heltok,

Baidu
Google
Tesla
...

Who cares?

Major car manufacturers will have a big advantage with being able to silo their technology to their vehicles. While Tesla has driver assist deployed, the real advantages will come at the intersection of multiple sensors and deep learning. Considering how many vehicles they have deployed, it shouldn't be too hard to get an insanely rich dataset compared to the competition.

Obviously the major problem is that they've got some technologies that have a chance of capturing a multi-trillion dollar market in the future with a company that basically is run by a borderline charlatan who apparently lies about everything with no remorse. Oh, and there is the financial reality that they'll need billions and billions to pull this off.

BTW that battery changer that was demo'ed... How is that working in production? Last I checked literally no one has been allowed to talk about seeing it. So we have no idea if it even works as promised. (Well the new promises. Not the old ones. Those were obvious bull****.)

recent piece by nyu's damodaran sketching/outlining a TSLA valuation and the associated difficulties:

http://aswathdamodaran.blogspot.com/...ise-meets.html

it doesnt really get into the details about the tech involved or the likelihood of things like mass adoption of TSLA autopilot fleets, but it provides some grounding as to what growth and sales/capital numbers need to happen to justify different valuations. obviously the valuation depends on the likelihood of the tech adoption/etc, but i think at times itt the high level "TSLA has great autopilot" stuff is not always translated into the "i think sales growth of X or marketshare Y at time Z are possible" to link it to a valuation (not that it has to be, but sometimes its good/useful to take that look as well); that being said, one of the points of the article is that this is the type of stock where the price is driven by these high level/fat tail outcomes, and of course what you think of Musk.

decent read and he's a thoughtful writer. his valuation (directly pre SCTY news) was ~150/share.

sort of a general question for those who have taken or have strong positions on the tech (both battery and autopilot) feasibility/adoption/progress/competition: how are you coming to these conclusions? ie industry expertise/knowledge, technical training, information sources etc. i dont mean this to be demanding you show your work or anything, there have just been some very divergent but strong opinions on these issues, and the claims are difficult to evaluate without specific knowledge/expertise imo, so im curious to the extent you all are willing to share.

TSLA confirmed in terminal decline yet?

also, Apple Car Rollout Delayed Two Years, Media Report Says

Tesla was at $263 when I wrote that, and the market was lower that it is now. If you bought then and sold now you made nearly 20%, even with the Model 3 announcement/sales. Since then:

- Model X became a total disaster, with missed deadlines, production problems, and so on. As I said:

- Telsa have missed deliveries and other key metrics by a lot, even despite constantly lowering estimates.

- A lot of executives and key staff have left the company:

The sheer number of departures is due to exactly what I said, and it's devastating to a startup. Recently, more news that competitors are pouring billions into electric cars, which is going to drain their talent.

Tesla are too late. Their own timetable had an affordable mainstream car out already. They've missed the boat for a first mover advantage. Battery chemistry has caught up to what's needed to make electrics mainstream viable, and other are car makers are going to beat them to mass production.

This is a slow cooked goose for sure (Musk is a genius self promoter and stock promoter - the Trump of the tech world), but it's coming unglued bit by bit. They are indeed in terminal decline.

You also said Tesla is "finished as a carmaker" and headed towards "definite bankruptcy". So when do those predictions come due?

In their lastest billion+ equity raise, Tesla turned down addition money offers fwiw. Definite sign bankruptcy around the corner amirite?

They will never compete with the major carmakers successfully, which mean they will burn cash until they are done.

How long? The point at which their market cap becomes small enough that raising enough capital via secondaries to keep up capex is no longer possible. I imagine that will come as the Model 3 gets delayed and the true cost starts to be known. I would have said 3-4 years, but depending on whether the SolarCity deal goes through (which will ramp up their debt and already large cash burn at least 2x), it could be sooner. Tesla have all of their valuable assets covered by loan holders. They have no net assets despite a number of secondaries bringing in cash. They're negative when you consider that much of their plant and machinery is worthless in an asset sale. Once the confidence game falls apart, that's it.

Remember we're in a market at all time highs. Even Enron - a pure fraud - didn't collapse until well after the tech bubble burst. A lot of doomed companies in 2005 didn't collapse until 2008 happened. Where there's constant hype, and a market going up and up to keep all boats afloat, it takes time.

