[NorCalAthlete]

Even Mike Tyson likes Tesla :

[David70]

Originally Posted by GrussGott

buh buh buh the subsidies!

And your total as-of-2020 winner is ... Boeing.
then 3 other automakers.
then TSLA.

And if you put it on per car bases Tesla would be far out ahead of every other car manufacturer. Sure GM is higher, they sold 6.8 million cars last year to Tesla's 500k, less than 3 times the subsidies? Over 13 times as many cars. Want to talk about number of jobs at each company?

[David70]

Originally Posted by GrussGott

Can't say what is long game is or was, but Tesla is pretty clearly an energy technology company using auto sales to fund its tech build just like Amazon is a logistics tech company that used book sales to build its tech or google that used search revenue to build its ad tech or netflix that used dvd rentals to fund it streaming tech ...

and as long as we're talking business models, two points:

(1.) Zero Marginal Costs
Software companies have high valuations because the marginal cost to add a new customer is trivial, i.e, selling another Microsoft Office copy has almost zero cost, but relatively high revenue, and upgrades to Office are also low costs and get another fee. Tesla is starting to do this with its software ...

(2.) Virtuous Cycle
The greater the market share, the greater the economies of scale, thus the cheaper the prices, thus the more market share, thus more scale, etc etc. Amazon is preeminent example of this. Tesla is building some of the largest battery production technology and infrastructure in the World AND its already got multiple channels to sell its own batteries and software: autos, semis, megapack, powerwall.

(3.) Recurring Revenue
Joe Rogan's podcast, by itself, is not worth $100M ... but combined with other content it can be used to get people over the hurdle to pay a monthly fee, i.e., if you don't like spotify music you might like Rogan plus you also get the music so why not? Amazon does this with prime: you might not order enough packages to make it worthwhile but you also get the movies so ok. Tesla has this with its supercharger network ... most auto companies need to make an expiring product, but Tesla can make forever cars and basically sell supercharger subscriptions where you get the car for free ... not to mention Tesla can also then sell the battery capacity to energy companies!


So consider this for a moment:

* You pay for your battery factories with auto sales
* You sell the batteries with the car, let's say for cost
* You're now getting subscription revenue for superchargers from your battery customers ...
* You're also getting recurring revenue for the battery network from energy companies (in place of them building peaker plants)
* and the more EVs on the road, the more energy companies need peakers

It makes Amazon's virtuous cycle look rinky-dink.

The short term Tesla is banking on cars, medium to long term they have to produce something that is far better than the rest to support their valuation.

I doubt cars by themselves will produce the needed high margins as cars historically don't and there are lots of big companies headed this directlon.

Maybe it's batteries but they are against LG, Panasonic and many other companies, including startups.

Maybe it's driving automation but Tesla. Musk loves to talk about how your car will be an investment once it works, then promises it will work on "X" but it doesn't. Also lots of competition.

Tesla chargers might work but doubt they have provided any profit to date, they are strictly for Tesla's and long term it is very simple (and cheaper) for anyone to put up charger station on their land (compare this to a gas station). I don't see anything special about a Tesla charger and assuming he is leasing every spot, right now places seem to be ok with charging almost nothing.

This idea of storing large scale power for peak demand is still an idea that no one has made money on. Another hope.

I don't agree with the comparison to Amazon and the "rinky dink". What Amazon successfully accomplished was creating a business that no one is close to duplicating. All Tesla has is a bunch of things they are working, dreams on with many doing the same thing.

What I do find interesting is Musk seems to have a fallback plan to save face, if Tesla fails he can then say he still succeeded by getting EV's going but I doubt the investors in his company see it that way.

[GrussGott]

Originally Posted by David70

This idea of storing large scale power for peak demand is still an idea that no one has made money on. Another hope.

It's more than hope: it's been a full scale working peaker in Australia for 4 years, with the next one currently being built in California. Given a megapack is about 10% the cost of a gas peaker (which are already enormously tough to pay for) it's pretty certain that they'll sell ... the problem is going to be making enough batteries.

Originally Posted by David70

I don't agree with the comparison to Amazon and the "rinky dink".

Well we gotta remember that Amazon is 25 years in and Tesla is 10 years in ... not sure how long you've been following Amazon, but at the same period in Amazon's development they got all the same criticisms: no profit, people want the old thing (in-person shopping), infrastructure is too expensive, etc.

