> For Musk to hit all of his targets, Tesla would need to build about 430,000 Model 3s by the end of next year. That’s more than all of the electric cars sold planet-wide last year.
> Even if half of the Model 3 inventory shipped to other countries, 2 U.S. sales under Musk’s targets would outpace the BMW 3 Series and the Mercedes C class—combined.
> To sell that many $35,000 sedans in the U.S. “would be absolutely unprecedented based on what we know about car markets today and how people spend their dollars,” said Salim Morsy, electric car analyst at Bloomberg New Energy Finance. “It could happen. I’m pretty sure it won’t.”
If they could pull this off this might be a great investment by Tencent.
It's also great for the car industry and environment as well. Especially considering their work on automated driving. If they get that many cars on the road it would give them a ton of data and a big advantage/lead in AI over other companies. But it could also be setting the bar too high and setting them up for failure (even though they might otherwise have nailed targets).
Regardless, as a design fan it would be interesting to see so many Teslas on the road. They are great looking cars.
> To sell that many $35,000 sedans in the U.S. “would be absolutely unprecedented based on what we know about car markets today and how people spend their dollars,” said Salim Morsy, electric car analyst at Bloomberg New Energy Finance. “It could happen. I’m pretty sure it won’t.”
Model 3's will sell literally as fast as Tesla can push them off the production line. The pent up demand for this thing is insane. Over 400,000 people have already paid $1000 deposits on their cars.
The only thing that could possibly stop Tesla is their own inability to deliver.
I can't think of any product I'd rather have than a Tesla.
I think Tesla will sell millions of Model 3. Which other car is 400,000 people waiting patiently to buy for two years, even putting down a $1,000 deposit?
Tesla is doing to traditional car manufacturers what Apple did to Nokia.
> Tesla is doing to traditional car manufacturers what Apple did to Nokia.
Sincerely, and with all due respect, this is a false analogy.
What happened to Nokia was pretty much self inflicted. Mismanagement, competing empires, complacency.
Apple did not start shipping low end brick phones and eat Nokia's market.
Post '08 bailout automotive manufacturers are lean and hungry (for the most part)
Furthermore, the 'traditional' car market, while slow to move, is not far behind. And in some cases is taking a longer view. E.g. Ford is going straight to Level 4 in 2022. Forget the ICE v. electric debate, that ship has sailed and everyone is heading to EV. The real battle will be to produce the safest self driving product.
I am long on TSLA, I expect them to do well however they are in a far riskier spot than Apple was when the iPhone dropped.
They were healthy, profitable and experienced (+Jobs). TSLA is none of those.
I'm not disagreeing with your sentiment. I just thought we were past the Apple analogies.
Tesla is currently training their driving AI using the existing fleet in shadow mode. How do you skip this step and go straight to level 4? They need months of tuning outside a lab, worldwide.
A lot of car manufacturers still refuse to build an EV from the ground up. They are reusing an ICE platform and converting them to EVs.
heh, I'm sorry. Musk is still alive and surpassed Jobs long ago now, he's up to his 5th disruptive successful company. Online Payment, Cars, Space, Solar roofs and AI beat shiny laptop and smartphone.
Car companies are selling bricks. In large part because of the used car market no company makes reliable and cheap because the cost conscious don't buy new cars.
Further, the dealer model forces high markups, heavy advertising, etc to attract the kind of people that buy new cars.
Fair opinion, but I think you are arguing the wrong point.
Apple ate market share from Nokia because of brand advantage.
Many commentators mention that manufacturers are improving their EV product, but I think that boat has long sailed: Tesla vs. Ford won't be about features, but the brand.
If my basic needs like housing and healthcare were already met (unfortunately they aren't), my next purchase would probably be a Tesla or a Solar/Powerwall combo for the house, or both.
Well, they lost access to $1,000 until they cancel (plus 3-6 weeks, since it can allegedly take Tesla this long to refund the money).
I don't think 400,000 have just $1,000 to spare for a really anything they will just cancel. The $1,000 mean that the person who reserved it really wanted the car and is unlikely to just refund it unless they have a very good reason to do so.