Hypothetically speaking, in your opinion, does Tesla have any outs? What could be a game changer?

I really wracked my brain for that question. I like to argue the other side, but I can't see anything.

There are zero outs in batteries. LG Chem, Chinese factories, Panasonic (who will basically own the gigafactory as well as others around the world and take any profits), own this space, and the tens of billions in capital and research needed to stay at the forefront mean that Tesla is shut out of competing until at least 2022 when they're selling a million cars (in the best scenario bull case). The idea that they'll sell lots of batteries or "powerwalls" is farcical; the "preorders" have quietly faded away after last year's fanfare. Battery/solar/invertor systems are expensive commodity items, which is why practically everyone who sells them, including Musk's SolarCity, is deep in debt or close to bankruptcy without government handouts.

There are zero outs in car production efficiencies. Unlike space travel, which is a tiny (relative to cars) non-commercial pork barrel, cars are an absolutely cutthroat business where world's-best engineers, designers, supply networks operate on large efficiencies of scale using enormous amounts of capital to generate over a trillion a year in finished goods.

The give you an idea of the scale of the car industry, Ford pulls in $140 billion a year in revenue using $220 billion in assets and incredibly complex and long developed global supplier chains, to produce that revenue, out of which it makes $7 billion in profit and has a market cap not even twice Tesla's (and about the same when you include the value of dividends until Tesla starts paying a dividend in the best case at 202X).

So you can see the problem and how little profit there is in the car business. They're too expensive to be toys like phones - incomes don't support that kind of frivolous spending like the do on iPhones. A weeks' wages (or $60/month, subsidized by a carrier) is nothing to pay for bling and cool; a year's wages is very different. If that kind of money existed, people would already be buying BMWs rather than Fords.

So what's left? Let's take a fanciful scenario - Model 3 comes out in 2018 and is a hit - they sell 500,000 that year at $35,000. This brings in $17 billion and even magically a couple of billion in profit (little chance on the profit, but I'm trying to be fanciful). Great. It's 2018 and there lots of electric competitors coming on the scene from the mainstream, in all shapes and size and ranges and combinations, and Tesla have brought in $15 billion of the $170 billion+ they need to produce cars on the scale that Ford does, competing with a global industry capitalized at 100x that figure. Meanwhile, batteries are becoming cheap enough that 200-300 mile ranges - enough for most uses, are common, and a bunch of ultra cheap 50-100 mile battery + small range extender, non-motive engine that gets rid of range and charging anxiety round out the offerings. Meanwhile a worldwide buildout of next gen battery factories is continuing (it's already well underway) which will collectively dwarf the gigafactory.

You can see how they're not going to make meaningful inroads into this world. While you can continue to offer secondaries on a vastly inflated stock and use that shareholder money to lose this much per car once you factor in capex:



people will always buy (similar to how selling quality steaks for $1 will get you a ton of revenue), but there's a limit to how long you can do this, and patience with Musk is already wearing thin.

So what else is there? Getting there first on (true) autonomous driving? I think that has zero chance, but let's say it has some chance.

What are they going to do with this technology? They don't have mass production ability on the level of Ford for 10+ years by their own estimates, let alone the global industry. Even if Tesla wins, others won't be far behind - months, not years, given how much money is in this research and the fact that it'll mostly depend on hardware/software combos which will look a lot like the nVidia Drive PX plugged into a multi (multi) camera array.

Full self driving itself is only going to commoditize cars even further and probably decrease global car production volume - engine no longer matters, handling no long matters, many personal driving touches no longer matter. Cars become pods to get around, and the level of sharing goes through the roof.

I just don't see any possible outs for Tesla. I see a long expensive struggle that they're near certain to fail. They don't have the capital, they don't own the self driving hardware, they don't have the software. They're already valued at Ford's level when you include NPV of dividends.

I mean, if anyone has a plausible bull case where Tesla produce more profit in say 2023 than Ford does today, I'd love to hear it.

Again, you are incorrect on the most rudimentary of basics of how fleet learning and SDC technology works. The fact that Tesla has easy access to the largest and richest dataset is a massive advantage, if they start implementing additional sensors on their cars they will creative a wonderful positive feedback loop that may allow them to entrench similar to Google until the rest of the competition catches up. (This assumes everyone realizes that Google's special sauce isn't their search algo any longer, which is dubious.)

