessarily considered in gross margins for Tesla whereas they are considered in the case of a traditional automaker in a dealership model. I wouldn't be surprised if Tesla still has an advantage compared to manufacturer+dealer but we won't learn that from comparing vehicle margins directly. There's also a lot of super weird dealer kickbacks behind the scenes that can make gross margin misleading for traditional autos, probably in Tesla's favor.
  - matthewfcarlson 4y ago
    Anecdotally, we bought a Tesla a few years ago and it was awesome. Just buy it online, walk up, unlocks with your phone, and drive away. My spouse (a very socially anxious person who despises car dealerships) loved it and said if it made sense, she would never buy a car anywhere else. Granted, the same experience is rolling out for traditional cars (carvana, carmax, etc).
victor106 4y ago
> a stealth bailout of the domestic auto industry with a $7500 tax credit on cars that have just $750 worth of batteries in them. As it currently stands the $7500 limit is only for the first 200,000 cars. Tesla benefited a lot from it and exhausted its limit back in 2018. https://www.reuters.com/article/us-tesla-tax-credit/tesla-hits-200000-cars-meaning-lower-tax-credit-for-buyers-idUSKBN1K222F https://www.reuters.com/article/us-tesla-tax-credit/tesla-hi...
- duped 4y ago
  I think GP is referring to the Climate Bill being debated in Congress this month where the 200k limit would be lifted and an additional $4k tax credit given to used EV purchases.
- ssharp 4y ago
  The bill the commenter was mentioning is currently in the Senate and hasn't been voted on yet. It would bring back the $7,500 credit for any EV that is built in the U.S. and removes the 200,000 limit. The bill also changes the mechanics of the credit so that it is applied immediately off the purchase price rather than a tax credit whenever you file. It also allows for up to a $4,000 credit on used EV's.
  - victor106 4y ago
    Got it, Is there anything in the bill that excludes Tesla from access to those credits?
    - enragedcacti 4y ago
      Here is the summarized set of rules: Federal tax credit for EVs will remain at $7,500 Tax credit cap for automakers after they hit 200,000 EVs sold is eliminated, making GM, Tesla and Toyota once again eligible The language in the bill indicates that the tax credit would be implemented at the point of sale instead of on taxes at the end of the fiscal year In order to get the full credit, the EV must be assembled in North America, the majority of battery components need to come from North America, and contain a certain percentage of minerals from countries with free trade agreements with the US Includes a new federal tax credit of $4,000 for used EVs Includes zero-emission vans, SUVs, and trucks with MSRPs up to $80,000 Electric sedans priced up to $55,000 MSRP also qualify The full electric vehicle tax credit will be available to individuals reporting adjusted gross incomes of $150,000 or less, or $300,000 for joint filers https://electrek.co/2022/07/29/which-electric-vehicles-still-qualify-for-us-federal-tax-credit/#h-status-of-the-12-500-federal-tax-credit-for-evs https://electrek.co/2022/07/29/which-electric-vehicles-still...
jmyeet 4y ago
Tesla's valuation is roughly $800,000 per car they shipped last year. Compare this to Ford, which is roughly $30,000. Quick googling shows Ford has $138B on total debt, a market cap of $60B and produced almost 2M cars. Tesla still has $30B in debt. When you start looking at assets, it gets more interesting. Tesla's assets are ~$68B. Ford's $257B. You can't just magically produce more cars. You need more people, more batteries, more factories and other significant capital expenditure. My point is that "growth" is used as an excuse for Tesla's valuation but any look at comparative numbers should show you it's way out of whack compared to any auto maker. And as the F150 shows, Tesla's dominance of the EV market isn't as sticky as it would need to be to justify that valuation. Cybertruck anyone?
- beckingz 4y ago
  That's a huge amount of working capital at Ford! Wow.
axlee 4y ago
Tesla's only claim to profitability is government-enforced carbon compensation laws. Tesla is basically a greenwashing insurance that masquerades as a real automaker, don't get fooled.
- Kranar 4y ago
  It's cheaper to to provide that government-enforced carbon compensation than it is to provide the massive amounts of subsidies and tax credits that oil companies get. In other words, the government actually saves money every time someone buys an electric vehicle.
  - asdajksah2123 4y ago
    Both things are true though. Oil companies get massive subsidies. And Tesla's survival is dependent on green subsidies. There's an easy (and I'd daresay, correct) solution there. Not subsidizing oil and reducing green subsidies. Unfortunately, it's not politically palatable.
- panick21_ 4y ago
  This is nonsense. The kind of argument uninformed people who dislike Tesla pick up on twitter and then endlessly regurgitate over every online forum. The revenue Tesla gets from credit is very small compared to the revenue of cars and gets smaller and less significant with every single quarter.