I think the commitment of $1000 is overblown. What is the actual opportunity cost here? Maybe $50-$150 depending on the interest rate and time frame you want to use for your estimates. That is nothing in the scale of a car purchase and it buys you the right to receive the car several months quicker. Relatively speaking it is like someone paying $10 to have a new laptop shipped to them overnight instead of by ground except the shipping has been prepurchased a year before the laptop.
If you aren't the type of person who can find a spare $1000, you also probably shouldn't be the type of person who spends $30,000 on a car.
You are missing the psychological element. In general, people:
(a) Feel a strong obligation to be consistent with past behaviour - not just in placing the deposit, but then thinking and reading about the new car design and wanting a Tesla for months or years.
(b) Want to avoid admitting the 'mistake' of giving Tesla a free loan. Not just admitting the mistake to themselves, but also to all their friends they told about their deposit.
(c) Hate giving up something they 'own' - ie. their place in the queue
(d) Value something that's scarce more than something that's easily available
(e) Are more likely to want something that other people love and are queueing up to buy.
I think you vastly underestimate how much demand is represented by 400,000 people willing to part with $1k before a product even exists. Refundable or not.
The sort of people who would consider buying an expensive sedan can probably afford to loan Tesla $1000 for a year or so.
I reserved a Model 3 because I figured that if I didn't, I would be at the end of a very long waiting list and would probably lose out on the federal rebate. The most likely outcome is that I'll decide that's too much to spend on a car and cancel, but it still made sense to me to keep my options open.
I expect a lot of those reservations to be converted to actual sales, but a lot of them won't. In any case, I think Tesla will have plenty of demand if the product meets expectations.
A $1000 deposit is a significant commitment to ordering the car, even if it is fully refundable. Very few people would do this until they are basically decided on buying this. For everyone who would reconsider, there are for certain plenty of people, who are interested in the car but would not put down money without a test drive first. So, judging from the deposits, I would rather assume the actual list of interested buyers way exceeds the amount of people who put money down.
I disagree. I put down the deposit because I wanted to reserve my spot in line. Putting down $1k now isn't that much if it might save me $8K in tax credits by having an earlier spot in line.
I still haven't figured out if I can get a charger in my apartment building. I haven't decided I like the look of the car. I haven't even decided I want a sedan.
I love Tesla, so on the chance that I do want the car I put down the deposit. But I'm still 50/50 on actually buying it. I imagine many are in a similar positions.
Curious, did Tesla published updated stats ? or anyone else for that matter. The announcement numbers were way above expectations, but it's not much if half of that evaporated after the hype.
Sure, there will be tons of people who cancel... but then there will also be tons of people who wanted to wait until the car was fully finished before signing up to get one. They'll be fine.
This is the car version iphone, with people queuing up at the store days before the product is seen. I would believe they would stop production exactly at 400K cars, the current waiting list and start a new Model 4 waiting list. They have an air of exclusivity now with their current models. People still gawk at the sight of a Tesla. They would want to maintain that awe factor with Model 3 as well.
I would assume that a company investing billions would try very hard to make accurate sales estimates.
I would be surprised if Tesla isn't surveying random people on the list, asking questions about their planned purchase and making estimates on the % that will end up cancelling.
> I would be surprised if Tesla isn't surveying random people on the list, asking questions about their planned purchase and making estimates on the % that will end up cancelling.
I hope this would give an accurate result. People might say one thing and do something else when they have to actually shell out the money...
I can't remember a product that sold 400,000 preorders (many of which were sight unseen) with a $1,000 deposit in my lifetime. I think anyone trying to downplay the demand isn't looking at it in the right context.
A related concern is how well their repair and service operation scales. There are already repair horror stories all over internet for the relatively tiny number of cars already on the road.
The model S is a beautiful car, but it's a luxury toy. I'll venture that most Model S owners have at least one additional car. If you're in the market for a 35k sedan though, you're looking for a commuter and family car that needs to be reliable. Having it out of commission for three weeks while the one repair shop within 50 miles waits for a backordered part is unacceptable.