Google has also suffered extreme brain drain over the last few years setting themselves back. (I guess this assumes that the guy who developed Google Brain and heads Baidu's efforts counts as talent. However, that would require knowing what talent is in this field instead of prattling on about camera resolution when the highest end MobilEye devices use 1% of the pixels of industry leading cameras.)

At 15% growth per quarter, Tesla will be producing 4 million cars per year five or take. 1000 profit per vehicle is more than enough to generate 3.5 billion in profits.

That is very very short of Musk's goals but still impressive if Tesla pulls it off. Indeed a more modest 13% quarter to quarter growth is more consistence with their pace so far and that still leaves them with a lot of room to generate 3.5 billion in profits.

It would be sub 5% profit margin.

35k is the starting price. You do know how this works with ALL car companies right? The starting price is different than the average selling price, yes? Musk has said multiple times that the ASP will be in the low 40k range at volume not counting incentives. Not sure if they will front load the fully loaded 50k model 3 orders though, wouldn't surprise me.

And which major car companies are set to release a comparable EV in 2018? BMW 3 series EV seems to be the closest comparable competition and it is aiming at 2020, although that date doesn't seem to be very firm yet, so 2021 is a better bet. That's 3 years behind Tesla.

This is totally inane. This is the 3% of the global dog food market type of analysis. How do they get to sell that many cars? Demand for their niche products doesn't seem to be robust. How big is the market for EV across the US? It is clearly a significantly smaller than the entire market for compact cars. How will people who typically buy cars in this demographic charge them? (Apartment owners.) Do they have range sufficient for the needs of these owners?

There are some very real questions regarding the Model 3 and its potential to reach the sales figures. And that is assuming they ever figure out how to make cars at scale (which they've been struggling with as TS correctly points out).

Norwegian site Autofil compares the new Mercedes E-Class "Drive Pilot" vs the Tesla "Auto Pilot" system. Their real world metric testing came to a similar conclusion as both motortrend and caranddriver testing - "Tesla’s autonomous system is far superior to the Mercedes."

The test revealed a scary situation where the Mercedes system crossed into the lane of oncoming traffic and reset itself there as if it was the proper lane. Although, the benefit of these non tesla systems is that they are ****ty enough that no driver will be convinced that he can watch a movie and or otherwise pay no attention to the road while using them.

TS' argument is far more inane. Ford is losing moneyr too if you include CapEx, and all that to grow at a rate barely beating inflation.

Tesla is growing at much higher rates and high levels of CapEx are natural for any manufacturing firm in early growth stages.

I have consistently been saying Tesla is overvalued but its story is nearly unfalsifiable in the short term so it's not a short candidate.

And I still think it's "plausible" that Tesla will ship 4.5 million cars in 2023. It will take more models dipping into other market segments, and making those models among the most popular cars in the relevant markets. Improbable? For sure. Impossible? No.

Keep in mind battery power density is improving at 5~8% annually. That suggests in 7 years, Tesla's range can reach about 400 miles. By then, especially in more densely populated areas, charging stations will become much more common place. I don't think the technology or infrastructure are here yet... but they are coming faster than a lot of people realize.

I also think you guys underestimate the amount of governmental support there is to build the infrastructure outside of the US.

I still think Tesla is a dog to be generate 3.5 billion in profits in 2023 but I do see a "plausible" path to it.

I'm well aware of the government support in Eurotardia. There is a network of charging stations used by taxis and Teslas, since no sane person needs an EV. (Much less has a place to charge one.)

I think that argument is reasonable and pretty much where I lie. I think they are overvalued and have some paths to success, which will be huge. Musk is pretty much a dishonest charlatan who'll say anything to get money, which is perfect for what they need (lots of money and no honesty).

I think literally every single post he's ever made about SDC has been totally incorrect. Mostly from a fundamental misunderstanding of the tech and the players. I still can't even fathom how he thinks Google didn't suffer a huge amount of talent flight with Ng leaving (who obviously then recruited a bunch of talent). As if Google Brain is some trivial and easily replicated piece of technology. For a good laugh go back and read his comments about feature extraction. I can't even rebut them since they're just illogical and total fantasy.