The "rinky dink" part is a nod to the potential on a normalized timeline: Amazon has to compete with Walmart, Costco, Target, and zillion other retailers, not to mention has a channel imbalance (clicks vs bricks).

Tesla, on the other hand, has already exceeded Audi's total sales (not just EVs, all sales) putting it in at #4 in its segment, is already making a profit, and is arguably building the infrastructure native to their product to outproduce anyone on the planet. Further, they have little overhead compared to the Bigs (no advertising, no dealer overhead, no legacy costs), and are almost totally vertically integrated compared to others. They also have the strongest brand. And beyond that, Tesla has more markets and more segments than Amazon (B2C, B2B, B2G) including a ~$3T power market.

So, quickly shrinking costs with growing sales, segments, markets, and channels. That's the dream scenario of any growing business, at least according to Warren Buffett.

But, will all of that potential come to pass or any of it?

That said, on a normalized timeline, Tesla's potential far exceeds Amazon's ... but, to your point, Amazon has done it and Tesla hasn't.

[bayarea328xit]

Nissan Press Release

Nissan Technical Presentation - YouTube

For electric drivetrain, there is a continuum for single "charge" range, battery size and charging flexibility (grid vs gas).

BMW explored this with the ReX i3 -- you have a battery that can be charged while driving with the small gas engine.

Nissan is pushing this boundary more with e-Power. Nissan's effort allows you to carry a much smaller battery with a highly efficient gas engine charging the battery on the go. In their presentation, Nissan mentions 1/50-th the battery size for e-Power compared to pure-EV -- that sounds much too small. Maybe, they meant 1/5-th -- there was a translation mistake.

All auto makers are betting on their projection of how the transition to EV will occur over the next 5, 10, 20, 30+ years.

It will be interesting to see it play out -- I bet that a high-efficiency gas engine for powering a battery-driven EV drivetrain will take more than 50% of the US market for at least 10+ years before we get to 50% market share for pure-EVs.

Follow-up: I think decoupling the gas engine from the drivetrain is the main improvement to be had -- once you do this, you can optimize the gas engine for electrical power generation independent of vehicle speed.

[GrussGott]

Originally Posted by bayarea328xit

I bet that a high-efficiency gas engine for powering a battery-driven EV drivetrain will take more than 50% of the US market for at least 10+ years before we get to 50% market share for pure-EVs.

There are a number of factors at play:

(1.) Oil prices and scale economies of gasoline distribution and filling stations

(2.) Battery costs, energy density, and availability

(3.) Charging solutions, costs, and availability

A few interesting stats:

* The avg registered vehicle in the US is 13 years old - you can look at that as a lot of pent-up demand for new cars

* If every new car sold in the US were an EV, it'd take 10 years to replace most cars on the road


I think what people forget is what happens as the economies of scale tip ...

For example, gas stations sell gas as loss leaders for in-store sales; what'll happen if gas sales slow and store trips decrease?

There are easily installable induction charging kits for EVs ... and installing the pads in parking lots is relatively cheap ... I bet Target, Walmart, CostCo and other really really want those quick trip sales gas stations are getting; what if they install chargers and induction pads?

In short, you can see gas station sales dropping like a rock in cities and suburbs; that'll kill gas stations making them more scarce which'll kill the economies of scale around making and selling gas ... gas prices will rise, availability & convenience will fall & at the same time EV costs will fall, convenience will rise. Toss in some new financing models based on total cost of ownership (incl maintenance) and power sales and you can see easily a collapse of ICE.


Net-net: economies of scale won't favor gasoline sales due to price, availability, and convenience. Practical business folk see no future in such a vehicle.

It's ain't politicians, it's just business.

[bayarea328xit]

Originally Posted by GrussGott

I think what people forget is what happens as the economies of scale tip ...

Maybe. The problem is really that there is a lot of KoolAid lying about, many of the people who drank the KoolAid ended up getting rich, now we are trying to extrapolate why to figure out how we get in on the action...

Projections are easy to make; however, they may be wildly off. Because, even if the projections are based on actual market actions, the market actions themselves may be misguided if not rooted in fundamentals. Here, it may not matter that the market actions are broadly in concert.

I really appreciate the effort you take to provide your thoughts. Thank you.

It is a shame that the previous thread was deleted -- it would have been great to revisit it in 10 or even 20 years.

I hope this thread sticks around for that long.

Take care.

[GrussGott]

Originally Posted by bayarea328xit

the market actions themselves may be misguided if not rooted in fundamentals.