parkingrift 4y ago
I doubt that Tesla can continue to grow 50% YoY as soon as 2023. The Model S, X, and Y are extremely expensive compared to the competition. I’m in the market for an electric SUV right now. The Kia EV6 and Hyundai Ioniq 5 both seem legitimately better than the Model Y, and they are substantially less expensive. The Model Y AWD Long Range is $68,000. The Ioniq 5 SEL is $52,000. Tesla has historically never had to compete on price, but those days are ending. Either Tesla will lower their prices and their margins, or they will suffer lower sales. Competing on price is the future Tesla desperately wanted to avoid, but Tesla has not been able to scale fast enough to avoid it. Good luck to Tesla shareholders. It’s a car company that the market is valuing as if it were a high growth tech startup.
- asdajksah2123 4y ago
  Tesla is still making poor quality cars. No other car I've seen spends as much time in repairs as Teslas do.
  - spullara 4y ago
    You've never owned a BMW then.
    - daveidol 4y ago
      Modern BMWs are actually quite reliable - just expensive to repair.
    - samfisher83 4y ago
      That's a pretty low bar.
  - beeboop 4y ago
    Source?
  - jml78 4y ago
    If you are taking the model S and X sure. model 3 and Y, negative.
distances 4y ago
> The top ten automakers have .. pension liabilities. I don't think this part is true. I haven't heard of company pensions being a thing outside of US. I doubt VW, Toyota or Daimler have any pension liabilities at all, barring their US subsidiaries.
RC_ITR 4y ago
The real criticism of Tesla is that there are about 65m cars sold per year now globally. If every one of those cars has $10k of profit (way too high, but for arguments sake), that’s $650bn of profit per year. When a single company with less than 1% share of sales has a market cap higher than the entire theoretical annual profits of an industry, that implies an insane amount of speculation (about things like Robo taxis and insurance, etc)
philsnow 4y ago
> None of them are making profitable EVs at scale. Is the f150 lightning not profitable for Ford? I looked just now and can't find any information (maybe have to wait until next fiscal year?). Their costs for that line are lower than most other automakers because they share so many parts and design elements with the ICE f150.
- mywittyname 4y ago
  I don't think Ford has released this information yet, and it's really too soon to judge either way, considering manufacturing issues and price instability. The Mach-E went from very profitable, to a losser basically overnight as battery prices skyrocketed. At this point, battery manufacturing is EV manufacturing. Battery costs are such a large percentage of overall costs that the entire margin of a vehicle can evaporate at the whims of a supplier. I think we need to wait and see how SKBlueOval does before we can really judge Ford's EV performance.
outworlder 4y ago
The P/E for Tesla suggest it is going to take decades(at the peak, over a century) for that valuation to make sense. Even if it grows to the point that it destroys all other automakers and become a monopoly, it's still too high. You can only sell so many cars. The valuation seems to be taking into account that Tesla is not only about cars, but also artificial intelligence, which would allow it to expand to other markets(taxis, maybe even military). Jury is still out.
- bryanlarsen 4y ago
  Huh, Tesla P/E is 107, so it'd require about a 5X growth in income to reach a sane P/E. If it keeps growing at 80% p.a., that'll take about 3 years. 4 years at 50% growth. And a 5X increase isn't unreasable, that's still under 10% market share.
- njarboe 4y ago
  If Tesla does make 20 million cars that sell for an average of $50k and have net margins of 20%, their annual revenue would be $200 billion. If at that point they have the same PE as Apple has now (~25), that would be a market cap of $5 trillion. That would be a 6x gain from today just on regular auto sales. If the only side project that works out is Full Self Driving (which is the major focus of Tesla and occupies most of Musk's Tesla time) comes to pass, double that revenue would not be unreasonable. There are many things that could go wrong, but lots up possible upside.
  - tsimionescu 4y ago
    > If Tesla does make 20 million cars that sell for an average of $50k and have net margins of 20%, their annual revenue would be $200 billion And if they make a hundred trillion cars and sell each for 50$, they will be even richer. But both of these assumptions are absurd, so why discuss them? There is no market for selling 20M $50k cars every year, especially of the same make.
    - njarboe 4y ago
      The key is Full Self Driving. Elon Musk has stated that without it, Tesla won't grow like they are planning. Who know if it is possible, but I think Tesla has the best chance with their access to top talent, no spending limits at this point, and a leader that is willing to put and keep the cars out on the road even with the bad PR of the inevitable crashes and deaths. Full Self Driving will save so many lives.

