Elon Musk once scoffed at the notion that BYD could compete with his company. Now, the automaker run by billionaire Wang Chuanfu is poised to be the new No. 1 in electric vehicles.
Until this year, most of the analysts weren’t really including FSD in any of their projections. They were projecting Tesla maintaining the really high margins instead of high margins. Some are adding AI in now.
When the really high margins became high margins, things changed pretty rapidly.
Of course retail investors amd what actually happens is different, and it’s hard to deny there must be some impact beyond what analysts are saying, but I don’t think it’s as much FSD as people think it is.
Edit: analysts weren’t even including the energy business either, but thats about to change too.
Without value as an AI company too, there is no sensible way Tesla can be valued as high as it is. Tesla should basically surpass the 10 leading car makers combined, if it should make sense by merely making cars as we know it today.
Tesla was bringing in insane margins and profits, I don’t think people necessarily appreciate how much it was.
In 2022, Tesla earned more profit (12.6b) than Ford AND GM (10.6 combined) on substantially less vehicles. Most of the legacy manufactures were also looking to suffer for an extended period of time, bringing in the question of their long term profitability, while Tesla showed growth and profits. Tesla was also on track to beat Toyota in 2023 or 2024. (Edit: It might have been VW not Toyota)
People were looking at their growth trajectory and what the company guidance was and seeing those margins were, and while the PE would be high 4-5 years down the road looking at it like this, it wasn’t going to be entirely crazy either.
When a company is growing so fast, people give it a higher multiple, until it’s not.
Then the margins dropped, Elon did his batshit insane stuff with Twitter, and some combination of that leaves us where we are today.
Right now, they really need to make their Gen 3 25k vehicle as that’s much more priced in than FSD IMO. Tesla has been guiding 50% CAGR for
years now, and if Gen 3 comes out and it doesn’t start that trend again with their standard good margins, they’re going to get brutalized. If they keeping delaying it much longer, I think they’re going to get really hurt as well.
The current price is really just a waiting period to see what happens with Gen 3 and the energy business.
I expect to see downgrades in 2024 because Tesla won’t meet the 50% CAGR target that people take to mean 50% each year.
By 2025 I think the big talking point will be their booming energy business as people start to realize it might actually be bigger than the car business for real.
Edit: it’s also worth pointing out, margins came down because interest rates went up. A car payment at these lower prices is around the same as it was when prices were higher, it’s just that money is going to the banks as interest instead of the car manufacturers. That, and Elon fucking the brand over with his twitter nonsense.
I admit what Tesla has done is very impressive, and they actually ARE as big as the rest of top 10 combined on pure electric cars here (Denmark). But the competition has arrived, and it is very unlikely that Tesla can maintain such a huge market share, and the margins will probably never come close again to what they were, again because there is more competition now.
In the energy market, Tesla presented solar roof tiles which went away again, and they had the power wall which I’m not sure is very popular anymore. Here nobody uses that, when we bought our solar solution with battery, Tesla didn’t even appear in internet searches as an option. Tesla has done some energy things for the past 15 years, including selling a battery park for mass storage in Australia, but it seems none of the projects are very successful, and Tesla is far from a market leader in any aspect of energy AFAIK.
I’m guessing by almost worthless, he means it would be valued as other car makers, and that would decrease the value to a fraction of what it is today. Unfortunately for Musk, Tesla AI is in fact basically worthless without the false promises. Because Tesla is at best #4, and in high tech generally, being #4 means your margins have to be very low.
Just double replying here in case you did read my other reply and just didn’t reply. I made a big oopsie with the energy profit by mixing up lines with service and other. The profit was 381 million, not almost a billion. My bad.
The energy business, primarily commercial, has actually been doing really well. It was stalled during covid in favor of vehicles, but it’s ramping now. They have done much more than just Australia, and they’ve actually been very successful. You just don’t hear about it the same as it’s less flashy than cars or AI. They also sell AI driven software to help optimize power grids power arbitrage, which is successful recurring recenue software tack on as well.
Their new facility that’s ramping right now will put out 40gwh a year which is more batteries than some legacy auto manufacturers are using, and they are building a second in China that’s going to start producing in 2024. That’s over a million cars worth of batteries being sold at commercial margins. As the business ramps its going to be as or more profitable than cars excluding a future where FSD is successful. (edit: just for reference, they deployed about 66,000 60kwh cars worth of batteries in Q3)
They’re also getting into the power business in Texas and I’d expect to see that to expand, and their virtual power plant product is also growing and will be a big thing in the future. I’m actually excited about VPP from any and all providers as it’s really going to add security to the power grid while helping out the home owners. A Vermont power company wants to get a home battery in 100% of their customers homes over the next few years.
