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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 yea

by 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)

by Aloha 4y ago

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)