What I find weird is the massive short float, coupled with an insane amount of institutional support. No idea how that plays out.

People are overestimating how much simpler a FEV is to build than a gasoline powered car. Also, 500k in sales in 2018 is okay, but what about when the worldwide demand for FEVs is >30 million annually. Those days aren't far away (<10 years)

Fixed a key part of your post. This is precisely why I argue Tesla is doomed.

Right now Tesla make sales because they're the only performance electric car with good range, and performance electric cars with good range are fun.

Right now, they have a unique product on several major levels because they -via their shareholders - are absorbing the huge cost of providing that product while batteries are too expensive for this to be worth major car maker's time.

Once batteries can make cheap 300+ mile cars mainstream at a cost similar to ICE (and with good performance, which is trivial once you have enough kWh to spare), Tesla are competing with the entire global car industry, and lose all the advantages that got them this far.

They might have had a first mover advantage if they managed to come anywhere close to their original timetable. Instead, they're years behind, and too slow.

Ironically, the future improvements in battery price that you think will help Tesla is what is going to kill them. Cars aren't iPhones.

Tesla is synonymous with fast EV.

Affordable EVs by Ford and so on will only help Tesla ramp up.

Just skimming through this and hoping someone could respond to some elementary questions and thoughts

Why is there so little discussion about home charging systems? Is it not economical or technically possible in the near future? To me thats the game changer. No more gas stations or charging stations for the daily commuter. Also the cost of setting up solar could be offset by reducing the energy bill for the home and possibly selling back to the grid. Seems to me that this should be the focus. It offers convenience and appeals to the green folks

Why is there so much attention paid to the driverless technology for personal use? I think its nothing more than a novelty and that it's future value is in commercial use. Imo the future in transportation is highly efficient public transit, shared transportation, and better community planning. I dont think theres much profit to be made directly from self driving cars. I dont see large profits directly coming from personal cars with autonomous driving capability. Is the excitement and focus in this technology about its ability to drive car sales or spin-off commercial uses?

You plug them into the wall.

There is going to be a huge time lag between the end of personal cars and shared SDC.

Right but i dont see much focus on bundling this with solar systems. From what i understand you just draw from your own electricity. Does the recent acquisition have anything to do with this? Again imo the green crowd and the novelty of powering your car from the sun will drive sales. Also financing solar equipment packages should generate a ton of sales with people looking at the conomics. It seems like a much more promising direction than self driving cars

I agree with the lag and thats why i dont see how people are so excited about it and the short term benefits. Before this technology becomes commercial, it really only has novelty value. I really dont see self driving cars driving big sales, just some novelty/luxury sales. Imo its a long time before a company like tesla could benefit from the technology and the money will come from spin offs, not personal car sales imo. If tesla could convince me they will have their ducks in a row to roll out large scale commercial products for the self driving technologly in 3-5 years i would be excited. Otherwise i see other technology and competition as a huge threat to this on a 10 year timeline

Well the PowerWall isn't a new concept, it's not close to being the first and for it to be economical you need to have way cheaper battery prices.

The advantage for Tesla is they have:
- The car which has 60 - 90 kwh of energy storage
- The PowerWall which has a multiple of 7 kwh (I think)
- Solar power installation with SolarCity

They have the potential to run the entire energy ecosystem at home (car as primary storage, PowerWall as secondary storage and solar generation to power it all). But this is really in the future and needs adaption. And even if people want to live that way, there are a lot of parts in the world that couldn't work that way because the sun isn't shining often enough there.

Any CPA's on here to confirm this authors take that GAAP and non-GAAP spread for Tesla is on the verge of closing in Q3 due to Tesla's elimination of RVG backing for vehicle finance loans? (Also see's a possibility for GAAP profitability in Q3)

It's essentially true but almost irrelevant. The only people really making a huge deal out of the RVGs at this point are the shorters who are invested in the idea Tesla is pure fraud. I'm saying this as someone that said Tesla was deceptive in doing its accounting this way. But at this point it's irrelevant.

Tesla basically faked it until they made it. At this point nobody really thinks the RVGs are a problem since the cars are reselling for significantly higher than RVG values.

This reminds me of Amazon writing off advertising (yes, advertising) as one time charges to generate an operating income to keep up the hype.

Amazon too faked it until it made it.