So keep an eye on all this if it interests you at all, it’s going to be big, and as I said, people are going to start accounting for it. They made almost a billion profit on that on Q3 (edit: I’m an idiot and can’t line items up. It was 381 million profit at about 40% scaled. I mixed up a line with service and other. The point still stands though, you can’t ignore almost 400 million in profit with the rapid growth its showing)
As for the AI, analysts really weren’t accounting for it and they weren’t accounting for energy either. You can say they are all crazy for having given tesla those valuations without it if you want, but im just telling you what was really happening. A few like Cathie Woods were, but most weren’t.
And like my edit about car payments. I wouldn’t ever expect the same margins on the 3/y again, but do expect margins and prices to go up as interest rates come down. People buy cars based off the car payment, and those are the same today as when margins were higher and Tesla still sold around 1.8 million vehicles this year at those same payments. If payments become cheaper because interest rates come down, prices will go up somewhat at all manufacturers as there will be more demand for cheaper payments. Those other manufacturers are suffering more than Tesla due to the interest rates and they desperately need them to go down to help with their profitability. The longer this drags on, the worse they’re going to be as ICE restriction start coming into play in various countries.
Also, the competition is coming and teslas market share going down is old and tiring to hear. Tesla isn’t competing against other EV makers, their competing against ICE sales. Their total market share is increasing. The story is always going to be their EV market share is decreasing because if you are at 100% and someone sells 1 car, you’re decreasing. If their total market share is decreasing in a region, then that might be a real problem.
The real competition (edit: within the EV space) is going to be the Chinese EV makers. That I feel is legit. But Ford, GM, Stellantis, Toyota etc, it’s the same story and they’re still struggling and even cutting back plans. They talk a big talk, but the jury is still out on that one.
I don’t think Tesla AI is worthless without FSD either, but clearly dramatically less without. They do use AI for power as I mentioned, and they’ve diversified their FSD computer into the bot, which is a long shot, but it puts their eggs in 2 baskets instead of 1 which could prevent a complete disaster if FSD fails. The bot is easier to solve than FSD so it’s not out of the question.___
Thank you, that’s a very interesting and thorough response. 👍
From what you write, it all sounds very impressive, question is then why Musk would call Tesla basically worthless without AI?
Also, the competition is coming and teslas market share going down is old and tiring to hear.
Well I wrote the competition has already arrived, and yes Tesla may increase market share total, because the total EV market is increasing market share. What I meant is that they can’t sustain their current market share and margins in the EV market. So they will not become as big as the rest of top 10 combined. Tesla may be able to hold their market share for the total market, maybe even increase it a bit. But I strongly suspect even that will go down when the competition is nearer completing the transition period, and compete at full strength. Tesla had a 10 year head start, but in 10 years that won’t matter as much.
The real competition is going to be the Chinese EV makers.
The competition from China is already real, and Chinese cars dominate China with BYD having 7 out of 10 top selling cars in China and Tesla only 2, and China is now the biggest market in the world. China is expanding quickly to other markets. We have many Chinese brands in Europe now, that all arrived very recently. But European and American makers like for instance VW and Ford, are also improving rapidly. Then of course there is Hyundai/KIA which is the world 3rd largest maker, that makes some very good EV offerings here.
One of the reasons I think Tesla may lose in the long run, is that they are a very long time about making new models. Maybe it’s just Musk who promises results unrealistically soon. But the delays are sometimes up to 5 years delivering what he claims they can do now!
Thanks! I appreciate the reasoned discussion here as well
why Musk would call Tesla basically worthless without AI?
He says a lot of things and that’s definitely a hyperbolic statement. He seems to think the company is going to be worth 10+ trillion dollars with FSD and Bots solved, so maybe under a trillion plus the hit they’d suffer from failure is basically worthless?
So they will not become as big as the rest of top 10 combined
If Tesla actually comes out and makes 20 million vehicles sometimes in the 2030’s and can get reasonably high profits, I don’t think it’s as far fetched as one might think especially after you take the energy side into account. They don’t have to do the 10 on cars alone, as energy grows. And remember, Tesla is legitimately making high profits on these cars, even at these lower prices. Other auto manufactures haven’t figured this out even on ICE cars (not trucks) where margins are comparatively low, so there’s no reason to believe Tesla can’t keep higher margins than them with volume. If Tesla lowers their prices to be more competitive, others will have to follow, and because they can keep lowering their car prices due to better margins, they can drive the others to 0 or below (except for lower volume luxury makers like Porsche with crazy high margins anyway). As long as Tesla continues to lead on the engineering side with things like their 48v architecture, they’ll maintain higher margins.