It is worth noting that Jon McNeill (Pres. Global Sales and Service) took the time to post on a user forum in direct response to service delays and spoke with a fair bit of detail about how they are fixing the problem. Whether or not you are a fan, I think everyone can agree that this level of engagement is a strong positive for their cause. https://teslamotorsclub.com/tmc/posts/2004525/
That's really interesting. Seems like the answer is they need a lot more third party shops - the problems that McNeill describes sound like the kind of thing that happens when there isn't enough competition. If I'm a model 3 customer, I don't really care about your service record in Palo Alto. What can you do for me in Skokie?
Very interested to see how all this plays out. The success or failure of the Model 3 could decide whether Tesla is the next Ford or the next Delorean.
Right. The point is that soon they'll need a whole lot more of them, and first party repair centers as well. "Sorry, we have trouble with quality control at 3rd party shops" isn't going to cut it for a mass market car.
Re: Ford and Delorean, this is not the hill I want to die on. But what I mean is that the batteries, charging stations, etc, all live or die with the cars. If they can successfully create a mass market for consumer EVs, sky's the limit. If not, you can see a future where Detroit eats their lunch and the Model S is a footnote.
Personally, I've found The vehicle itself to be very reliable. But they need to scale out service operations. I can call an Audi dealer and have my car brought in within a couple days (or go to one of many third party shops). With Tesla, they're typically booking 1-2 months out (and that's in the bay area, where we have like 3 service centers). Luckily, the only times I've had to bring in my Tesla, it was something super non-trivial.
This reminds me when the iPhone came out. Tesla is making a revolutionary new product. Millennials are also coming of age now through the next decade. Many of these buyers, either purchasing first-time, or upgrading their "college/hand-me-down" car, will buy Tesla, just because it's fashionable (ala iPhone).
I'm bullish on Tesla and Musk.
Edit: I should add that the product extends past the car itself. The whole direct to consumer, transparent pricing, no haggling, will win over a new generation of buyers.
I think for a young late 20s, early 30s professional with disposable income, maybe a baby on the way, it's really a no-brainer deciding between a 3-series, C-class, Volvo, vs a Model 3.
And if you can only afford a Camry/Altima/Jetta/etc. a 5-10K increase in price for a much better (perceived) product is also a no-brainer. People will def max out their credit to get the upgrade to a Tesla.
If I can fit a family of four in a 2012 Mustang it is nearly inconceivable a mid-size EV would not have enough space. Almost inconceivable that it won't have plenty of space.
One thing I've wondered about this: exactly what data is Tesla able to collect from the vehicles on the road? I've not found this on their website, nor any way to opt-out of data collection. For a vehicle with an always-on camera and cellular connection that can't be shut off, you'd think more people would be concerned about this.
This is my primary concern about Teslas. I'd love one from a pure tech and driving point of view, but I'm not willing to submit to a panopticon just to get one.
My second concern is aftermarket serviceability. I would never buy a car that the manufacturer could later remotely disable (leaving me with no recourse) just because they feel I've breached their ToS or something. Tesla is far too much like Silicon Valley software companies in that regard - 99.9% of the time "you'll be fine", but the other 0.1% of the time you're screwed and there's no way to fix it.
> “would be absolutely unprecedented based on what we know about car markets today and how people spend their dollars,” said Salim Morsy, “It could happen. I’m pretty sure it won’t.”
That quote implies people won't choose to buy that many Model 3's. We know there are almost that many pre-orders, so it's not a question, and it's not something to be doubted. It's a fact people will spend their money that way.
Has anyone looked into the various subsidies around the world? It seems that Tesla are smart enough to design around various regulations and taxes. SUVs became a thing in part because of differential tax treatment, and I've heard in the UK that company cars and business vehicles are heavily slanted towards electrification (both hybrid and full EV) I can see things changing faster than people would think based on the retail prices.
An interesting follow up would be investigating how much those subsidies cost or earn for the governments that provide them e.g. if you can provide all your electricity from homegrown hydro electricity rather than imported gasoline, then how much money does it save you to have an EV on the road. Is all that value being passed onto EV users?
It's not going to do anything great for the environment and we've been over this on previous Tesla threads (years ago). Driving electric cars instead of hybrids in areas where the electricity is primarily derived from unclean sources is not better than hybrids for the environment.
