Estimate Manch estimate differs from your
Long story. Manch didn’t graduate from UCLA and he reads widely I think the worry about TSLA is their cash flow management and ability to scale. TSLA fluctuates mainly due to above reasons. Without above headwinds, TSLA would be trading at higher price.
I am of the opinion that we are probably at a high for total number of cars purchased (for the developed world). The rise of ride hailing, increased urbanization, and millenial attitudes towards transportation is only going to drive down car ownership in the coming years. Everyone is in trouble.
The challenge for Tesla is they have a disruptive technology (EVs) in a probably shrinking but massive market (Vehicles). How well can they take share profitably to build a viable business.
Exactly. To increase their manufacturing capacity to 2-3x current capacity would require $15-30B. They need to either dilute shareholders or issue more bonds.
Think this way,
Ride sharing is a threat of all car manufacturers, that includes TSLA. When such transformation affects, others will also get impacted.
TSLA, being EVs, manufacturing cost is so less as the number of components of EVs is way less than ICE cars. The Profit margin on EV cars are higher than ICE cars.
If such is the case, holding TSLA is safer than holding other ICE car members.
Remember, EVs are efficient than ICE cars, lessor cost of mfr and cost effective for customers. These economics drives up the EV cars than ICE cars. TSLA being leader in technology, holding it safer than all other car mfrs.
Following this logic, not holding is safer than TSLA right? Unless is logical to believe that TSLA would capture more car sale because of ride sharing going autonomous EV? And they can lower the cost of manufacturing after many years of doing so.
If the entire world is out of cars,like dooms day, not holding TSLA is fine.
If you feel that there will be some cars, even for ride sharing, then TSLA will be there than any other ICE cars. In short, as of current scenario, TSLA is the last one to survive.
This will continue, until someone comes with better technology/options to supersede TSLA.
Among all the car mfrs, best bet is on TSLA.
Knowing these, 62% institution holders, and 20% Elon is holding leaving just 18% to public in which people like WQJ holing since $41 strongly.
So I want to pick on this a bit. Because I had the same impression - an electric car should be easier to maintain, more reliable, etc. Unfortunately I think we are many years away from that based on my personal experience with the recent issues on the Model 3. I will take my most recent problem which was a drive unit failure.
I got into my car and I got a bunch of random error messages that the car couldn’t power up. I googled online (since the Tesla website was useless) on what could be wrong and how I can troubleshoot. No help rather then some vague posts on the tesla user forum that the 12 volt battery failure can cause this.
So I called Tesla (45 minute hold wait), and finally got to work 2 levels of tech support and neither knew what the error messages were about or how to help me. I then got asked to wait for a tow (another 30 minute wait), got car towed to Tesla service center (I was lucky that I was near one when the car failed) which took 30 minutes. Then I was stuck at the dealership for 45 minutes - 1 hour as they were so backed up that the tow truck couldn’t even drop the car for 20-30 minutes.
Once there, the service underwriter didn’t know what caused the problem. The diagnosis didn’t come in till 4-5 days later where they said the drive unit failed and has to be replaced. They had to replace an entire drive unit.
I have been driving since 1994, and have never had an engine fail on an ICE engine. 6 months and I got a problem with drive unit that could not be repaired by replacing a component, but required the whole drive unit to be dropped and replaced. And because they did that, they also had to replace a bunch of interconnects (like the Pyro fuse which prevents the battery from catching fire).
And since the drive unit was dropped and replaced, they had to redo alignment of all the wheels.
Logically it sounds like electrification should simplify a car, but when something fails, the complexity has now pulled troubleshooting and repair out of our hands into a highly skilled labor pool and more often then not, point fixes are not possible and entire components need to be replaced.
My takeaway is that repairs will become increasingly hard and expensive with electrification because of the complexity.
Exactly. Some might think TSLA is risky, and that’s totally reasonable. But every other automotive stock is riskier giving EV and autonomous trajectory.
