Tesla

[BRT]

Only if u forgot to recharge or going long distance driving. For most urban user and weekend warrior, full charge at home overnight would be the norm and sufficient.

Also it is recommended to have a rest every few hours constant driving. A half an hour toilet stop, including makan and check your facebook whatsapp and even nap would be a perfect fit for the recharging.

And of course backup and maybe hot swappable battery packs will be easily developed. A hot swap battery pack will only take a couple mins to swap. Lets not forget EV has extra big empty space in the front which is perfect for more battery.

Just look at how we tackle the smartphone low battery problem. Similar solution for ev.

So the only remaining obstacle really is the cost of ownership.

Sent from my SM-T800 using Tapatalk

If this human behaviour is true, then cell phone powerbank no biz Liao.

Not forgetting the rush to increase power in cell phone battery leading to short circuits and fire. Fire in your pocket and fire in the car is probably quite different. Let’s see if they mass produce model 3 if quality will not suffer. Samsung Battery gate is probably not even statistically significant when one produces 10m pieces, but one not likely want to be at tail end risk.

In my opinion the short term solution is the swappable battery pack. To expect instant gratification generation to wait half an hour to charge is not realistic

No sure why you guys so focussed on the half hour charge time. 
In Singapore context, half hour charging is not an issue at all as this function will almost not be used at all. 
Why?
Model 3 range is touted to be 350km base model and long range 540km(probably bigger battery packs). Lets say i go to work from woodland mrt to raffles place mrt by car (using google maps) is 27km*2 = 54km round trip. Lets say one day we allocated  60km for work travel and maybe another 10km go makan at night. 70km total. Maybe allow for traffic jam and aircon use. 100km/day range is used. After 3 days, you  would left 50km (~14% charge left, simplistically saying taking that 100% charge = 350km)

So only need to charge once every 3 days at the very least. 
For average user, let's say you reach home, get out of car and plug it in the wall socket and charge at 2kw/H(like running a 1hp aircon unit). that will be 16kwh total for 8 hours charging. That's around 1/3 of the battery charge or 100km worth of driving.

You would really only need the supercharging half hour if you are like salesman and do like 200km everyday driving or if you do long distance to malaysia. 

One of the solutions to charging of course is swappable battery packs. However each battery pack will likely cost a few thousand extra and will only have maybe 10 or 20kwh capacity.

Another solution is the one currently touted by Toyota and Hyundai which is the hydrogen powered EV, but this is still not mainstream yet and require expensive investment into setting up hydrogen pump stations and other infrastructure.

In recent years, hybrid is actually gaining quite a bit of traction in the Taxi industry as well as with motorist. IMHO currently this is still the best combo for cars with massive range increase and still as convenient to pump petrol. 

BYD did a Taxi EV trial in HK was a failure and now they are testing it in Singapore. Not sure if they will be successful or not. 

I would say end of the day its all about total cost of ownership for switch to EV. Locally the gov not very supportive of Tesla car, so in local context no point discussing Tesla cars. If talking about EV in general then  will have to see how the BlueSG EV car sharing goes. Might become mainstream in the future and gov might even create special self driving EV car/bus lane on the roads.

hey. why do you say "Locally the gov not very supportive of Tesla car, so in local context no point discussing Tesla cars."? i'm eagerly waiting for them to come to singapore.

Old article...
http://www.zemotoring.com/news/2011/02/t...government

There was a drama last year when a Tesla import was taxed with a carbon surcharge.
http://www.straitstimes.com/singapore/tr...del-s-here

After that 2  Tesla cars granted tax break.
http://www.straitstimes.com/singapore/tr...tax-breaks

Thats over a year ago liao. Why do you think Tesla has not come back to set up shop again? After all, Elon can pick up phone and call our PM directly what. If SG gov really want it to happen, we will see big announcement of gov spending for setting up supercharger stations and charging stations at HDB. My suspicion is that there are still some hurdles becoz of our gov. 