Aloha 4y ago

I dont think they can continue to grow at that rate and preserve their gross margin. The high end part of the market isnt large enough to sustain 20m cars a year. To give you an idea, for scale, the two largest producers made 10m each in 2019 roughly respectively - and those two are VW and Toyota. I cannot see in any way for Tesla to displace that many units and maintain their margins at the level they have them. The big three domestic manufacturers largely shed their pension liabilities to the UAW when they last went (or nearly went in the case of Ford) bankrupt in 2008.

itsoktocry 4y ago
>and maintain their margins at the level they have them. Tesla's margins shrunk quite a bit last earnings report, so I agree. Selling high-end cars in a niche market is easier than selling 20 million cars annually (which no one has ever done before).
- Aloha 4y ago
  I'm skeptical that anyone can make 20m cars a year. It also doesnt surprise me that Teslas margins have shrank, I think the price of their vehicles is rendered somewhat inelastic because of the preorder-purchase contract system they use. The vehicle price is more or less fixed at the time of order based on my understanding, and while they can retroactively increase prices, it will likely result in abandonment of the order.
  - kbenson 4y ago
    > I'm skeptical that anyone can make 20m cars a year. There's just over 30m seconds in a year, that's a car every second and a half. That seems like it would take a lot of assembly lines to pull off ignoring other constraints. On the other hand, at 184.8″ for a model 3, that's like a stream of them bumper to bumper leaving a single assembly line at 6.65 Mph for the entire year. Viewed in that light, maybe it doesn't take that many assembly lines to reach a speed at which this would be achievable, ignoring other very important constraints. (Or maybe I made a mistake in my math.)
    - Aloha 4y ago
      The level of market displacement is pretty huge - its not clear to me that its possible for that to happen. The market for vehicles is pretty inelastic, like, you cant grow your way there in an organic way.
      - kbenson 4y ago
        I agree, I was trying to examine how plausible it was from a very simplistic model, which is why I said "ignoring other very important constraints". It sounded implausible on the face of it, as it might require cars to be leaving the assembly line at freeway speeds, but it wasn't quite that bad in reality. There are plenty of other things which make it very unlikely/implausible though, such as market demand, as you note.
mg 4y ago
I heard the same arguments when Apple had a hit with the iPhone. The high end of the market is saturated, and soon the competition would bring down the prices. But the price of the iPhone continued to go up. It never stopped going up. Because it continued to offer more and more value. People already see some value in Teslas self-driving technology. And that value will continue to go up for a long time.
- anony999 4y ago
  >> People already see some value in Teslas self-driving technology. And that value will continue to go up for a long time. Up to the point where you tell your car "Hey, go get me a pizza". You are aware that real self driving(L5) is not possible without some AI breakthroughs, right? All the promises you see from Elon are just pure BS. Your tesla has issues seeing a big truck straight in front of the driver lane so you can forget the "Hey, go get me a pizza" command. I can't really see many reasons to buy a Tesla except its propulsion technology (i.e. big batteries). I doubt that's enough to compare it with the iPhone which was really more about software than hardware. Tesla software/user experience is not significantly better than a dumb car with carplay or just an ipad fixed on board. The only way for Tesla to win more market share is for the competition to ignore/defy the wanna be EV consumers.
  - diydsp 4y ago
    > Tesla software/user experience is not significantly better than a dumb car with carplay or just an ipad fixed on boar That's only part of it. It also includes the prestige and social cache. Once upon a time, apple was the same. Me, i don't care, but all the fancy ppl around me, the multi generational wealthy and boomers, can't get enough Teslas. That desire for luxury may wax like apple... or the coming recession may sponch it.
    - anony999 4y ago
      Tesla still has an "early adopter" and tech aura(IMHO). I wouldn't say it's seen as luxury in Europe. I believe they sell well in Europe because they have the best batteries/range and little competition. I believe once (if) Mercedes and the other brands ramp up production on their electric cars Tesla will have a very hard time competing. They have to deliver either better tech or better value(price). They cannot compete on "luxury" or brand. Tesla itself markets as a tech company (to investors and everyone else). It sells the first move advantage(i.e. battery tech, economy of scale)