In reality though the only way they can ever reach their 20 mil goal though is going to be some huge manufacturing breakthrough or FSD. So maybe that’s what he actually means as well? No FSD, they can’t make their 20m lofty sale dreams which is somewhat priced in, the company loses its value? Maybe even the infrastructure they build towards that goal starts being idled because they overshoot and start losing more money than expected?
We really need to see the Gen 3 platform to get an idea of the future though. I personally wasn’t too worried about CT delays as it was never going to be a super high volume vehicle and probably never going to be sold outside NA, but when it comes to Gen 3 Tesla is talking the big talk right now on it, but it’s all just speculation until we see it, and how their optimizations are going to impact margins. All we know from Elon is it’s in advanced stages of development, whatever that means. I think they learned their lesson with the CT/Semi though which they revealed at the very early stage.
The competition from China is already real
Sorry you’re right, China is legit there in China and area. The Chinese competition is a legit threat to all auto manufactures. They do still need to get their manufacturing plants set up in other countries though, so in that sense, it’s still coming. Them producing out of the EU and Mexico is going to be a rude wake up call for a lot of people.
Semi unrelated, but I also have really high hopes for Hyundai/Kia. They seem to be taking it more seriously than others, people really like their EVs, but then they do this, which is baffling https://www.cbc.ca/news/canada/kia-canada-car-sales-1.7063216 and they also seem to have a problem with their dealers saying a battery replacement is going to cost $60,000 CAD which is ridiculous. They got some operational things they need to sort out, but I don’t think it has to do with their actual cars.
If Tesla actually comes out and makes 20 million vehicles sometimes in the 2030’s and can get reasonably high profits, I don’t think it’s as far fetched
Problem for Tesla becoming that big, is not just that others are making decent electric cars now. The problem is that Tesla is no longer the technology leader, which they were by far for about 10 years. But today we have Blade batteries from BYD that are both safer and cheaper than Tesla, The 50% VW owned Yiwei, just released a new car with sodium-ion batteries, which are cheaper more durable and works better at low temperatures, and can charge faster than existing batteries. The engines VW already uses in their ID series are way better engineered than Tesla, resulting in both more compact and lower weight than a Tesla with equivalent power. All in all Tesla is losing their technological leadership in key areas like Batteries, charging and engines. The rest is basically a traditional car, except the computer AI which Tesla is also behind on.
It’s naive to think other EV makers can’t build cars as cheap as Tesla, Tesla had a very strong head start, and traditional car makers have had a very serious disruptions in their development and some supply chains, which they are only just now beginning to manage about as well as the old ways.
But something is happening in the industry, that I’m not quite aware of what is. But 10 years ago, we could buy a new car here for 75K DKK, adjusted for inflation that would be about 87K today. But the cheapest car available today is 139K, so it’s 50% more expensive to buy the cheapest car today, than what was possible 10 years ago??? To be fair it’s one model series higher.
Obviously for a time, it was the chip shortage, that meant the cheapest cars were the first to get axed dur to the shortage. But the shortage is over, so why haven’t the cheap cars come back? This is something that has happened across all makers of the cheapest available cars! More expensive cars have gone up too, but not as much.
My point of mentioning this, is that you shouldn’t discard the competition from traditional car makers, they are all in this to make money. The money is moving more towards EV, so car makers too are moving more towards EV. They are far from in full force yet, as they ICE production is still the majority of their revenue and profits. But maybe the reason the cheap cars haven’t come back, is that they want to make us used to pay more, and make EV more attractive?
I claim that currently, traditional car makers could make and sell ICE cars that are at least a third cheaper than what is currently available, and still make a profit on them. But for some reason they choose not to. So don’t be too sure they can’t make EV cheaper and more competitive too, but they do what makes them the most money. And when VW sell an ID7 it’s very likely at the cost of a VW ICE car.
So just like you say Tesla competes with ICE mostly, so do traditional car makers, except they are also competing against their own products. How the bean counters value this I don’t know, but I bet they try to prevent to much disruption, because disruption cost money, and they try to prevent competing to much against themselves.
In a few years the tilt will be more clearly towards EV, and that will change the economic models for traditional car makers, and that’s when traditional carmakers will be all in to compete in EV markets.
Most have already arrived, and they’ve come to stay, but they are not in full force yet. Except the Chinese that have car makers that like Tesla started with electric and only make electric.