> Driving electric cars where the electricity is from unclean sources is not better than hybrids for the environment
Some of the widely reported research about the power generation and electric cars is flawed [1]. Electric vehicles and hybrids come out about even in the worst markets, like Missouri [2]. But nearly everywhere else, an electric vehicle is better for the environment. People don't always consider that the electric grid is moving away from coal [3], which means your electric car will get greener during the time you own it without you having to upgrade it.
Unclean power plants are still vastly more efficient than the most efficient internal combustion engines. That's why trains are electric wherever possible.
> Unclean power plants are still vastly more efficient than the most efficient internal combustion engines.
I don't think so.
> That's why trains are electric wherever possible.
1. Thing is, you don't have to refuel electric locomotives, so that saves time and logistics. Unless you plan to install a pantograph on the roof of your Tesla, you still have to refuel it.
2. Unlike cars, diesel locomotives do not use any kind of direct transmission anyway, they generate electricity from Diesel engines to power electric motors. Because unlike cars, they have to transmit huge power and torque to make the first wheels turns, and mechanical transmissions are not good for that, but electric engines are. So since they use electric engines anyway, why not power them from electrical energy instead of diesel? That's why locomotives are electrical wherever possible.
You don't think so? Is that your opinion or a fact?
Most calculations I've seen seem to conclude electric are more CO2 efficient per mile; from 2 to 9 times depending on which state is producing the power.
> Unclean power plants are still vastly more efficient than the most efficient internal combustion engines.
I'm an automotive engineer specializing in hybrid vehicle powertrains. Published and everything.
As of two years ago the only country in the world where the power source makes an EV not worthwhile, well-to-wheel emissions-wise, was India. Every other country in the world has clean enough power production to make EV cars an environmental net positive.
And I believe India's power is getting much cleaner over the next few years, so it may not be the case much longer.
The important distinction is that this abstracts the "cleanliness" away from the individual. Replacing one coal plant with a wind plant, for instance, is far more easily done than waiting for all affected consumers to replace their cars.
> Driving electric cars instead of hybrids in areas where the electricity is primarily derived from unclean sources is not better than hybrids for the environment.
As of two years ago the only country where that was the case was India. Right before that, South Africa and China both became clean enough for EVs to be an environmental net positive.
Power produced in the US is some of the cleanest in the world, and getting cleaner every day as coal plants are decommissioned. We are well above the environmental net benefit line.
> Driving electric cars instead of hybrids in areas where the electricity is primarily derived from unclean sources is not better than hybrids for the environment.
There are no longer significant areas where this is the case. Even most coal markets in the US are clean enough (not sure what will happen with new de-regulations). The US, on average, is by far clean enough.
The entire clean energy argument depends on your classification of nuclear energy. Long term storage issues put it squarely in the unclean category for me so I'd argue that US energy is by and large pretty unclean. I'm also pricing in the expected value of meltdowns in my unclean rating. It's hard to quantify exactly but the black swan events have pretty catastrophic consequences for the environment. Since I've witnessed two very severe ones in my lifetime, one in what many people would call a technically very advanced country I don't think it's unreasonable. If you think that's tinfoilhat-crazy, fell free to talk to an insurance or reinsurance company about insuring nuclear plants fur a fon conversation.
Just to clarify. the two incidents I was referring to were Chernobyl and Fukushima (as they are INES 7). The Three Mile you mention was "only" INES 5. I'd argue it's still pretty bad but INES 7 is what I'd consider the black swan events.
>Driving electric cars instead of hybrids in areas where the electricity is primarily derived from unclean sources is not better than hybrids for the environment.
ICE cars are far less efficient than fossil-fuel power plants, due to the weight/size restraints of a car-engine form-factor. Given this, electric cars actually do emit less energy than cars that burn fossil fuels.
But frankly, you're looking at this the wrong way - most electric cars are at the start of their life, and have at least 10 years' worth of use, if not 20 or more. Given that renewables will inevitably become a major portion of the electricity grid within 10 years (and realistically, almost certainly within 5), they'll become more efficient in the future, and make renewables reduce even more CO2 emissions, since they're punting petrol away, too.
as you indicated - this depends on where you live - and if you're ready to just fix the problem yourself with solar power. Stating that it won't help is IMO misleading - Tesla is basically offering you all the missing tools to carry a high energy American lifestyle towards being carbon neutral. The footprint you missed in terms of consumed goods or at home, could be compensated by buying CO2 certificates.