itsoktocry 4y ago

>The top ten automakers have huge amounts of debt They have huge amounts of debt because they run huge financing departments and therefore also have a huge number of assets on the balance sheet. >Their gross margin on cars is the highest in the industry. They have a completely different sales model, so it's apples to oranges. Most OEMs wholesale cars to dealers, of course those margins will be smaller. >Tesla has been hitting their goal of growing at 50% per year for a decade and plans to continue until they are making 20 million cars a year in 2030. Base rate fallacy, extrapolated into infinity, sure. >The next 5 years are critical for the existing players and many will shrink dramatically or go bankrupt. Some will disappear or merge, of course. But the next 5 years is also crucial for Tesla, since they are still a rounding error in global market share.

tyree731 4y ago
> They have a completely different sales model, so it's apples to oranges. Most OEMs wholesale cars to dealers, of course those margins will be smaller. Well yes, but they've been successful with this sales model, and sell cars all the same, so that makes them more valuable in comparison.
- enragedcacti 4y ago
  There are a lot of costs to operating a service center and managing customer deliveries that aren't necessarily considered in gross margins for Tesla whereas they are considered in the case of a traditional automaker in a dealership model. I wouldn't be surprised if Tesla still has an advantage compared to manufacturer+dealer but we won't learn that from comparing vehicle margins directly. There's also a lot of super weird dealer kickbacks behind the scenes that can make gross margin misleading for traditional autos, probably in Tesla's favor.
- matthewfcarlson 4y ago
  Anecdotally, we bought a Tesla a few years ago and it was awesome. Just buy it online, walk up, unlocks with your phone, and drive away. My spouse (a very socially anxious person who despises car dealerships) loved it and said if it made sense, she would never buy a car anywhere else. Granted, the same experience is rolling out for traditional cars (carvana, carmax, etc).

victor106 4y ago

> a stealth bailout of the domestic auto industry with a $7500 tax credit on cars that have just $750 worth of batteries in them. As it currently stands the $7500 limit is only for the first 200,000 cars. Tesla benefited a lot from it and exhausted its limit back in 2018. https://www.reuters.com/article/us-tesla-tax-credit/tesla-hits-200000-cars-meaning-lower-tax-credit-for-buyers-idUSKBN1K222F https://www.reuters.com/article/us-tesla-tax-credit/tesla-hi...