I think you’re really discounting the engineering lead that Tesla still has, especially against legacy manufacturers, and it’s that lead and vertical integration, which is why their profits are higher than others, and others won’t be able to match. I don’t think it’s naive to think VW or Stellantis can’t make an EV as cheap as Tesla. All of legacy auto has been high volume lower profit cars. Even after price cuts, Tesla still makes more on their cars (excluding trucks which are high profit). That’s not a bad strategy and you can make a good business on it, but Tesla has really changed how cars are manufactured and they figured out how to make a high volume high profit vehicle. You can’t compete with that without following, and following means you’re always behind.
A few years ago VW said it took Tesla 10h to make a car, and it takes them 30h. They haven’t matched Tesla on that yet. They would need to implement giga castings among other things to do that for example. In 2022 they said they were working on giga castings for their trinity factory which would start production in 2026, and now that’s delayed until 2030. Most of legacy is repeatedly delaying things like this. Ford is cutting back F150 Lighting production in half. GM is delaying things. They need to get economies of scale going to be profitable, but they’re pulling back because it isn’t profitable. They must commit to scale to make it work, but they aren’t.
There’s a lot of innovations like the castings inside the cars that people just don’t see that lead to Tesla’s high margins. Tesla’s power electronics are leagues ahead of the legacy automakers as well, almost all designed in house on the CT even, and they just leapfrogged everyone by moving to 48v. Then they do things like steer by wire with no backup in the Cybertruck which no one has done in production (they all have backups). Put aside what you think of the Cybertruck itself, and it’s really an engineering marvel underneath. Underneath it’s the future of where Tesla is going, and others will again, need to follow, but it’s going to take years and years. I imagine the Chinese will follow the quickest cementing their lead over legacy. I’ll be surprised if any other legacy manufacture makes a high volume 48v car by 2030. Someone like Porsche might in the meantime?
And Tesla is doing all of this and more again in Gen 3. Maybe VW finally gets their 30h car down to 15h, but Tesla gets their Gen 3 to 5.
Obviously we won’t know until we see what happens with Gen 3, but the Cybertruck is a glimpse into that which I think shows enough to not dismiss this possibility.
If you’re actually interested in how things are engineered, I’d recommend you watch these two Cybertruck videos for a glimpse of what’s going on. They include a lot of the leads at Tesla and are super informative and get into a lot of detail on things. They aren’t short though so if you’re not interested in that kinda thing that’s understandable.
The engines VW already uses in their ID series are way better engineered than Tesla
That’s cool about VW’s new motor for the I7, I hadn’t seen that, hopefully we get to see a tear down in the near future. It also only comes (for the time being) in a car more expensive than a Model 3, but they say it will work on other models, so I’m curious to see what happens with that. Tesla isn’t resting on their laurels there either, they have their carbon wrapped motors for performance vehicles which I’m hoping to see trickle down to the performance 3, and they’re working on cheaper to mass produce motors for the Gen 3 platform using no rare earth metals.
Batteries
Those sodium ion batteries are cool, but don’t expect to see those outside lower range commuter cars anytime soon due to their low energy density. There’s definitely a market for cheaper cars like that which don’t make sense with higher cost batteries. A lot of people won’t want one as their only car though. As a second car they’re probably perfect though. Sodium Ion batteries are probably going to shake up the storage business, and we might even see Tesla adopt them there?
BYD literally makes their own cells and batteries for their own cars and is a supplier to Tesla, so they were always going to lead in that. That’s why they’ll probably pass Tesla for pure BEV sold in 2024. Those blade batteries are definitely cool.
If Tesla can pull off their 4680 batteries though as described at battery day, they’ll be joining BYD on that stage. Legacy isn’t doing what Tesla is on this front, and that’s again another reason why they won’t be able to match Tesla on margins. If they can’t realize their 4680 goals, that probably ruins their 10-20 million car goals as well though. (Edit: Also Tesla is going as far as making their own lithium refinery. That’s how committed they are to this and how they will keep their margins high)
high prices
I’m not sure what’s going on over there that’s a little fishy, maybe they think they can get more money out of you guys and charge less elsewhere? A 2013 Corolla cost $15,450.00 CAD vs $22,690 for a 2023. Inflation adjusted would be $19,946, so about 13.5% more?
Tesla stock goes up because it goes up. Thats about it.
The company had high margins and a commanding lead for a desirable auto segment, but at this point its losing ground. The stock goes up because it increased 7x during covid because of lies and hype, so its a Bitcoin/GameStop style meme engine now. It dips and people buy buy buy. It has very little to do with company fundamentals.