I didn't short the stock but I can understand why someone would.
They are expected to generate over 90% of their value after 2020 [0]. There's the expectation that Elon Musk will definitely deliver, that Tesla market share will not be eaten up by other carmakers when they seriously start releasing electric vehicles. The expectation that electric and not another form of energy, such as hydrogen, will dominate, etc.
There's a lot that could go wrong and a lot of unknown variables. Then again everything might turn out fine, the point is that no-one know for sure.
> when they seriously start releasing electric vehicles
They've been "serious" for a long time. Chevy has been selling the Volt since 2010. If they were going to muscle out Tesla they would have done it by now. And it's not just about technology. Tesla has the customer reputation that companies like GM will never have again.
I own a Volt. Best car I've ever driven. GM doesn't care much for it. The only advertising they really do for it basically is trying to steal EV customers from Nissan's Leaf. Really dumb. And the dealers don't like it because 1) they don't know how to service them and especially 2) they almost never need servicing. If you run almost exclusively on electric, you only need like 4-5 oil changes in the entire life of the car. And the brakes last forever, too.
Actually, the reason GM "doesn't care" about the Volt (I'm exaggerating here; they obviously care a little bit) is because they're rational: electric cars are not popular with mass-market consumers, and it's far from clear that they're going to become popular.
GM is investing in what sells, and right now (i.e. for the last decade or two), that's SUVs and light trucks. Which doesn't bode well for Tesla, at least in the near term.
You can certainly argue that fuel prices are going to go up and make electric cars popular. The question is: does it happen before Tesla goes broke?
(Edit: downvoting doesn't change facts. From GM's own 2017 outlook [1]: "Ten all-new or recently redesigned crossovers are expected to drive GM’s sales and share higher in 2017, including the Chevrolet Equinox and GMC Terrain, which will compete in the industry’s largest segment." And they're not joking about that last part. As of February 2017, SUVs and Trucks dominate the list of most-popular vehicles sold in the USA [2].)
I'm about to buy a Volt as soon as VW buys my dieselgate car back from me. I have had to go through a few different dealers to find someone who is serious about selling the thing.
The platform looks amazing. It boggles my mind in all the years this vehicle has existed that they haven't made more vehicles based on it.
Agreed. A pickup based on the Volt technology would be fantastic. Electric can allow crazy good torque. And you have a nice big battery, backed by a quiet and efficient built-in generator that only needs to run occasionally, to run power tools off of.
I'm on a work visa here in the US, and I couldn't get financing on a Volt because GM Financial insisted on doing > 30 months lease on their hybrid cars (and my work visa expires before then, though it's likely to be renewed anyway).
Go figure. It's not like I can't afford the monthly payments.
Sheesh. When I bought a Prius (admittedly, 2007), I was here on a fiancee visa. Toyota Financial had no problem okaying a three year lease even though my visa was (technically) three months (but available for extension).
Very interesting points. So as the other comment has pointed out, traditional automakers will have difficulties selling through their dealerships. Do any of the established players have any plans for their own dealerships / showrooms?
They can't as the rights to having local dealerships has already been split out. They'd have to buy out their dealers and probably change a bit of State law to accommodate that.
Is there something special about the brakes? Less maintenance needed makes sense, but I would have thought the brakes are no different than gasoline cars?
GM isn't a threat to tesla unless Cadillac starts selling something to compete with the model S. As a Tesla shareholder what keeps me up at night are Mercedes, BMW, and Lexus.
> Tesla has the customer reputation that companies like GM will never have again.
Tesla is more like a luxury brand so its biggest potential competitors will be the big 3 in Germany and possibly Lexus (which all have a pretty good reputation), and currently none of them propose that many options.
Audi and Lexus have none. BMW has two, but only one of them can sort of compete with Tesla (can't go far with the i5 battery). Mercedes only has one (if I'm not mistaken). It really feels like they're only getting started, and if/when they start releasing really compelling models, it will be something more to deal with for Tesla.
