[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.

[GrussGott]

Originally Posted by bayarea328xit

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.

It seems very surprising to me that the answer to the above optimization problem would be overwhelmingly pure-EV

Great points ... I'd offer the formula is: infrastructure -> costs -> vehicle design

That is, gas is cheap because infrastructure to support its looonnnggg fragile supply lines is high use: oil/coal/ng mining/refining, shipping/trucking, storage, distribution, outlets, etc. Those are some damn expensive supply lines - cut consumption by 30%+ permanently and what happens?

And power outages / supply shortages are becoming more common in more states ... nobody's happy about that, so there's going to a big desire for energy generation & distribution security (that doesn't start forest fires).


Combining our points, the notion of "a car" will transform over the next 15 years due to:

* Energy security desire (growing)
* EV costs (dropping),
* Lyft/Uber/MyDriver personal mobility crowdsourcing (growing)
* Autonomous vehicles, delivery infrastructure (growing)
* Work-from-home (growing)

Mobility problems will breakdown into short vs long trips & and frequency. (As an investor, I'd put it as: invest in the home, disinvest in HQ - meaning anything delivery or home related booms, anything commuting or headquarters related busts.)

For mobility/"cars" solutions break out into a few buckets:

(1.) No car
Lyft, Uber, autonomous public vehicles?

(2.) Short hop city car
Limited-range EV for around town frequent trips primarily charged at home or via induction at the grocery store. low range, small batteries, slow charge, and relatively cheap (even <$10k would be possible)

(3.) Long range / work vehicles / sports cars
The family truckster, pickup truck, or track monster with a large battery, high-speed DC charging, relatively expensive. We already see this starting with Taycan 800V vs Tesla

Right now, EVs as a product necessarily have to do it all to prove viability, but once enough consumers get used to owning/operating one you'll get much larger product portfolios and they'll sell a LOT of EVs (another topic: subscription revenue)


As infrastructure and bureaucracy shift to electric, (and energy generation shifts to distributed vs centralized?) gasoline will become more inconvenient and expensive in cities and suburbs - it'll still be available (esp rural), but more of a speciality item like horse feed, stables, and saddle makers. I still see horses all the time in Rancho San Antonio, you just don't see them on I280 except on a trailer.

And, from a human behavior perspective, people won't want to worry about charging AND a special trip for gasoline ... which, as I said, will KILL the convenience store business model likely to be replaced by Nuro-like autonomous neighborhood delivery vehicles. If you live near Mountain View you've seen them all over.


Net-net: today's EV product portfolio is not tomorrow's; once people get used to charging they'll want speciality vehicles optimize for their use-cases.

[bayarea328xit]

Originally Posted by GrussGott

...

You provided an excellent overview of the future direction of EV technology evolution.

Now, if we turn to Tesla, I am even less convinced that Tesla will have a role in the *EV VEHICLE* solution of the future.

I see the EV market evolving into the following branches:

1. Local only - pure-EVs with < 100 mi range
- local delivery - no passengers
- local commute service - passengers + AV
**vehicles in this group will not be owned by individuals; they will be owned/operated by companies that run the respective businesses
**for peak efficiency, I am assuming that the best solution here will be to have a small enough battery to meet the range requirements for 90+% of the rides; with charging stations for quick top-off between rides; specifically, these vehicles won't need > 100 mi range
**with the small battery requirements, not sure if Tesla will find success here

2. Vehicles with more than local reach - say 300+ mi
- this is the place that Tesla can contribute; however,
-- how many people are going to want to *own* AVs? Why not just use the service? Otherwise, you have your very expensive vehicle sitting in your garage, or (worse still) being used by someone else with you subsidizing it for priority access.
- for long haul commercial, e.g., semi, to me, this makes even less sense for pure-EVs -- my brain can't even comprehend the zeroth order math for this to be viable.

Work from home is going to push down vehicle ownership --> skew to (AV) ride sharing + delivery vehicles (#1, above).

