Tesla

That's an interesting story.

There are people who make investment decision solely based on numbers alone. The strategy of owning many companies, with sensible numbers, at cheap prices has worked for some people. But it does not work if there is no diversification. Because qualitative factors are not taken into consideration, the investor does not have a fuller picture of the company. For instance, he may unknowingly be buying a saddle maker in a world where the number of horses are shrinking.

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It is often said that there are many ways to make money in financial markets.

This is true. Because if investors only want to buy companies with nice numbers and at cheap prices, then Tesla will not be trading at where it currently is.

A 'punter/speculator' would have made money on Tesla -- or other in-fashion tech companies -- just by anticipating what kind of stocks the market will find exciting. Its the same thing that scalpers and HFT traders do; being ahead of the buying crowd and re-selling at a higher price.

Alas, what would one have to do to know what the next 'hot' stock will be?

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Car manufacturing is very competitive with many brands and players. Whatever kind of car Tesla is producing, its better-equipped competitors will likely offer something similar, if not better. Nissan has its all-electric Leaf for years.

Car manufacturing isn't like software technology where the most efficient, most user-friendly, bug-free, etc can dominate the market. It costs next to nothing to duplicate a software, but millions and billions to produce cars. The heavy capital expenditure to develop and manufacture cars is part of the reason why automakers tend to get into serious trouble during recessions.

While Tesla is likely to be treated seriously by its competitors, my guess is that it will at best share a fraction of the market with the incumbents.

Agree with the difference between investors and punters. I personally just find it hard to have any respect for punters though. They profit not from investing in value accretive businesses, but by selling at a higher price to a greater fool. Not to mention their destabilising influence on markets. Speculators on high are what create bubbles, which are then popped by skeptical old fashioned investors.

(30-01-2020, 08:45 PM)karlmarx Wrote: That's an interesting story.

There are people who make investment decision solely based on numbers alone. The strategy of owning many companies, with sensible numbers, at cheap prices has worked for some people. But it does not work if there is no diversification. Because qualitative factors are not taken into consideration, the investor does not have a fuller picture of the company. For instance, he may unknowingly be buying a saddle maker in a world where the number of horses are shrinking.

===

It is often said that there are many ways to make money in financial markets.

This is true. Because if investors only want to buy companies with nice numbers and at cheap prices, then Tesla will not be trading at where it currently is.

A 'punter/speculator' would have made money on Tesla -- or other in-fashion tech companies -- just by anticipating what kind of stocks the market will find exciting. Its the same thing that scalpers and HFT traders do; being ahead of the buying crowd and re-selling at a higher price.

Alas, what would one have to do to know what the next 'hot' stock will be?

===

Car manufacturing is very competitive with many brands and players. Whatever kind of car Tesla is producing, its better-equipped competitors will likely offer something similar, if not better. Nissan has its all-electric Leaf for years.

Car manufacturing isn't like software technology where the most efficient, most user-friendly, bug-free, etc can dominate the market. It costs next to nothing to duplicate a software, but millions and billions to produce cars. The heavy capital expenditure to develop and manufacture cars is part of the reason why automakers tend to get into serious trouble during recessions.

While Tesla is likely to be treated seriously by its competitors, my guess is that it will at best share a fraction of the market with the incumbents.

(30-01-2020, 10:31 PM)Corgitator Wrote: Agree with the difference between investors and punters. I personally just find it hard to have any respect for punters though. They profit not from investing in value accretive businesses, but by selling at a higher price to a greater fool. Not to mention their destabilising influence on markets. Speculators on high are what create bubbles, which are then popped by skeptical old fashioned investors.

That depends on what one wants to achieve through the markets. Does one wants to be a purist either technicals, quant, or value? Or one adapts to the changing environment. My nick already betrays my inclination  Like Ed Seykota says in Market Wizards: "Everybody gets what they want out of the market". It is actually true that not all wants to make money.

Agree that Tesla at best will be dominant in a niche local market like GM cars or maybe niche segment like Aston Martin. China will be big in electric cars cause they have no baggage so it's going to be very tough to beat that.

Tesla shanghai factory shutdown liao. Big impact?

(30-01-2020, 08:45 PM)karlmarx Wrote: That's an interesting story.

There are people who make investment decision solely based on numbers alone. The strategy of owning many companies, with sensible numbers, at cheap prices has worked for some people. But it does not work if there is no diversification. Because qualitative factors are not taken into consideration, the investor does not have a fuller picture of the company. For instance, he may unknowingly be buying a saddle maker in a world where the number of horses are shrinking.