duped 4y ago
I think GP is referring to the Climate Bill being debated in Congress this month where the 200k limit would be lifted and an additional $4k tax credit given to used EV purchases.
ssharp 4y ago
The bill the commenter was mentioning is currently in the Senate and hasn't been voted on yet. It would bring back the $7,500 credit for any EV that is built in the U.S. and removes the 200,000 limit. The bill also changes the mechanics of the credit so that it is applied immediately off the purchase price rather than a tax credit whenever you file. It also allows for up to a $4,000 credit on used EV's.
- victor106 4y ago
  Got it, Is there anything in the bill that excludes Tesla from access to those credits?
  - enragedcacti 4y ago
    Here is the summarized set of rules: Federal tax credit for EVs will remain at $7,500 Tax credit cap for automakers after they hit 200,000 EVs sold is eliminated, making GM, Tesla and Toyota once again eligible The language in the bill indicates that the tax credit would be implemented at the point of sale instead of on taxes at the end of the fiscal year In order to get the full credit, the EV must be assembled in North America, the majority of battery components need to come from North America, and contain a certain percentage of minerals from countries with free trade agreements with the US Includes a new federal tax credit of $4,000 for used EVs Includes zero-emission vans, SUVs, and trucks with MSRPs up to $80,000 Electric sedans priced up to $55,000 MSRP also qualify The full electric vehicle tax credit will be available to individuals reporting adjusted gross incomes of $150,000 or less, or $300,000 for joint filers https://electrek.co/2022/07/29/which-electric-vehicles-still-qualify-for-us-federal-tax-credit/#h-status-of-the-12-500-federal-tax-credit-for-evs https://electrek.co/2022/07/29/which-electric-vehicles-still...

jmyeet 4y ago

Tesla's valuation is roughly $800,000 per car they shipped last year. Compare this to Ford, which is roughly $30,000. Quick googling shows Ford has $138B on total debt, a market cap of $60B and produced almost 2M cars. Tesla still has $30B in debt. When you start looking at assets, it gets more interesting. Tesla's assets are ~$68B. Ford's $257B. You can't just magically produce more cars. You need more people, more batteries, more factories and other significant capital expenditure. My point is that "growth" is used as an excuse for Tesla's valuation but any look at comparative numbers should show you it's way out of whack compared to any auto maker. And as the F150 shows, Tesla's dominance of the EV market isn't as sticky as it would need to be to justify that valuation. Cybertruck anyone?

beckingz 4y ago
That's a huge amount of working capital at Ford! Wow.

axlee 4y ago

Tesla's only claim to profitability is government-enforced carbon compensation laws. Tesla is basically a greenwashing insurance that masquerades as a real automaker, don't get fooled.

Kranar 4y ago
It's cheaper to to provide that government-enforced carbon compensation than it is to provide the massive amounts of subsidies and tax credits that oil companies get. In other words, the government actually saves money every time someone buys an electric vehicle.
- asdajksah2123 4y ago
  Both things are true though. Oil companies get massive subsidies. And Tesla's survival is dependent on green subsidies. There's an easy (and I'd daresay, correct) solution there. Not subsidizing oil and reducing green subsidies. Unfortunately, it's not politically palatable.
panick21_ 4y ago
This is nonsense. The kind of argument uninformed people who dislike Tesla pick up on twitter and then endlessly regurgitate over every online forum. The revenue Tesla gets from credit is very small compared to the revenue of cars and gets smaller and less significant with every single quarter.

parkingrift 4y ago

I doubt that Tesla can continue to grow 50% YoY as soon as 2023. The Model S, X, and Y are extremely expensive compared to the competition. I’m in the market for an electric SUV right now. The Kia EV6 and Hyundai Ioniq 5 both seem legitimately better than the Model Y, and they are substantially less expensive. The Model Y AWD Long Range is $68,000. The Ioniq 5 SEL is $52,000. Tesla has historically never had to compete on price, but those days are ending. Either Tesla will lower their prices and their margins, or they will suffer lower sales. Competing on price is the future Tesla desperately wanted to avoid, but Tesla has not been able to scale fast enough to avoid it. Good luck to Tesla shareholders. It’s a car company that the market is valuing as if it were a high growth tech startup.