Look at HK has 3 Tesla offices liao. But recently they also cancel the rebate so sales there gone down. But rich people still buy to show off.

thanks. after reading the articles, i'm inclined to agree. that's unfortunate. sg seems perfect for EVs cos the distance constraint doesn't matter as much here. i would say the data collection of all its cars may also be a problem for the gov. i believe all tesla vehicles collect and send data back to their servers.

[Wildreamz]

As much as many critics hate Tesla's Valuation, Tesla's market cap has (for the most part) tracked revenue growth pretty closely. The big acceleration in 2017 was due to the revenue contribution from Model X sales (which ramped up in late 2016, hitting peak production rate in 2017).

Early reports from Tesla suppliers are hinting at a Model 3 production rate increasing to 5000 per week. If Tesla could pull this off, it would represent a ~2-300% increase in unit sales from Model 3 sales alone in 2018; 3-400% if they could hit their target of 10,000 per week by end 2018. Interesting to see how 2018 plays out.

https://insideevs.com/teslas-model-3-sal...-combined/

Tesla’s Model 3 Sales Target By End Of 2018 Would Outpace BMW 3-Series/4-Series & Mercedes C-Class Combined

https://futurism.com/tesla-boosting-mode...cars-week/

Tesla May Be Boosting Model 3 Production Back to 5,000 Cars Per Week

(vested)

[HitandRun]

As a matter of curiosity, I was wondering how many of the Tesla supporters see Tesla achieving profitability? At 200,000 annual production, at 500,000 or ?

Tesla delays production AGAIN

That's sad. I was hoping to see Tesla with 5k per week production of model 3 and still struggle to make money. 

Looks like I probably have to wait till the end of the year to confirm my thesis.

[Wildreamz]

As a matter of curiosity, I was wondering how many of the Tesla supporters see Tesla achieving profitability? At 200,000 annual production, at 500,000 or ?

Tesla delays production AGAIN

That's sad. I was hoping to see Tesla with 5k per week production of model 3 and still struggle to make money. 

Looks like I probably have to wait till the end of the year to confirm my thesis.

You mean they probably just going to spend all the money they make again on new projects, like Amazon?

[Wildreamz]

Succinct, balanced analysis.

[holymage]

Not to be a wet blanket, but I think investors in Tesla are aboard a hype train and buying into a dream may not realized.

Firstly, let's not forget that the automotive industry is very capital intensive, Tesla has issued stocks and debt several times due to its poor free cash flow. This is a tough industry with high fixed costs, sales in volume is required to "spread" the fixed costs in order to make profits per vehicle unit.

Secondly, automotive industry is a highly cyclical industry as cars are a big item consumer discretionary expense. Consumer will prolong their car replacement when a recession hits. Add in the high fixed cost, there will be double whammy. Expect profits to swing widely when that happens. This is also part of the reason why traditionally auto companies do not enjoy premium valuation compared to consumer goods companies.

Thirdly, big auto makers has already taken notice of EVs is the future and are rushing to design and manufacture EVs. Competition is getting tighter. Just google and you see major auto makers companies has pledged their EVs production by year XXX. China's Nio has produced an EV at half the price of Tesla's model X.

Fourth, at least in the near term, EVs are much more expensive than ICE vehicles, and thus are highly subsidized by governments in various means to encourage consumer purchase. If government were to withdraw the subsidizes, what will happen to the car sales? Case in point, Tesla sales in Hong Kong. And that is why the majority of vehicles globally are still ICE.

Fifth, interest rates are rising and is highly likely to continue to rise, given the accelerating inflation due to years of loose monetary policies. Given Tesla's debt...

Lastly, onto valuation, which is the key. Assuming Tesla managed to grab a mature market share and growth slows, as all companies mature eventually. Assuming a P/E of 10, Tesla is required to make a net profit of $5.3 billion, at today's valuation of $53 billion. That is more or less around the normalized net profit of big auto makers - Ford, GM, Volkawagen. The assumption is, the world's cars count remains constant, and IF Tesla manages to get market share from the big auto makers. Unfortunately, this growth has already been factored in at today's market capitalization of $53 billion. And the reality is, Tesla has been still making losses for continuous years ($675 million losses in 2016). Using P/S, Tesla's P/S is abnormally high at 7.5 as well. Even Elon Musk admits that Tesla stock is expensive (Musk: "I do believe this market cap is higher than we have any right to deserve").