With the above in mind, I'd hate to invest in Tesla for their vehicle solution.

So, for Tesla, what's left: batteries (in EVs, local, non-commercial storage), solar (local installed energy source), large scale energy distribution (batteries for commercial storage/distribution), AV technology provider, ...

Each one of these are still really big businesses -- will Tesla strike it big in any of those? Not sure ... need to think more.

[GrussGott]

Originally Posted by bayarea328xit

So, for Tesla, what's left: batteries (in EVs, local, non-commercial storage), solar (local installed energy source), large scale energy distribution (batteries for commercial storage/distribution), AV technology provider, ...

Each one of these are still really big businesses -- will Tesla strike it big in any of those? Not sure ... need to think more.

Totally with you - I think that's the big question, though I obviously tip towards "yes" and here are examples why:

Herbert Diess, tomorrow, announces a new VW+Tesla collaboration: VW will make a ID.2, and ship it to Tesla for batteries and software.

or

Tim Cook, tomorrow, announces a new Apple+Tesla partnership: Tesla will contract build Apple-branded autonomous vehicles.

or

Harald Krüger, tomorrow, announces a new BMW+Tesla partnership: BMW will produce a new M6 powered by Tesla


In short, Tesla has built such a powerful brand that *ANY* company would be thrilled to negotiate a partnership or JV and Tesla's market and financial power would guarantee it an AT LEAST equal deal, not just for autos, but for literally any product powered by a battery. And, beyond that, Tesla has the capital to buy its way into anything if they really really need to.

Currently we're in the but-can-Tesla-take-it-all? phase ... Amazon did, Apple did, Google did, Netflix did, etc and every one of them came out of left field directly into crowded fields with legacy competitors and arguably Tesla's hurdles far exceeded any other industry disruptor to date ...

But, to your point, doesn't mean they'll continue and anything can happen!

[GrussGott]

Originally Posted by bayarea328xit

I see the EV market evolving into the following branches:

1. Local only - pure-EVs with < 100 mi range

2. Vehicles with more than local reach - say 300+ mi

Separate thoughts on this ...

(1.) I'm an autonomous vehicle bear; I don't think it'll grow beyond driver-assist for at least a decade, probably two. Further, I still think people will want their own vehicle in their garage - they won't want to rely on a service. (though some will and they'll become popular)

(2.) Same as above, I don't see level 5 AVs happening too soon ...

Further I think new subscription models will develop between power generators and consumers: power companies will subsidize auto costs similar to cell network providers subsidizing cell phones.

The real change will be energy deregulation, i.e., moving from centralized to distributed energy generation. We'll start seeing more cities, neighborhoods, and individuals generating their own power similar to the migration from mainframe to PCs. This will be cheaper, more reliable, more secure, and more flexible. EVs will become an extension of each person's energy grid - some will be net-consumers, some net-generators, many hybrid.

EV batteries via V2x technology will substitute for peaker plants and outages will be manageable at the home, neighborhood, or city level. For example, in the recent Texas outage, the "everybody plug in" message can be sent to provide backup power (in addition to megapack plants) while primaries come back online.


In any event, as I say, Tesla is at the nexus of the transformation of not one, but, simultaneously two, of the largest industries in human history: energy and transportation.

Given their brand equity, they'll have to work hard to fuck it up.

[bayarea328xit]

Originally Posted by GrussGott

Separate thoughts on this ...

(1.) I'm an autonomous vehicle bear

Do you feel this way for full AV local driving? With some incarnation of Google/Waymo firefly, I think it would be quite safe to drive around locally at < 25 mph. Or, even < 35 mph.

That would address a large segment of the population - maybe more so as work from home takes hold.

Making this possible even at 25 mph will change the lives of many people - kid pick-up/drop-off, senior citizens getting a lot more flexibility, freedom, etc.

[GrussGott]

Originally Posted by bayarea328xit

Do you feel this way for full AV local driving?