They print profits out of thin air by earning carbon credits through ZEV program and selling them to other manufacturers. It was 30% of their profits this year and enables competitors to stave off actually making any EVs, leaving Tesla as the only game in town in the US
Until this year, most of the analysts weren’t really including FSD in any of their projections. They were projecting Tesla maintaining the really high margins instead of high margins. Some are adding AI in now.
When the really high margins became high margins, things changed pretty rapidly.
Of course retail investors amd what actually happens is different, and it’s hard to deny there must be some impact beyond what analysts are saying, but I don’t think it’s as much FSD as people think it is.
Edit: analysts weren’t even including the energy business either, but thats about to change too.
Without value as an AI company too, there is no sensible way Tesla can be valued as high as it is. Tesla should basically surpass the 10 leading car makers combined, if it should make sense by merely making cars as we know it today.
Tesla was bringing in insane margins and profits, I don’t think people necessarily appreciate how much it was.
In 2022, Tesla earned more profit (12.6b) than Ford AND GM (10.6 combined) on substantially less vehicles. Most of the legacy manufactures were also looking to suffer for an extended period of time, bringing in the question of their long term profitability, while Tesla showed growth and profits. Tesla was also on track to beat Toyota in 2023 or 2024. (Edit: It might have been VW not Toyota)
People were looking at their growth trajectory and what the company guidance was and seeing those margins were, and while the PE would be high 4-5 years down the road looking at it like this, it wasn’t going to be entirely crazy either.
When a company is growing so fast, people give it a higher multiple, until it’s not.
Then the margins dropped, Elon did his batshit insane stuff with Twitter, and some combination of that leaves us where we are today.
Right now, they really need to make their Gen 3 25k vehicle as that’s much more priced in than FSD IMO. Tesla has been guiding 50% CAGR for years now, and if Gen 3 comes out and it doesn’t start that trend again with their standard good margins, they’re going to get brutalized. If they keeping delaying it much longer, I think they’re going to get really hurt as well.
The current price is really just a waiting period to see what happens with Gen 3 and the energy business.
I expect to see downgrades in 2024 because Tesla won’t meet the 50% CAGR target that people take to mean 50% each year.
By 2025 I think the big talking point will be their booming energy business as people start to realize it might actually be bigger than the car business for real.
Edit: it’s also worth pointing out, margins came down because interest rates went up. A car payment at these lower prices is around the same as it was when prices were higher, it’s just that money is going to the banks as interest instead of the car manufacturers. That, and Elon fucking the brand over with his twitter nonsense.
I admit what Tesla has done is very impressive, and they actually ARE as big as the rest of top 10 combined on pure electric cars here (Denmark). But the competition has arrived, and it is very unlikely that Tesla can maintain such a huge market share, and the margins will probably never come close again to what they were, again because there is more competition now.
In the energy market, Tesla presented solar roof tiles which went away again, and they had the power wall which I’m not sure is very popular anymore. Here nobody uses that, when we bought our solar solution with battery, Tesla didn’t even appear in internet searches as an option. Tesla has done some energy things for the past 15 years, including selling a battery park for mass storage in Australia, but it seems none of the projects are very successful, and Tesla is far from a market leader in any aspect of energy AFAIK.
Elon Musk himself has stated that without AI, Tesla would be almost worthless.
https://www.independent.co.uk/tech/elon-musk-tesla-self-driving-b2102597.html
I’m guessing by almost worthless, he means it would be valued as other car makers, and that would decrease the value to a fraction of what it is today. Unfortunately for Musk, Tesla AI is in fact basically worthless without the false promises. Because Tesla is at best #4, and in high tech generally, being #4 means your margins have to be very low.
Just double replying here in case you did read my other reply and just didn’t reply. I made a big oopsie with the energy profit by mixing up lines with service and other. The profit was 381 million, not almost a billion. My bad.
👍
The energy business, primarily commercial, has actually been doing really well. It was stalled during covid in favor of vehicles, but it’s ramping now. They have done much more than just Australia, and they’ve actually been very successful. You just don’t hear about it the same as it’s less flashy than cars or AI. They also sell AI driven software to help optimize power grids power arbitrage, which is successful recurring recenue software tack on as well.
Their new facility that’s ramping right now will put out 40gwh a year which is more batteries than some legacy auto manufacturers are using, and they are building a second in China that’s going to start producing in 2024. That’s over a million cars worth of batteries being sold at commercial margins. As the business ramps its going to be as or more profitable than cars excluding a future where FSD is successful. (edit: just for reference, they deployed about 66,000 60kwh cars worth of batteries in Q3)
They’re also getting into the power business in Texas and I’d expect to see that to expand, and their virtual power plant product is also growing and will be a big thing in the future. I’m actually excited about VPP from any and all providers as it’s really going to add security to the power grid while helping out the home owners. A Vermont power company wants to get a home battery in 100% of their customers homes over the next few years.