In conclusion, Tesla is in a very tough industry, while carrying a (very) rich valuation. Most Tesla investors are probably feeling good due to the stock price and the "beautiful" dream that Elon Musk continuously feeds them. This kind of reminds me of the same investor mentality during the dot com bubble..

[Wildreamz]

Not to be a wet blanket, but I think investors in Tesla are aboard a hype train and buying into a dream may not realized.

Firstly, let's not forget that the automotive industry is very capital intensive, Tesla has issued stocks and debt several times due to its poor free cash flow. This is a tough industry with high fixed costs, sales in volume is required to "spread" the fixed costs in order to make profits per vehicle unit.

Secondly, automotive industry is a highly cyclical industry as cars are a big item consumer discretionary expense. Consumer will prolong their car replacement when a recession hits. Add in the high fixed cost, there will be double whammy. Expect profits to swing widely when that happens. This is also part of the reason why traditionally auto companies do not enjoy premium valuation compared to consumer goods companies.

Thirdly, big auto makers has already taken notice of EVs is the future and are rushing to design and manufacture EVs. Competition is getting tighter. Just google and you see major auto makers companies has pledged their EVs production by year XXX. China's Nio has produced an EV at half the price of Tesla's model X.

Fourth, at least in the near term, EVs are much more expensive than ICE vehicles, and thus are highly subsidized by governments in various means to encourage consumer purchase. If government were to withdraw the subsidizes, what will happen to the car sales? Case in point, Tesla sales in Hong Kong. And that is why the majority of vehicles globally are still ICE.

Fifth, interest rates are rising and is highly likely to continue to rise, given the accelerating inflation due to years of loose monetary policies. Given Tesla's debt...

Lastly, onto valuation, which is the key. Assuming Tesla managed to grab a mature market share and growth slows, as all companies mature eventually. Assuming a P/E of 10, Tesla is required to make a net profit of $5.3 billion, at today's valuation of $53 billion. That is more or less around the normalized net profit of big auto makers - Ford, GM, Volkawagen. The assumption is, the world's cars count remains constant, and IF Tesla manages to get market share from the big auto makers. Unfortunately, this growth has already been factored in at today's market capitalization of $53 billion. And the reality is, Tesla has been still making losses for continuous years ($675 million losses in 2016). Using P/S, Tesla's P/S is abnormally high at 7.5 as well. Even Elon Musk admits that Tesla stock is expensive (Musk: "I do believe this market cap is higher than we have any right to deserve").

In conclusion, Tesla is in a very tough industry, while carrying a (very) rich valuation. Most Tesla investors are probably feeling good due to the stock price and the "beautiful" dream that Elon Musk continuously feeds them. This kind of reminds me of the same investor mentality during the dot com bubble..

Thank you Holymage, you raised some very good point, and I believe are shared by many skeptics around the world. It is important to understand both the bull and short thesis, so let's get right into it.

Firstly it is important to note that there are 2 distinct ways to build and grow a business from zero:
1. After initial capital raise, quickly achieve a positive cash flow business model, and scale organically, using only strictly capital earned from business activity with some leverage and minimal fresh capital injection. Need to be in "good" businesses (high margin, low fixed capital cost, low capex etc.) Growth is slower, but shareholder retains most of his equity.

2. After initial capital raise, proof-of-concept, raise more capital, scale business (not necessary positive free cash flow), raise more capital, scale business even more, make more capital raise (either through debt, dilution or otherwise). Growth is faster, but shareholder gets diluted over time, but could work with "bad" businesses (low margin, high capital cost, high capex). 

