this post was submitted on 30 Dec 2023
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Got a huge laugh from me lol. Well said.
The 30 vs 10 was specifically for EVs. They haven't figured it out yet on their electric vehicles.
A lot of people say what you have about the castings having problems on repairs, but what actually happens is if the accident is big enough to reach the casting, the car is totaled anyway castings or not. They have replaceable crush bars for smaller accidents. It's not as big a problem as people think. Everyone is going to switch to castings to stay competitive, and some already have.
You might think that, but legacy has been talking about it for decades now, and hasn't. One of Tesla's leads in the video I linked shows a circuit board which handles many things, and on it, they talk about stepping down to 24v for the audio amplifiers which are on the same board, which they also want to make 48v in the next iteration. The thing is, those are custom in house designed circuit boards. Legacy outsources most of that stuff, they aren't as vertically integrated on the power electronics and can't just do that easily.
That's why it's a chicken and egg problem for them with their suppliers.
Edit: oops, and ya, we'll see if VW can do 40 mil, but the 10x part doesn't need to include that, even VW then would be worth way more. We're looking at what things are worth today and projecting out.
Edit: just to clarify the above edit, if Tesla does make 20 mil vehicles with high margins, even if VW makes 40 mil with high or low margins, Tesla would still be worth a lot, and VW would be worth more as well with the variability being are they high or low margin. The valuation will come from the revenue and profits and future growth outlook.
I think the reason legacy hasn't switched to 48V, is that the benefits are moderate, and for a period of 10 years, every manufacturer will need to stock generic spare parts as both 12 and 48V. Again I don't think it's a game changer, although 48V is admittedly slightly better.
When I say Tesla won't be as big as top 10 combined, it's in volume not just value. Tesla needs to become as big as top 10 in volume, AND maintain the current margins to justify the current market cap (Totlal value of the stock). Tesla is currently worth $ 789 B while VW is only 65 B, Tesla is valued at 80 times their profits, VW is valued at a way more reasonable 4 times their profits.
To justify the value of Tesla, it must increase profits by 20 times in about 5 years. Doubling profits every year for 5 years will "only" be 32x, so even doubling is not enough, and their own forecast is "only" 0,5x. Which although impressive, is "only" 7.6x over 5 years. Basically Tesla would need to eat all the growth of EV, and become a near monopoly. As I see it, it will be more likely the opposite that will happen. The competition will catch up and surpass Tesla, and gain market share against Tesla in the EV market. While the ICE market will dwindle.
All in all, I think Tesla will grow for a while yet, they may even become #1 although I doubt it. But they won't grow by nearly as much as is required for the current stock value to be reasonable.
It doesn't matter how many other cars VW sells in the future though which is what I'm trying to say about the 40mil comment.
If tesla makes a trillion dollars in profit in 2035, it doesn't matter if VW makes 2 trillion. Both companies will be worth vastly more, and both companies prices would sky rocket well before in anticipation of that happening.
And ya, these high numbers today were due to the high margins and growth. It makes less sense if you look at the next couple of years while we wait for Gen 3, as margins are down for everyone due to interest rates and we're between growth phases waiting on gen 3. But once we see Gen 3 that will paint a better picture on if Tesla can or can't meet future profit expectations.
Everything hinges on Gen 3 right now. Just like the old price everyone balked at when it was 1000:1 hinged on a successful Model 3.
Edit: and I just want to reiterate. Prices came down in the USA because of interest rates, not competition. Your monthly payment today is the same as when margins were super high. The money is just going to the banks now. They probably won't ever be as high again, but they will go back up.
True, but I don't believe there is room for such growth in the market. AI is not a thing that will take us all by storm in a few years, it will mature, and it will start to be used in niche segments, and then later we may see a sudden breakthrough when it gets good enough. But we need level 4 AI for that, and Tesla and most developers are still just at level 2, not that much better than 5 years ago. AFAIK only Mercedes is at level 3. But even from there it's probably at least a 10 year journey to level 4.
What is Gen 3?
OK I remember you mentioned that earlier, you may be right, for sure it must have been to increase sales, and AFAIK it did that very successfully. I'm pretty sure it gave a few headaches for the competition, that will now have to work even harder.
Just a thought. ;)
But you'd be amazed what the fight for survival can do for making a company more competitive. Tesla was basically build on that in the beginning. It was never certain Tesla would survive, but they came through extremely competitive. In part because everybody worked their butts off for the project.
Now Tesla is reasonably secure as a major player in the industry, but others are feeling the heat, and are dialing up their efforts too.
That's very fair to think it won't materialize as Tesla thinks. There really are some long shots going on here and a huge amount of faith on investors.
Gen 3 is just the new vehicle platform to make the next 5-10 million vehicles (if we assume they can even do that). It hinges on the 4680 battery developments, and their ability to get costs down even further. It's what the small vehicle (~4 million/y estimated vehicles as per Elon), the van, probably a non cyber truck and whatever else they got up their sleeve will be built off of. As much as you think the company value hinges on FSD, it hinges on this as well. And maybe they are interconnected. No 20 mil without FSD, and no 20 mil without Gen 3 being a success.
I think we've exhausted everything to discuss here lol. I've really enjoyed this conversation with you and you've given me some additional things to think about. So many conversations about Tesla just devolve into chaos and this was a really nice breath of fresh air. Thank you =)
Likewise, interesting to debate this rationally, I can see there is potential, and I think Tesla will do well for the foreseeable future. But I would never buy Tesla stock at the current price.