In short, German carmakers' historical expertise in designing good internal combustion engines are worthless if electric cars take over. The auto industry is ripe for some serious disruption.
btw. mercedes buys the batteries from asia and their engine did come from tesla, however they broke up and now they have a new partnership which helps them.
german manufacturers have no interest in selling electric vehicles to the masses.
Before automaker were only focusing on the fully urban, second car. The like of Nissan Leaf, Renault Zoe, even BMW i3.
Tesla has opened up a slice of the market the traditional maker didn't expect would work: primary car. This has a feel of Apple with iPhone in 2007.
Even if Tesla ramp up tremendously and try getting in every car segment simultaneously, they will not have the capacity to provide all the cars that people are looking for, so the rest of the companies will likely continue to provide the bulk of the car market. Which is not a negative for Tesla, the market is simply enormous: it would take Tesla to produce over 2 million cars per quarter to even get over the single digit market share.
The biggest risk now for Tesla is not being able to reach critical mass fast enough. I can understand their valuation and their need for cash. I can understand the shorters too, unlike the smartphone market, car purchase has at least a 4 years cycle and even in the first world, a car purchase is one of the biggest investment.
Hydrogen is unlikely to win, it's fair to say that it has already lost [1]. The hydrogen economy was mostly a myth [2]. 95% of hydrogen is made from natural gas [3].
> ...that Tesla market share will not be eaten up by other carmakers when they seriously start releasing electric vehicles
Tesla has been around long enough that it can no longer be replaced by a large company that just throws a ton of money and talent at it. They're too far ahead. There's no substitute for the raw amount of time Tesla has spent developing its product.
ahead of who? There are several low-end electric cars already on the market (Chevy, Nissan, BMW), and one high-end (Tesla). They are meeting in the middle
I think that a surprising number of people buy stock based on how they feel about the company rather than how they feel about the company compared against the current price.
They are expected to generate over 90% of their value after 2020
This is true of many startups, especially in a low rate environment. It's the "Terminal Value" in the calculation that drives value. Of course the Terminal Value also is extremely volatile, and changes a lot to small changes in inputs.
I have a small investment in TSLA stock. What I'm betting on is that in addition to being a car manufacturer on the scale of Ford/GM that TSLA will also be the world leader in AI/driverless cars. I don't have a huge position, but intend to hold onto it forever.
The year is 2051, SpaceX has made significant progress on building out infrastructure on mars. In the last 25 years we have seen the explosion of Musk's empire across the solar system. Starting with the seed efforts on earth, robotic rockets have been flowing to Mars in droves. The exceptional thing is how they have delivered the infrastructure to the planet once there.
These rockets are far superior to their ancestors. With orbital factories around earth, and regular deliveries of colonization supplies, the network is vast, complex and efficient.
Starting with battery manufacturing on earth, all the colonization components required of earth are delivered to the orbital factories where humans and robots work in a beautiful synchronized effort to prepare each packet to Mars. Batteries and other components are delivered to orbit. They are then constructed into the various machines to be delivered to mars on the massive Falcon-33s that will haul them to Mars.
The autonomous Tesla Landers are quite complex, they have impressive batteries, but its their job which is more impressive.
Once orbiting Mars, the payload shall be unpacked and deployed to the surface, where they will continue the construction of the massive solar arrays which already have a large contingent of batteries to slurp up the solar energy and store it for all the other needs of the build-out.
The project has been going on for decades, but we are starting to see some serious results in this phase...
The original idea was laughed at, but it was all backed by sound science and a simple phased approach:
* Develop seed infra at home; Batteries, rockets, robots
* Consumerize these to fund later phases
* Proof-out orbital autonomous delivery services via the ISS
* Commoditize space tourism, popularize it with celebrities
* Exploratory missions to Mars
* Develop orbital manufacturing capabilities, where supplies can be delivered autonomously
* Build Ultra-heavies in orbit, modularly to avoid launch costs from surface (required tethering technology to be developed)
* Deploy communication relay probes between spatial bodies
* Deliver initial robots to surface of Mars, they prep for solar install
* initial solar install to feed robot population already on surface
* Add batteries
* further infrastructure to follow, but with a working autonomous robot service group ready to build out
We are now at the deployed battery stage, the Organization is now preparing the life support systems for long-term human colonization, and within the next 25 years, we will have a permanent Human Civilization2 on the planet Mars... perhaps, Again?
