Surreal - Tesla’s market cap is now bigger than Ford’s was at its peak

[Sig]

The energy density is too low. Nobody in the Western world can produce EVs profitably. Maybe the Chinese can, but strictly speaking it is not just Tesla's fault the lack of profits. On top of that they are badly organized but eventually that can smoothen out. But as long as there is no breakthrough in the battery front, they won't be selling profitable cars without government subsidies to the masses.

You're confusing your discussion points. If we're talking about if Tesla is attempting to follow a similar strategy to Amazon where their marquee product is just there to create captive demand for the actual profitable product then the answer is yes. The marquee product is electric cars, the actual profitable product is batteries way beyond electric cars which is a massively larger potential market. Same strategy and the strategy itself is sound, it's just that I don't think they specifically can pull it off because Elon doesn't only not understand operations he doesn't seem to realize he doesn't understand it.
If you want to talk about Tesla's lack of profits, first off they've had several profitable quarters and if they switched to a profitability versus growth mindset (and stopped sucking operationally) the product is already profitable (and Tesla already reached the federal tax credit phase-out mark). And it's an important thing to realize that in fact a "breakthrough" isn't required to drive down cost curves. The solar pv industry is the best demonstration of this. Back in 2007 timeframe silicon pv was in the $7/watt range. A bunch of "breakthrough" thin film solar companies got tons of VC money with the promise that they'd cut prices in half to $3.50/watt within 3-5 years. Many of them succeeded. The problem was that the mass production of plain old silicon PV, driven in large part by government incentives, had driven the product down the price curve at it was now only $2.50/watt. Today the completely un-subsidized price for panels is $.35/watt. That's plain old silicon, no "breakthroughs" and in fact the effort and money focused on "breakthroughs" turned out to be a waste. This cost curve is apparent in wind turbines and inverters and so far is also happening in batteries. No reason to believe it won't continue. After all, before we spent trillions in today's dollars subsidizing fossil fuel over the past 100 years it too was rare and extremely expensive.

 

[Pekelo]

Well, the stock seems to be dropping... Below 580 now.

By the way, Tesla doesn't make batteries. And they have ran out of federal subsidies in the US.

 

[Specterx]

Batteries, it's all about the manufacturing cost curve for batteries. Like I said, Tesla is probably too much of a shitshow to pull it off operationally, but the concept of pulling down the battery cost curve with mass manufacturing for electric vehicles, along with the massive size of the battery market vice electric cars, is eminently reasonable from a strategy perspective.

At this point, I'd venture TSLA is way overvalued even if this thesis works out 100% perfectly. Manufacturing economies of scale just don't get you the years and years of extraordinary growth and profits that are baked into the price. It just might if the other auto companies were asleep at the wheel, but in fact they're falling over themselves to introduce EVs despite still-tepid consumer demand.

To justify its valuation, TSLA will need to develop entirely new, much higher-margin sources of income. Actually functional FSD and/or robotaxis, somehow using the cars as a platform to sell other software and services, or other entirely unrelated businesses not yet devised. And that's just to justify the current stock price, with no appreciation for years to come.

 

[ZBZB]

Model 3 leases give no option to purchase the computer on wheels at the end of the lease. They are coming back to Tesla to be sent out as Robotaxis and could earn $30,000 a year. So a fleet of 1 million Robotaxis will produce a profit of $30bn a year. Put a 20 pe on it and you get a $600bn market cap. Watch the Tesla autonomy day from 1hour 10 in.

 

[Specterx]

The solar pv industry is the best demonstration of this. Back in 2007 timeframe silicon pv was in the $7/watt range. A bunch of "breakthrough" thin film solar companies got tons of VC money with the promise that they'd cut prices in half to $3.50/watt within 3-5 years. Many of them succeeded. The problem was that the mass production of plain old silicon PV, driven in large part by government incentives, had driven the product down the price curve at it was now only $2.50/watt. Today the completely un-subsidized price for panels is $.35/watt. That's plain old silicon, no "breakthroughs" and in fact the effort and money focused on "breakthroughs" turned out to be a waste. This cost curve is apparent in wind turbines and inverters and so far is also happening in batteries. No reason to believe it won't continue. After all, before we spent trillions in today's dollars subsidizing fossil fuel over the past 100 years it too was rare and extremely expensive.

The solar industry is an excellent refutation of the "batteries as a huge cash cow" thesis. Sure, the price of solar panels has come way down over the past 10-15 years due to economies of scale, etc. - but solar-panel manufacturers have generally been a terrible investment, because it's a capital-intensive, cyclical, low-margin commodity industry where no player has been able to gain a lasting advantage. Without unique patented technology or some other kind of competitive moat, making batteries will likewise be a shitty low-margin business.

 

[Sig]

The solar industry is an excellent refutation of the "batteries as a huge cash cow" thesis. Sure, the price of solar panels has come way down over the past 10-15 years due to economies of scale, etc. - but solar-panel manufacturers have generally been a terrible investment, because it's a capital-intensive, cyclical, low-margin commodity industry where no player has been able to gain a lasting advantage. Without unique patented technology or some other kind of competitive moat, making batteries will likewise be a shitty low-margin business.

All very good points!

 

[Ellenor]

This is not surprising, because Tesla is the only company, in my opinion, that is moving in the right direction on sraaneniyu with others. This is the path of technology development and progress, in the future I would not be surprised if everything is from Tesla, their cybertruck is already in the videos of multimillion artists.