So keep an eye on all this if it interests you at all, it’s going to be big, and as I said, people are going to start accounting for it.
They made almost a billion profit on that on Q3(edit: I’m an idiot and can’t line items up. It was 381 million profit at about 40% scaled. I mixed up a line with service and other. The point still stands though, you can’t ignore almost 400 million in profit with the rapid growth its showing)As for the AI, analysts really weren’t accounting for it and they weren’t accounting for energy either. You can say they are all crazy for having given tesla those valuations without it if you want, but im just telling you what was really happening. A few like Cathie Woods were, but most weren’t.
And like my edit about car payments. I wouldn’t ever expect the same margins on the 3/y again, but do expect margins and prices to go up as interest rates come down. People buy cars based off the car payment, and those are the same today as when margins were higher and Tesla still sold around 1.8 million vehicles this year at those same payments. If payments become cheaper because interest rates come down, prices will go up somewhat at all manufacturers as there will be more demand for cheaper payments. Those other manufacturers are suffering more than Tesla due to the interest rates and they desperately need them to go down to help with their profitability. The longer this drags on, the worse they’re going to be as ICE restriction start coming into play in various countries.
Also, the competition is coming and teslas market share going down is old and tiring to hear. Tesla isn’t competing against other EV makers, their competing against ICE sales. Their total market share is increasing. The story is always going to be their EV market share is decreasing because if you are at 100% and someone sells 1 car, you’re decreasing. If their total market share is decreasing in a region, then that might be a real problem.
The real competition (edit: within the EV space) is going to be the Chinese EV makers. That I feel is legit. But Ford, GM, Stellantis, Toyota etc, it’s the same story and they’re still struggling and even cutting back plans. They talk a big talk, but the jury is still out on that one.
I don’t think Tesla AI is worthless without FSD either, but clearly dramatically less without. They do use AI for power as I mentioned, and they’ve diversified their FSD computer into the bot, which is a long shot, but it puts their eggs in 2 baskets instead of 1 which could prevent a complete disaster if FSD fails. The bot is easier to solve than FSD so it’s not out of the question.___
Thank you, that’s a very interesting and thorough response. 👍 From what you write, it all sounds very impressive, question is then why Musk would call Tesla basically worthless without AI?
Well I wrote the competition has already arrived, and yes Tesla may increase market share total, because the total EV market is increasing market share. What I meant is that they can’t sustain their current market share and margins in the EV market. So they will not become as big as the rest of top 10 combined. Tesla may be able to hold their market share for the total market, maybe even increase it a bit. But I strongly suspect even that will go down when the competition is nearer completing the transition period, and compete at full strength. Tesla had a 10 year head start, but in 10 years that won’t matter as much.
The competition from China is already real, and Chinese cars dominate China with BYD having 7 out of 10 top selling cars in China and Tesla only 2, and China is now the biggest market in the world. China is expanding quickly to other markets. We have many Chinese brands in Europe now, that all arrived very recently. But European and American makers like for instance VW and Ford, are also improving rapidly. Then of course there is Hyundai/KIA which is the world 3rd largest maker, that makes some very good EV offerings here.
One of the reasons I think Tesla may lose in the long run, is that they are a very long time about making new models. Maybe it’s just Musk who promises results unrealistically soon. But the delays are sometimes up to 5 years delivering what he claims they can do now!
Thanks! I appreciate the reasoned discussion here as well
He says a lot of things and that’s definitely a hyperbolic statement. He seems to think the company is going to be worth 10+ trillion dollars with FSD and Bots solved, so maybe under a trillion plus the hit they’d suffer from failure is basically worthless?
If Tesla actually comes out and makes 20 million vehicles sometimes in the 2030’s and can get reasonably high profits, I don’t think it’s as far fetched as one might think especially after you take the energy side into account. They don’t have to do the 10 on cars alone, as energy grows. And remember, Tesla is legitimately making high profits on these cars, even at these lower prices. Other auto manufactures haven’t figured this out even on ICE cars (not trucks) where margins are comparatively low, so there’s no reason to believe Tesla can’t keep higher margins than them with volume. If Tesla lowers their prices to be more competitive, others will have to follow, and because they can keep lowering their car prices due to better margins, they can drive the others to 0 or below (except for lower volume luxury makers like Porsche with crazy high margins anyway). As long as Tesla continues to lead on the engineering side with things like their 48v architecture, they’ll maintain higher margins.