So either invest in TSLA or avoid automotive segment entirely.
P.S. Actually you could argue a safer bet is one of the Chinese auto / battery stocks.
Repair costs should be lower over time, but perhaps not at first.
Their next ramp is in China, where China is seemingly financing loans for them, so no dilution.
After that, Tesla “claims” profits will fund. We’ll see. But some dilution is not a big deal if it maintains their massive lead in EVs.
It is unfortunate you have bad (Worst what you described) experience with TSLA Model 3. I do not have any exp with Tesla cars so far, neither my friends.
However, you can not conclude EV cars are worst as this will be Tesla mfr issue and Tesla quality issue.
We see lot of Model 3 and model S on road. I used 2 Leaf with 45k miles each for 3 years and I am using first bolt with 20k mileage and another one with 4k mileage, all with no issues so far. Both leafs just paid $350 for 3 years maintenance (6 months once regular servicing) upfront. Bolt, they did not even ask any maintenance fee and regular servicing happens every 6 months free of charge.
We can argue whether that 2M annual in 5 years is credible or not, but the 18B future cash flow needs to be discounted to its present value. Usually people use WACC which takes into account a firm’s borrowing rate and stock volatility. In Tesla’s case that discounting factor would be sky high. Anyway, you can pick a smaller number but still you need to discount it.
There’s a car company that’s doing that amount of business today: BMW. Since that’s today’s number there’s no need to discount. Its gross margin is around 20% and produces about 2M cars. I don’t know the ASP of BMW but given it’s a luxury brand it can’t be too low. Its market cap is 51B. Tesla’s market cap is 50B. They are virtually identical.
What kinds of future forecast will justify a 100B cap for Tesla? How credible are those forecasts? Any margin of safety if you buy in today expecting those forecasts to come about?
I get that. Just showing that the valuations are based on future potential, and those can vary wildly.
BMW is a good example. They are currently very profitable, however their future profitability is not clear.
This report is just from a few weeks ago: https://www.cnbc.com/2018/09/25/bmw-warns-of-lower-profits-on-emissions-regulation-and-trade-tariffs.html
They don’t have a clear EV plan, nor autonomous plan. And their vehicles are directly in the crosshairs of Tesla. And hit on for German emissions scandals.
All not good reasons to think they are going to grow profits in the future.
Wifey has a Leaf lease. It has had it’s share of issues but far less over the 3 years we had on lease then the Tesla. She just re-upped on a new Leaf lease. It shows the difference in maturity between Tesla and Nissan.
Tesla -> better battery, better ux, they get the tech user and build a good experience for the geek in you
Nissan -> better quality, knows what the mainstream wants
Wife dislikes the UX experience of the Tesla that I like. Because she hates driving and just wants to go from point A to point B. So does not want to learn something new. The changes that Tesla introduces actually repels her.
I like the Tesla UX. yes, it took a bit of getting used to but I can see why they did most of it (some I think are dumb as well). So the target market is not as homogenous as people would like it to be.
You can jump start a mechanical car by pushing it but can’t for current auto gear car.
Electrification or digitalization or electronisation
My experience is electronic home appliances fail more often but can’t buy old stuffs anymore. For example, my 20 years old fridge is still working fine but a new modern fridge can’t last 10 years… usually something would go wrong with the ice-maker or related parts.
Did you try those IoT fridge that connects to the internet? If internet’s out you can’t open your fridge.
OMG, we need to drive each way 30 miles to commute to office, but leaf does not last long esp 3rd year as their miles/charge was appx 70.
We switched to Bolt, like it very much as I often drive up to SFO airport and come back easily without recharge.
Try Bolt next time. They recently increased price( reduced company discount) in 2018
Yah I saw the battery degrade badly on the 2015 leaf. the 2018 leaf doubles the range to 150 miles. That said, wifey’s commute is 10 miles.