Yup - I could end up being very wrong ... and I definitely think Nuro-like autonomous delivery will be coming shortly and be VERY popular and prolific. I also think some public transport options will be available like airport transfers, inner city bus-type mobility, etc ... but for personal vehicles (and work/industrial) I just don't see it anytime soon.

By way of analogy, the core technology of "AI" has been around since the late 70s: backprop; yet it wasn't until very recently the hardware existed to deeply explore where the tech can go and to actually productize it.

Autonomous driving is the same: the technology is done, but productizing it may be years off simply due to costs and demand.

Further, while people will easily use driver-assist, and while it may soon get to level 4ish DA, I don't think there'll be any demand for level 5 for some time - this is due to regulatory issues, technofear, etc. Your mail person may have a level 4, FedEx, Amazon, Instacart ... and Apple may get into the game with some type of cool delivery integration with iPhones or even a highly assisted EV (basically Apple wants your attention anywhere you need to spend time in front of an operating system) or maybe an Apple level 4 Uber that still has a driver or even you're the driver ... lots of product I could see for level 4 stuff ...

...but I just don't think the stars will align to get level 5 and I don't see people trusting an AV with their kids ... or even them too much. Maybe the SF trolley cars.

[GrussGott]

Hey, seems like were just talking about what might happen if gasoline supply starts to become less convenient ...

Petaluma, California, has voted to outlaw new gas stations

Then again it's Petaluma soooo ...

[F32Fleet]

Does anyone think Tesla can be profitable without selling carbon emissions credits? As I understand it they lost about 600M last year once you remove these credits.

[GrussGott]

Originally Posted by F32Fleet

Does anyone think Tesla can be profitable without selling carbon emissions credits? As I understand it they lost about 600M last year once you remove these credits.

yeah so that's one of those BS "buh buh buh" narratives - here's why:

Ever notice how lots of companies ALWAYS beat estimates by 1¢? That's not coincidence: the CFO engineers the books to make it happen. In this case, Tesla has the luxury of earning profits by using various sources of income so they do. It wouldn't be hard for TSLA to find $600M elsewhere, but they don't have to so they don't ... so that's irrelevant but actually they shouldn't be able to find it!

The actual question investors should be asking is WHY IS IT POSSIBLE FOR TSLA TO EARN A PROFIT??

That is, you have company in GLOBAL hyper-growth mode who's making a brand new product, disrupting legacy competitors, and inventing new technologies to do it; TSLA should be spending enough to stay underwater for the next decade building factories, building scale, inventing ... they should be reinvesting in R&D, yet their R&D budget is miniscule compared to the challenges they're facing and they're turning profits? That's a bit scary.

TSLA is the growth company: Profits are only supposed to happen after wide-scale adoption, huge economies of scale, and unassailable moats have been built. TSLA has not achieved any of that and their finances may indicate they're not too concerned about it just happening ... that is, they're not spending for war, they're spending like they've already won so why not kick back and earn a few bucks? Seems like the wrong attitude, right?

There's a small case to be made that they're earning a see-we-can-do-it PR victory to boost stock price, but they've already done it so why not pivot into huge infrastructure and R&D spend?

Do they know something about their sales they're not disclosing?

Amongst other reasons, that's why I'm not an investor (other than via index funds).

[FizzyElf]

I hope BMW and the VW group put Tesla out of business.

[GrussGott]

Volvo goes all-in for 2030 (and GM tries to sidle up)

Maybe more important: online sales.

The Care by Volvo concept will now be expanded to include outright sales, with a package for maintenance, roadside assistance as well as insurance. By 2025, about half of all purchases are expected to be made online, said Lex Kerssemakers, Volvo’s head of commercial operations. That’s up from as much as 15% currently in the markets where Volvo offers its subscription service.

They're going full copy of Tesla ... but given Volvo is now Chinese maybe that makes sense ...