Sometimes, some business may get very big, but needs to get REALLY big, before it is even viable (case in point, Youtube, Netflix, Amazon, auto business, Smartphone etc) when the economies of scale and other efficiencies kick in. Other times it simply needs huge investment (Marketing, Capex, R&D etc.), long-term commitment, and huge technological breakthrough (Drug development, SpaceX etc.) before the business is even viable. Many of such business either die an early death, or get bought over by much larger companies with strategic interests (Youtube, Instagram etc.), so called "Exit", which is sometimes the best a Startup could hope for.

Back to Tesla, as it stands, the Auto Industries has very poor business characteristic (high fixed cost and capex), and the EV business ALSO requires huge technological breakthrough to scale battery production, and it needs to be produced in a way that it is cheaper and more profitable than ICEs. Hence, Tesla is really climbing a huge uphill battle here with all the odds against them. The risk is there, and this investment is not for the light-hearted. And this is even before regulatory risks.

However, Elon has showed time and again, that he could defy the odds and achieve the impossible (see SpaceX, Paypal), so investors puts a lot of trust in him and he has managed to raise capital time and again very cheaply.

Now, with this in context, to address your points: 
1) Yes auto industry has very bad business characteristics. However, the luxury segment is lucrative, with higher gross margin, and Tesla has been targeting the upper segment consistently with their Model S and X and so far has been very successful: Tesla Model S Crushes Large Luxury Car Competition (H1 2017 US Sales). And has maintained a high gross margin while doing so. Even today Tesla is much ahead of their competition in terms of cost per kwh ("Tesla is among the automakers staying ahead of the trend. While McKinsey projects that battery pack prices will be below $190/kWh by the end of the decade, Tesla claims to be below $190/kWh since early 2016.")

With the Gigafactory, the story here is, using advanced vertical integration and automation, making very few car models, they could further reduce the cost of battery by ~30%, hence, undercutting the industry average even more. And enjoy a high gross margin even with their "mass market" models like Model 3 and Y. 

Hence, investors are assigning a high multiple (tech company multiple) to the "future" Tesla. Whether they can do it or not, yet to be seen. I admit this is very unlikely, as unlikely as landing a rocket, but the pay-off is also as great as landing a rocket.

On dilution. Investors can be relieved that Tesla has managed this superbly so far:


Source: Wolfram Alpha

2) Cyclical and High Fixed Costs. See point 1 regarding Multiples and fixed cost. In addition to the cyclical component of the Auto Industry, it is also undergoing many Secular Changes (Autonomous Driving, Ride Sharing, Electrification etc). This uncertainty (plus the cyclical, high fixed cost aspect) is why the earnings multiple of most car makers are beaten down right now. There are still exceptions though, the high margin luxury auto makers that are still growing rapidly, like Ferrari (PE:34.45) 

3) Competition. See point 1 regarding Margin. Investors are betting that even with competition, their Margin will not be as good as Tesla's (which is already ahead of the crowd), due to the Tesla Brand, and the Gigafactory. Also Tesla almost pay no marketing cost; Tesla is very apt in using social media and viral marketing (Youtube: Tesla) to gain Global recognition. 

Source: Google Trends

Also Tesla does not sell through auto-dealership, which are incentivized to sell ICE because they command a much higher maintenance fees. Tesla uses a direct sales model (like the old Dell and the current Apple). 
Hence, I feel that competition for now is not a direct threat to Tesla, unless they start encroaching Tesla's dominance at a high end, or could produce at a much lower cost (not simply charge a lower price).

4) Subsidies and competition with ICEs. Since Tesla targets the High-end, cost is less of an issue to potential buyers. When the Model 3 hits the market in scale, due to higher margin, Tesla is more resilient to such risks than their competitors. Globally, governments are steering the industry towards more electrification due to many social benefit (environment, public health etc.), energy security (less dependent on oil) and fear of losing out ("China to ban petrol and diesel cars, state media reports"). 

ICE is a mature technology, costs of production isn't going to change significantly over time. Battery price however, is decreasing rapidly:

Source: https://electrek.co/2017/01/30/electric-...la-190kwh/

5) Rising interest rates. Yes, real risk there. Which is why 2018 is the make or break year for Tesla on many fronts.