In reality though the only way they can ever reach their 20 mil goal though is going to be some huge manufacturing breakthrough or FSD. So maybe that’s what he actually means as well? No FSD, they can’t make their 20m lofty sale dreams which is somewhat priced in, the company loses its value? Maybe even the infrastructure they build towards that goal starts being idled because they overshoot and start losing more money than expected?
We really need to see the Gen 3 platform to get an idea of the future though. I personally wasn’t too worried about CT delays as it was never going to be a super high volume vehicle and probably never going to be sold outside NA, but when it comes to Gen 3 Tesla is talking the big talk right now on it, but it’s all just speculation until we see it, and how their optimizations are going to impact margins. All we know from Elon is it’s in advanced stages of development, whatever that means. I think they learned their lesson with the CT/Semi though which they revealed at the very early stage.
Sorry you’re right, China is legit there in China and area. The Chinese competition is a legit threat to all auto manufactures. They do still need to get their manufacturing plants set up in other countries though, so in that sense, it’s still coming. Them producing out of the EU and Mexico is going to be a rude wake up call for a lot of people.
Semi unrelated, but I also have really high hopes for Hyundai/Kia. They seem to be taking it more seriously than others, people really like their EVs, but then they do this, which is baffling https://www.cbc.ca/news/canada/kia-canada-car-sales-1.7063216 and they also seem to have a problem with their dealers saying a battery replacement is going to cost $60,000 CAD which is ridiculous. They got some operational things they need to sort out, but I don’t think it has to do with their actual cars.
Problem for Tesla becoming that big, is not just that others are making decent electric cars now. The problem is that Tesla is no longer the technology leader, which they were by far for about 10 years. But today we have Blade batteries from BYD that are both safer and cheaper than Tesla, The 50% VW owned Yiwei, just released a new car with sodium-ion batteries, which are cheaper more durable and works better at low temperatures, and can charge faster than existing batteries. The engines VW already uses in their ID series are way better engineered than Tesla, resulting in both more compact and lower weight than a Tesla with equivalent power. All in all Tesla is losing their technological leadership in key areas like Batteries, charging and engines. The rest is basically a traditional car, except the computer AI which Tesla is also behind on.
It’s naive to think other EV makers can’t build cars as cheap as Tesla, Tesla had a very strong head start, and traditional car makers have had a very serious disruptions in their development and some supply chains, which they are only just now beginning to manage about as well as the old ways.
But something is happening in the industry, that I’m not quite aware of what is. But 10 years ago, we could buy a new car here for 75K DKK, adjusted for inflation that would be about 87K today. But the cheapest car available today is 139K, so it’s 50% more expensive to buy the cheapest car today, than what was possible 10 years ago??? To be fair it’s one model series higher.
Obviously for a time, it was the chip shortage, that meant the cheapest cars were the first to get axed dur to the shortage. But the shortage is over, so why haven’t the cheap cars come back? This is something that has happened across all makers of the cheapest available cars! More expensive cars have gone up too, but not as much.
My point of mentioning this, is that you shouldn’t discard the competition from traditional car makers, they are all in this to make money. The money is moving more towards EV, so car makers too are moving more towards EV. They are far from in full force yet, as they ICE production is still the majority of their revenue and profits. But maybe the reason the cheap cars haven’t come back, is that they want to make us used to pay more, and make EV more attractive?
I claim that currently, traditional car makers could make and sell ICE cars that are at least a third cheaper than what is currently available, and still make a profit on them. But for some reason they choose not to. So don’t be too sure they can’t make EV cheaper and more competitive too, but they do what makes them the most money. And when VW sell an ID7 it’s very likely at the cost of a VW ICE car.
So just like you say Tesla competes with ICE mostly, so do traditional car makers, except they are also competing against their own products. How the bean counters value this I don’t know, but I bet they try to prevent to much disruption, because disruption cost money, and they try to prevent competing to much against themselves.
In a few years the tilt will be more clearly towards EV, and that will change the economic models for traditional car makers, and that’s when traditional carmakers will be all in to compete in EV markets.
Most have already arrived, and they’ve come to stay, but they are not in full force yet. Except the Chinese that have car makers that like Tesla started with electric and only make electric.
I think you’re really discounting the engineering lead that Tesla still has, especially against legacy manufacturers, and it’s that lead and vertical integration, which is why their profits are higher than others, and others won’t be able to match. I don’t think it’s naive to think VW or Stellantis can’t make an EV as cheap as Tesla. All of legacy auto has been high volume lower profit cars. Even after price cuts, Tesla still makes more on their cars (excluding trucks which are high profit). That’s not a bad strategy and you can make a good business on it, but Tesla has really changed how cars are manufactured and they figured out how to make a high volume high profit vehicle. You can’t compete with that without following, and following means you’re always behind.