Yes. Short-selling pioneer Bob Wilson nailed the key insight on these situations. They are "manana stocks," Wilson declared, way back in the 1970s. Their valuation is premised on the notion that something wonderful will happen in the future. Time horizons keep being pushed out, but the stocks' fans don't mind.
Shorts can get very cranky and righteous about each little bit of slippage. But as long as new enthusiasts keep showing up, and old ones feel lenient, it's hopeless to insist on strict accountability. Even a short-lived burst of optimism is sufficient to arrange more funding, so manana always seems within reach.
Worst case: you're shorting Amazon. The bulls were right, and you go broke.
Best case: you're shorting something like Energy Conversion Devices, which eventually did run out of money and file for Chapter 11 in 2012. Shorts had been predicting its demise since the 1970s. That is a long time to wait.
Best case: you're shorting Sun Microsystems at the beginning of 2000, and it goes from $300/share to $3/share in the next 3 years. (http://www.1stock1.com/1stock1_211.htm)
My advice is to just not touch tech stocks; going short on them is just as dangerous as going long.
Even the best case wouldn't have you more than double your money, if you put up 1:1 collateral. I guess you could have less collateral than this, but in that case, given a growth stock, you would be wiped out if there was a modest increase. I don't see the risk/reward curve for long-term shorting.
When the price starts dropping, you would have to sell more shares to maintain a 1:1 ratio. For example, you can double the number of shares each time the price drops by half, and make up to 200%.
Every company these days is a tech company in some respects, but I don't think Tesla fits the bill in the general sense. Tesla is a green energy manufacturing company.
The only reason I think this matters is their finances are a lot different than a tech company. You are correct that Tesla is currently priced like a tech company though, so maybe I'm way off!
They changed their name this year from Tesla Motors to Tesla Inc. to indicate a wider focus on technologies, not just cars (solar panels, batteries). How do they not qualify as a tech company?
Knowing the company's core competency is very important. Stray from that, bad things happen. Is Tesla an electric car company? or an electric supply chain company? or what? If EV manufacturing, then focus on the car construction & experience, doing what's needed to power the thing (battery production, home solar services) but realize those can/should be ejected when better solutions arise. If a "tech" company, then we'll see Tesla stray into solar strip mining, long-distance delivery, app writing, and a host of other activities utterly unrelated to EVs - eventually dropping the EV part altogether.
Apple dropped the "Computer" from its name when moving firmly into a market (pocket supercomputers) which was a natural extension of its real core competency (high-UI/UX computers), but which (phones) were deeply perceived by the public as something profoundly different from "computers". Steve Jobs rediscovered the company's core competency, focused on it, and adjusted name & strategy accordingly.
Kodak thought its core competency was photochemical consumables. That was a pivot away from imaging, and into oblivion when the imaging technology shifted.
Smith Corona's competency was typewriters. We still need typewriters, but because SC tried to compete with computers (a spreadsheet on an electric typewriter is a non-sequitur), rather than being the best product for a shrinking yet enduring market, the biggest world brand vanished overnight.
If a company is going to pivot (which a name change absolutely signifies), then it better pivot around its core competency. Tesla's "tech" need be absolutely about either electric cars (by which batteries and solar are incidental and expendable for more suitable power sourcing), or solar (by which the consuming device may be far different than just a car), or power storage (source and use of power being incidental). Tesla is only "tech" insofar as they're pushing the limits of technology for building & powering electric cars. Stick with the cars, with solar ONLY as a means to free their power sourcing (and extra powering one's home), and they'll do fine; self-identify as a "tech" company, and they'll die of confusion. Musk is smarter than that mistake.
Interesting sidenote -- after reading the keyboard.io adventures-in-manufacturing emails, what really jumps out at me are the extent to which Apple's true brilliance these days is on the manufacturing/supply chain end of things.
I'm curious about what you would consider a tech company.
For me a tech company is any company that uses the development of technology as a competitive advantage. Solar is not, major solar companies are not developing innovative technology. Tesla is, they do not have an advantage in scale or low prices, but have advantage in how their vehicles function.