===

It is often said that there are many ways to make money in financial markets.

This is true. Because if investors only want to buy companies with nice numbers and at cheap prices, then Tesla will not be trading at where it currently is.

A 'punter/speculator' would have made money on Tesla -- or other in-fashion tech companies -- just by anticipating what kind of stocks the market will find exciting. Its the same thing that scalpers and HFT traders do; being ahead of the buying crowd and re-selling at a higher price.

Alas, what would one have to do to know what the next 'hot' stock will be?

===

Car manufacturing is very competitive with many brands and players. Whatever kind of car Tesla is producing, its better-equipped competitors will likely offer something similar, if not better. Nissan has its all-electric Leaf for years.

Car manufacturing isn't like software technology where the most efficient, most user-friendly, bug-free, etc can dominate the market. It costs next to nothing to duplicate a software, but millions and billions to produce cars. The heavy capital expenditure to develop and manufacture cars is part of the reason why automakers tend to get into serious trouble during recessions.

While Tesla is likely to be treated seriously by its competitors, my guess is that it will at best share a fraction of the market with the incumbents.

Listen to what this value investor said about Tesla.

https://podcasts.apple.com/sg/podcast/th...0458981986

Thanks for the link. I didn't listen to the podcast, but I found essays on his thoughts about Tesla. He has written quite a lot on it, here's just one of it:

https://contrarianedge.com/why-we-dont-o...not-bears/

He also has a 30 odd page report on Tesla, for those interested.

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1) If I understand his argument, he is saying that Tesla will be a big winner if it can churn out 2-3 million cars each year. He thinks Tesla can do this because there driving a Tesla is like using an iPhone 3, while driving conventional non-electric cars is like using a 2G Nokia (think 3380). And people will surely not go back to using a 3380 once they've tried an iPhone.

I disagree with such a comparison. While I've never driven a Tesla before, I cannot imagine how it can provide the sort of value-add that is equivalent changing your 3380 to an iPhone. Both a Tesla and a conventional is still an A to B form of transportation. My impression is that Tesla is really a souped up golf buggy.

But if Tesla is more than an electric car, that it actually succeeds in producing an accident-free self-driving car, then yes, that is like an upgrade from 3380 to iPhone. And that may dominate the market.

Unfortunately, I haven't the faintest idea or the ability to judge if Tesla has a high probability of achieving such goals.

Currently, Tesla is producing about a hundred thousand cars a year. Its share price seems to be far ahead of the present reality, for now at least.

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2) The author also thinks that the incumbents will not succeed in moving towards production of all-electric cars, mainly because they are constrained by their own legacy. Again, he invokes Nokia; it's inability to develop from scratch a new smartphone O/S is what doomed it.

The iPhone 3 smart phone -- which is good touchscreen, good internet browsing, and allows third party development of apps -- was a product which the market was not expecting.

The closest earlier iterations of a 'smart phone' is probably the Palm, but its user experience was too clunky to be widely-accepted.

Before Nokia was wiped by the iPhone, it first faced intense competition from Blackberry. BB -- which is notable for its secured messaging service, long-battery life, and enjoyable tactile experience -- was even further from Palm as a 'smart phone.'

Nobody saw the iPhone coming at all (partly also because the network carriers have always been resistant to the introduction of phones with heavy data usage). And so competitors didn't have enough time to react. And when they panic, they fumbled, as most people do.

BB tried developing a browser-enabled phone with its signature keyboard. But navigation is through a trackpad, not touchscreen. The browsing experience was comparatively poor, and third party development of apps wasn't available until it was too late. They didn't want to cannibalise their lucrative messaging service fees. Yes, constrained by their own legacy.

As much as Nokia and BB may be constrained by their own legacy, it should be noted that the iPhone's unexpected arrival on the market also contributed a large part of its eventual market dominance.

Tesla, on the other hand, has been tooting its electric car for a decade now. And while the incumbent car manufacturers might have dawdled for the first 5 years, they surely haven't been for the next 5.

If Tesla had the ability to deliver a hundred thousand electric cars in 2010, when no one cared about electric cars, then yes, it might have a large market share today. The incumbents had 10 years to catch-up. Blackberry and Nokia was clueless until the iPhone was launched.