asdajksah2123 4y ago
Tesla is still making poor quality cars. No other car I've seen spends as much time in repairs as Teslas do.
- spullara 4y ago
  You've never owned a BMW then.
  - daveidol 4y ago
    Modern BMWs are actually quite reliable - just expensive to repair.
  - samfisher83 4y ago
    That's a pretty low bar.
- beeboop 4y ago
  Source?
- jml78 4y ago
  If you are taking the model S and X sure. model 3 and Y, negative.

distances 4y ago

> The top ten automakers have .. pension liabilities. I don't think this part is true. I haven't heard of company pensions being a thing outside of US. I doubt VW, Toyota or Daimler have any pension liabilities at all, barring their US subsidiaries.

RC_ITR 4y ago

The real criticism of Tesla is that there are about 65m cars sold per year now globally. If every one of those cars has $10k of profit (way too high, but for arguments sake), that’s $650bn of profit per year. When a single company with less than 1% share of sales has a market cap higher than the entire theoretical annual profits of an industry, that implies an insane amount of speculation (about things like Robo taxis and insurance, etc)

philsnow 4y ago

> None of them are making profitable EVs at scale. Is the f150 lightning not profitable for Ford? I looked just now and can't find any information (maybe have to wait until next fiscal year?). Their costs for that line are lower than most other automakers because they share so many parts and design elements with the ICE f150.

mywittyname 4y ago
I don't think Ford has released this information yet, and it's really too soon to judge either way, considering manufacturing issues and price instability. The Mach-E went from very profitable, to a losser basically overnight as battery prices skyrocketed. At this point, battery manufacturing is EV manufacturing. Battery costs are such a large percentage of overall costs that the entire margin of a vehicle can evaporate at the whims of a supplier. I think we need to wait and see how SKBlueOval does before we can really judge Ford's EV performance.

outworlder 4y ago

The P/E for Tesla suggest it is going to take decades(at the peak, over a century) for that valuation to make sense. Even if it grows to the point that it destroys all other automakers and become a monopoly, it's still too high. You can only sell so many cars. The valuation seems to be taking into account that Tesla is not only about cars, but also artificial intelligence, which would allow it to expand to other markets(taxis, maybe even military). Jury is still out.

bryanlarsen 4y ago
Huh, Tesla P/E is 107, so it'd require about a 5X growth in income to reach a sane P/E. If it keeps growing at 80% p.a., that'll take about 3 years. 4 years at 50% growth. And a 5X increase isn't unreasable, that's still under 10% market share.
njarboe 4y ago
If Tesla does make 20 million cars that sell for an average of $50k and have net margins of 20%, their annual revenue would be $200 billion. If at that point they have the same PE as Apple has now (~25), that would be a market cap of $5 trillion. That would be a 6x gain from today just on regular auto sales. If the only side project that works out is Full Self Driving (which is the major focus of Tesla and occupies most of Musk's Tesla time) comes to pass, double that revenue would not be unreasonable. There are many things that could go wrong, but lots up possible upside.
- tsimionescu 4y ago
  > If Tesla does make 20 million cars that sell for an average of $50k and have net margins of 20%, their annual revenue would be $200 billion And if they make a hundred trillion cars and sell each for 50$, they will be even richer. But both of these assumptions are absurd, so why discuss them? There is no market for selling 20M $50k cars every year, especially of the same make.
  - njarboe 4y ago
    The key is Full Self Driving. Elon Musk has stated that without it, Tesla won't grow like they are planning. Who know if it is possible, but I think Tesla has the best chance with their access to top talent, no spending limits at this point, and a leader that is willing to put and keep the cars out on the road even with the bad PR of the inevitable crashes and deaths. Full Self Driving will save so many lives.