6) Valuation. Best to use Elon's own words here:
“If we’re able to maintain a 50% growth rate for 10 years and achieve 10% profitability number and have a 20 P/E, our market cap would be basically the same as Apple’s is today,” Musk said in 2015. “Now, that’s going to require a bit—on the order of $700 [billion]. Obviously, getting there will require some significant capex.” ("Elon Musk Says Robots Will Help Tesla Catch Up to Apple in Value")

(vested)

[BlueKelah]

Tesla should not have any trouble with funding. Even if rate rise, Elon has many rich kaki invested and will be able to provide funding and keep it going.

Most of Tesla loss making now is also from the absorption of the SolarCity which was making quite a bit of losses when they took over.

Investors are confident now as higher end model like Tesla S are really taking market share from the usual german BMW/AUDI/MERC in the luxury segment. https://seekingalpha.com/article/4115605...are-update

From what I been reading, Tesla model 3 doesn't look like they can ramp up production that fast. Also as more EV is made, speculators are speculating the price of battery making raw material like lithium super high. So manufacturing costs may keep skyrocketing whilst prices are fixed at time of pre-order. Tesla might have to do some hedging of some sort to prevent big losses.

Tesla also doing big energy power plant backup electric systems now. I think this will be a very profitable segment as they are the only company that can do projects like these fast and on time as proven in australia project.

It will be an eye opener if Tesla really evolves into the monopoly of the whole solar power plant to energy storage to EV sectors, might end up bigger than amazon or apple!!

But for now, will be interesting to see how it goes next couple of years. we will have to go EV someday. Actually every car already has a car battery and starting the car is also using electricity to initiate the spark plug lol. And most modern car have many electric components. Personally I prefer going hybrid, best of both worlds

[holymage]

Hello Wildreamz, you are welcome.

From your link it shows that Model S crushes large luxury car competition, while Model X is ranked 4th in luxury SUV. Now, let's get optimistic and assume Tesla will obtain about 50% market share in the luxury car segment and achieve 4x 2016’s revenue. That will be US$28 billion. Let's be generous once again and assume Tesla is super-efficient, with good consumer mindshare, and assign a profit margin of 8%. With a current market cap of US$54 billion, that would be a P/E of 24 for a mature market leader. This just shows how small the market is for luxury cars is. And I don't think the number of wealthy people in the world is going to increase any faster. Tesla definitely has to expand to mass market cars in order to grow revenue and justify its valuation.

As for competition, there are tons of it. Volkswagen, Ford, Toyota, General Motors, even Dyson are all spending billions to build electric cars. As of today, Nio and Byton are already producing cars at least 40% cheaper than Tesla's. Striking off competition just because of the Tesla brand is very risky. Just look at Apple's market share against Samsung, Huawei, Oppo, Vivo, Xiaomi over time. Apple is invented the smart phone when there is no competition. The parallels between the two companies are rather similar.

Even if the auto industry is going to be less cyclical due to secular trends and EVs are used as an alternative form of transportation; with Tesla’s pricing against competition, I highly doubt it will be used as a vehicle for public transport. Look at the cabs in SG, majority are either Toyota or Hyundai. Cost would be a major factor. Just imagine yourself as the boss of a “car leasing” company.

To trust a CEO on valuation of his own company is…, especially when his company is burning money that rapidly. The truth is Elon Musk needs to sell big fat dreams to investors to keep Tesla stock price high. That way the stock issues be less dilutive and it is easier for future fund raising. Let’s do a hypothetical scenario. Tesla 2016 revenue is US$7 billion. With 50% growth rate that would be US$400 billion in 10 years’ time. That would be almost the combined sales of market leaders, Volkswagen and Toyota in 2016. The P/E of 20 is also very generous if Tesla can even achieve that kind of sales.. as growth eventually slows down as the company matures and valuation declines. Not to mention the cyclical and capital intensiveness nature of the auto industry.