A few years ago VW said it took Tesla 10h to make a car, and it takes them 30h. They haven’t matched Tesla on that yet. They would need to implement giga castings among other things to do that for example. In 2022 they said they were working on giga castings for their trinity factory which would start production in 2026, and now that’s delayed until 2030. Most of legacy is repeatedly delaying things like this. Ford is cutting back F150 Lighting production in half. GM is delaying things. They need to get economies of scale going to be profitable, but they’re pulling back because it isn’t profitable. They must commit to scale to make it work, but they aren’t.
There’s a lot of innovations like the castings inside the cars that people just don’t see that lead to Tesla’s high margins. Tesla’s power electronics are leagues ahead of the legacy automakers as well, almost all designed in house on the CT even, and they just leapfrogged everyone by moving to 48v. Then they do things like steer by wire with no backup in the Cybertruck which no one has done in production (they all have backups). Put aside what you think of the Cybertruck itself, and it’s really an engineering marvel underneath. Underneath it’s the future of where Tesla is going, and others will again, need to follow, but it’s going to take years and years. I imagine the Chinese will follow the quickest cementing their lead over legacy. I’ll be surprised if any other legacy manufacture makes a high volume 48v car by 2030. Someone like Porsche might in the meantime?
And Tesla is doing all of this and more again in Gen 3. Maybe VW finally gets their 30h car down to 15h, but Tesla gets their Gen 3 to 5.
Obviously we won’t know until we see what happens with Gen 3, but the Cybertruck is a glimpse into that which I think shows enough to not dismiss this possibility.
If you’re actually interested in how things are engineered, I’d recommend you watch these two Cybertruck videos for a glimpse of what’s going on. They include a lot of the leads at Tesla and are super informative and get into a lot of detail on things. They aren’t short though so if you’re not interested in that kinda thing that’s understandable.
https://www.youtube.com/watch?v=J5zDNaY1fvI (Q/A and then a look at exterior and internal parts) https://www.youtube.com/watch?v=GFgGnhRZarY (walk through factory and how they work with the stainless steel)
That’s cool about VW’s new motor for the I7, I hadn’t seen that, hopefully we get to see a tear down in the near future. It also only comes (for the time being) in a car more expensive than a Model 3, but they say it will work on other models, so I’m curious to see what happens with that. Tesla isn’t resting on their laurels there either, they have their carbon wrapped motors for performance vehicles which I’m hoping to see trickle down to the performance 3, and they’re working on cheaper to mass produce motors for the Gen 3 platform using no rare earth metals.
Those sodium ion batteries are cool, but don’t expect to see those outside lower range commuter cars anytime soon due to their low energy density. There’s definitely a market for cheaper cars like that which don’t make sense with higher cost batteries. A lot of people won’t want one as their only car though. As a second car they’re probably perfect though. Sodium Ion batteries are probably going to shake up the storage business, and we might even see Tesla adopt them there?
BYD literally makes their own cells and batteries for their own cars and is a supplier to Tesla, so they were always going to lead in that. That’s why they’ll probably pass Tesla for pure BEV sold in 2024. Those blade batteries are definitely cool.
If Tesla can pull off their 4680 batteries though as described at battery day, they’ll be joining BYD on that stage. Legacy isn’t doing what Tesla is on this front, and that’s again another reason why they won’t be able to match Tesla on margins. If they can’t realize their 4680 goals, that probably ruins their 10-20 million car goals as well though. (Edit: Also Tesla is going as far as making their own lithium refinery. That’s how committed they are to this and how they will keep their margins high)
I’m not sure what’s going on over there that’s a little fishy, maybe they think they can get more money out of you guys and charge less elsewhere? A 2013 Corolla cost $15,450.00 CAD vs $22,690 for a 2023. Inflation adjusted would be $19,946, so about 13.5% more?
Tesla stock goes up because it goes up. Thats about it.
The company had high margins and a commanding lead for a desirable auto segment, but at this point its losing ground. The stock goes up because it increased 7x during covid because of lies and hype, so its a Bitcoin/GameStop style meme engine now. It dips and people buy buy buy. It has very little to do with company fundamentals.
They print profits out of thin air by earning carbon credits through ZEV program and selling them to other manufacturers. It was 30% of their profits this year and enables competitors to stave off actually making any EVs, leaving Tesla as the only game in town in the US