(30-01-2020, 08:45 PM)karlmarx Wrote: There are people who make investment decision solely based on numbers alone. The strategy of owning many companies, with sensible numbers, at cheap prices has worked for some people. But it does not work if there is no diversification. Because qualitative factors are not taken into consideration, the investor does not have a fuller picture of the company. For instance, he may unknowingly be buying a saddle maker in a world where the number of horses are shrinking.

Doesn't qualitative factors and numbers are interlinked? It must be one of the most unintelligent investing when someone invest base on number without any qualitative factors. I hardly read any superinvestor who does that. 

Tesla market cap is just above 100B. 
Rest of the automobile markers market cap should be between 500B to 1000B. 
assume Tesla beat the whole industry to nothing in 10 years and gain a 1000B market cap, the return is about 26%pa. 
assume Tesla beat the whole industry to nothing in 20 years and gain a 1000B market cap, the return is about 13%pa.
The whole market is just this big and electric car and self driving is disrupting with many new competitors. I don't know how Tesla can get 1000B market cap without killing everyone plus superior profitability. 

It is actually quite simple. The blind test basically said so.

Quote: While I've never driven a Tesla before, I cannot imagine how it can provide the sort of value-add that is equivalent changing your 3380 to an iPhone. Both a Tesla and a conventional is still an A to B form of transportation. My impression is that Tesla is really a souped up golf buggy.

You need to think a bit outside of the car driving experience. Outside of the US, Tesla's biggest markets are in Europe (Norway and Netherlands especially) and another big running theme in these countries these days are the fight against climate change, ESG concerns etc. There are many people who would drive an EV because globally, they want to distance themselves from humans' contribution to climate change, and locally, they don't want to add to the air pollution in their neighbourhoods. There are certain geographies (think cold climates) where smog from cars are a very visible contributor to air pollution in the winter. 

Quote: Currently, Tesla is producing about a hundred thousand cars a year. Its share price seems to be far ahead of the present reality, for now at least.

They produced more than 367,000 cars in 2019. https://ir.tesla.com/news-releases/news-...deliveries

Quote: China will be big in electric cars cause they have no baggage so it's going to be very tough to beat that.

A few things to keep in mind about the Chinese market:

1. Current EV sales penetration is about 5% (1.2mn vehicles). Industry chatter is that 70% of this is government and fleet purchasers (for ride-sharing for example) and about 500k units are in cities with licences plate restrictions. The government has been intervening in the market for automobiles for a while, most notably in the form of subsidies for purchases, but these are gradually being stopped. [Admittedly though, there is still an aim to promote the use of EVs, which is summarized by the "NEV Industry Development Plan" in Q4 last year which called for 20% EV sales penetration by 2025. But even in China, I don't think the government always gets it way.]

2. A made-in-China ("MIC") Model 3 (the cheapest available Tesla) is priced at just under RMB 300k. This was done with the help of government subsidies and targeted the luxury car buyers. For comparison, a MIC entry level Mercedes (C class) and BMW (3 series) costs about RMB 330k. A MIC Toyota Corolla costs about RMB 120k. At current prices, Tesla is just not going to be affordable to the mass market.

3. Most of the purchasing power in China resides in urban cities. Most urban dwellers live in high-rise apartment blocks. In most cases, these apartments are not sold with dedicated parking lots, and there aren't enough parking lots in a development for all units anyway. Therefore, creating a dedicated charging station which is available to an apartment owner and whose usage can be charged to the owner directly is a tough ask. And homes are where the car sits more than half the time and where most of the charging takes place.

Personally, for a number of reasons, I still don't see a rapid adoption of EVs in China in the next 1-2 years (i.e. no tipping point). I'm happy to be proven wrong though. To steal Buffett's space exploration analogy, I applaud Tesla's (and other OEMs') endeavour to electrify automobiles, but I'd prefer to skip the ride.

Yes I think charging stations and the speed of charging, especially for long distance travel, will be the major impediment to EV adoption. Think I wrote this a few years back. It makes a lot of sense for public transport because end of day they return to depots but not so easy for private cars. Nonetheless for city travels it will gradually make sense as effort picks up on the charging station.

I do not foresee tipping point for the private car market for next 1-2 years but I think it is plausible that EV sale will surpass ICE in coastal cities by the next decade. Indeed Tesla will remain the Aston Martin in China when BYD EV is selling ~RMB100k. That said Tesla is still top15 EV car sold in China.

Tesla jumps 19.9%, biggest one-day gain in 6 years
https://www.cnbc.com/2020/02/03/tesla-st...-time.html