If given a choice to put my money in expensive stocks only, I would rather put in either Facebook, Amazon, Google, Tencent or Alibaba over Tesla. At least those companies have a very strong moat.

Good luck to those vested.

[Wildreamz]

1. On valuation:

2016 Auto Revenues: https://www.statista.com/statistics/2329...worldwide/


In 10 years time, assuming combined revenue growth follows the same trajectory, then Tesla would be around the size Toyota is today (inflation adjusted).
Toyota currently has ~$210B market cap, PE~11. 4x in 10 years, not too shabby. 
Yes, this is just one of the blue sky scenario, just leave it at that  

Actually I think all these valuation estimates are really not useful, the auto industry is undergoing a huge transformation (ride sharing, automation, electrification), who knows what it will look like in 10 years? Tesla business model also evolving very rapidly, they are going into SUVs (Model Y), Pickup Trucks (Model P), Semi Trucks (Tesla Semi), utility scale battery storage, home battery storage (Powerwall), High-End Solar Panels (Tesla Solar Roof), ride-sharing (Tesla Network), insurance (insureMyTesla) all has the potential to contribute very significantly to their main auto business.

My investment Thesis is simple, I believe in Elon Musk's ability to innovate and execute.

2. on Competition:
There is a reason why Apple doesn't compete directly with all the other Android phones out there. All the Android phone manufacturers you stated compete with one another, but not directly with iPhones. Apple die hard fans would only ever consider Apple devices, mostly due to operating system, but also due to Apple building a life long relationship with their fans through their Apple Store, history of excellent customer services, excellent build quality, app and accessory ecosystem, simple to use UI, integration with MacOS and the Apple hardware ecosystem, dramatic keynotes, history of being forefront of technology, Steve Jobs' legacy, high price point (which added it's desirability), first mover advantage etc. 

Apple also has a unique advantage of being able to produce their phones at an extremely low cost: vertically integrated design (designed their own SOC, OS and Hardware), most efficient global supply chain ever building the highest volume of a small number of Phone models. Allowing them to pack the most features in their phone while maintaining a wide profit margin. 

Tesla has very similar brand loyalty from their fans, maybe it's a combination of their direct selling method (Tesla Stores), compared to other auto manufacturer's dealership model, or their use of social media, or Elon's personal charisma, Tesla's high price point, their first mover advantage, quality of their car, super charger network, or the company's mission to upend the Gasoline Car industry, and the fact that they have never sold a single gasoline car in their history, unique and fun features on their every car (Model S - first great EV, Model X - Falcon Wings, Model 3 - No Dashboard) etc.

Tesla also has the lowest cost among all the auto manufacturers out there due to their vertically integrated supply chain (they make 80% of their own parts in 2016), and Gigafactories to mass produce Batteries. In addition to Brand Name, this gives them the lowest cost of production and the widest margin. The only other EV with similar levels of vertical integration is BYD, but they lacked a globally recognized Brand Value (it's easier for Tesla to start selling cheap cars, than BYD to start charging a premium). 

Point is, Tesla now still do not compete with low price point cars. Rich people in China buying a new luxury EV, would not consider a BYD. Just like rich people buying a new flagship smartphone will not use OPPO or Essential Phone as their daily driver (but they may still buy it for fun) no matter how cheap they price it. And there is no luxury EV other than Tesla.. yet. Why is that?   Maybe it's still unprofitable to manufacture Luxury EVs at scale (and they don't want them to cannibalize their own ICE luxury car business)?

Also, any link to NIO and Byton producing cars 40% cheaper than Tesla? Would love to see it, for reference purposes.

3. On using Tesla as a public transport:
Well, there are many buses in Singapore manufactured by Daimler (Mercedes branded buses). In the case of supplying for public utilities (it's all speculation from here), it is the cost that matters most (then safety and reliability). The most expensive component in an EV is still the battery, and Tesla still leads the industry in cost per kwh.

It's a high risk play (lot's of stars must align), but I would rather bet on Elon than bet against him. 

(vested)