Well, to justify stock price there are "fundamentals" for value companies (costs, revenue, sales, balance sheet) ... but for growth companies those fundamentals are different; they're more forces or trends. For example Amazon is famous for deciding the internet is the retail solution and then finding a problem, books: book stores can only stock a thousand titles, but the internet can have every title ... same with CDs. So by starting there, Bezos was able to profit from key growth forces: proliferation of the internet and e-commerce. After that, it was simply about scaling to drive down costs and boot up the virtuous cycle ... but that took 20 years and all along the way he was hammered for never making a profit ... he was judged against value company fundamentals and, of course, those investors missed out.

In the case of TSLA we're seeing 2 of the largest industries in human history (transportation, energy) simultaneously transform and TSLA is right at the nexus and forefront of it ... so the growth-company fundamentals questions are what are those trends/forces and have they or will they change?

Maybe some of those growth forces are something like:

* consumer EV demand
* battery cost & energy density
* charging time & availability / convenience
* ICE legacy costs (union pensions, dealership fees, advertising, sales, factories)

Well, consumer demand is growing and has exceeded all analyst projections over the last decade ... battery costs are dropping faster than projected and new technologies are coming online faster than expected ... charging times are falling and charger networks are massively scaling (Tesla, Electrify America, etc), and ICE legacy costs are growing as sales have dropped - further, compared to Tesla, the bigs have ~$5k of legacy costs per car, conservatively.

I don't think any of these fundamental forces is going to slow or stop, rather accelerate, so then the question is, is Tesla the right company to capitalize on them?

So far, without a doubt, that answer is yes.

So THEN the question is, are there other forces at play that would stop Tesla's current trend of market capture?

So far the answer has been "the bigs are coming!" - and maybe they are, but Tesla is still the EV brand to beat.

So, if we're evaluating TSLA as a growth company at the nexus of a simultaneous transportation & energy industry revolution, the fundamentals are looking pretty good, no?

[bayarea328xit]

Originally Posted by GrussGott

...

You make a very compelling argument.

I'm not convinced. I am happy to be wrong here, but I am not sure that things are going to turn out the way Tesla (and possibly the market) thinks things will turn out.

When I look at Tesla sales, I find it very interesting that they combine the sales reporting of previous generation vehicles every time they release a new model. S and X got combined when the 3 got released. Now 3 and Y get combined when the Y got released.

I think Tesla is attempting a hell of a bootstrap. I just think they are going to run out of runway in a spectacular manner.

[GrussGott]

Originally Posted by bayarea328xit

I just think they are going to run out of runway in a spectacular manner.

So what forces do you think will bring the end of runway?

Demand for existing products falls? Demand for new products doesn't materialize? Inferior technology? Superior competitor products? Loss of competitive advantage?

And then given you believe slowing sales of aging products is not a normal product cycle, you'd say the new Model S will sell in equal or fewer numbers that it currently does? That is, refreshing the Model S product won't help sales?

[bayarea328xit]

Originally Posted by GrussGott

So what forces do you think will bring the end of runway?

I'll have to think a bit more to come up with a more complete response to your question.

Vehicle design = electric motor + power source for electricity

My zeroth order response is that, from an engineering point of view and given where we are now for the battery energy density (W/kg), everyone driving around with a massive battery in their vehicle all the time can't be the optimal solution if the majority of vehicles need a range of 300 mi with 0-60 times in the 6-9 sec range.

This is especially true if we contemplate the possibility of developing a highly optimized gas-based engine for generating electrical power in the vehicle - one that is decoupled from the drive transmission (and only used for generating electrical power, a la Nissan, above).

With the above in mind, it really comes down to the weight of the battery to travel 300 mi vs the weight of this hypothetical highly optimized gas engine. Whichever is lower will be the sweet spot.

There are then secondary considerations to include: (1) recharging time for the battery vs filling up the gas tank at vehicle end-of-range, (2) mechanical service requirements of the gas engine vs service requirements for the battery (if any), (3) drive experience (gas engine noise, acceleration, etc.), (4) required changes to the current infrastructure (grid, electrical power generation, user lifestyle - access to in-home/at-work charging if battery recharge times are long), (5) availability of raw materials (e.g., for batteries), (6) environmental considerations (pollution, CO2 generation), (7) political considerations (access to crude oil, raw materials for electricity generation).

It seems very surprising to me that the answer to the above optimization problem would be overwhelmingly pure-EV, and we are just now realizing this amazing solution when people have been struggling with the above for more than 3 decades.