This is why you should purchase put options instead of short selling. Exposure to short selling is theoretically infinite. Exposure to put options is just the price you paid for the option.
Shorting generally should only be for companies whose solvency is in doubt.
This is wrong. You should not be trading options if you only have a directional view of a stock, as you will get eaten alive. Options pricing involves much more than just the underlying stock. Most importantly, as another poster said, there is implied volatility. There is also time risk and interest rate risk priced into the option.
With options, you could be right on direction, and still lose money.
With put option you pay a big premium for the right for someone else to take that risk. If the company has a high volatility like Tesla you will pay a big premium to buy that option.
Is anyone actually short Tesla to a significant degree? I can understand the normal hedging positions and daily trading, but shorting a stock with so much positive sentiment is folly...
31 million TSLA shares are currently held short, which represents somewhere in the region of 20% of the non-insider shares. (Yahoo finance says 38% of the float, so I guess it depends how many shares you consider freely available on the market).
There are some reasonable bets here. Russia has a vested interest in climate change... their biggest liability is cold and ice, a rise in sea level and 5 degree bump in average temps would give them a much bigger role in agriculture and shipping. Add that to the petrodollars from selling their oil reserves and you've got a game changer for them economically.
China probably loses at least temporarily in the runaway climate change event due to destroyed cropland and refugees. The U.S. has exposure on both sides so it's a little more moot for us. We'll lose quite a lot of biodiversity, and may take a big hit to agriculture but we're banking petrodollars and have so much upside when people move to virtual reality we'll be fine. If we were horribly exposed Dems/Reps wouldn't be split on the issue, as clueless as they are.
And of course there are the Saudis and corporate/investment petro interests you allude to.
Russia/Saud/Exxon vs China with U.S. on the sidelines... not sure who wins there.
I really hope we can transition to sustainable energy, but there are big players that stand to gain from delaying it until the reserves are burnt. It's not a bet I would take but I understand why people would bet on there being plenty of feet sticking out to trip up Tesla and co.
Isn't the time to short a stock when there is too much positive sentiment? I would never short stocks because I don't believe in timing the market, but if I were to, I wouldn't seek out stocks with overall negative sentiment as those would seem to have the most upside.
Positive sentiment is often an excellent signal that the emperor has no clothes. Most people will ignore what they can see with their own eyes if everyone around them seems to see something different.
This was not a capital raise. Read the filing. Tencent acquired most of the shares on the open market and the remainder in the round that was announced earlier this month.
I don't need to read a filing to know that when you create shares out of nowhere, and sell them, diluting current shareholders, it's a capital raise. What else would you call it?
>Do you understand that's not what happens when shares are acquired on the open market?
Do you understand that Tencent bought shares in a secondary offering? Apparently you do, you said it. Not sure what you're arguing. Do you understand the purpose of selling shares is to raise money for operations?
Over the next year or so, it should be clear if they'll be left in the cold, or very wealthy. Pretty much everyone seems to agree that the Model 3 needs to do well in an unprecedented way (not impossible), or Tesla is in very deep trouble (not impossible). It's hard to imagine the BMW and Mercedes aren't working on things too, and they won't have horror stories of their cars being in the shops for the better part of a year.
This is still so uncertain, and I for one wouldn't feel comfortable even guessing, never mind guessing with real money.
The raise will dilute earnings for common shareholders, so definitely a downward force on stock price. That being said, this investment and the recent raise you alluded to should clobber the put skew.
This is not a new raise. The filing indicates shares were primarily purchased on the open market and then topped off by the Goldman-led round earlier this month. No new dilution here.
fair enough. so if it's not new shares, put skew should remain strong as there is still non-trivial risk Tesla runs out of cash. And probably at least a small positive push to stock price as investors would reasonably bet that Tencent could be called on to buy more shares.
>The raise will dilute earnings for common shareholders, so definitely a downward force on stock price.
The stock is detached from reality.
It's my understanding that this was another offering, so, essentially, Tesla sold 5% to Tencent at an average price of $217 and change. Current shareholders get diluted. Prices go up.
I don't get it, but I'd love an explanation. Were people, prior to these capital raises, concerned Tesla couldn't raise any more money? That would make sense, but certainly isn't the sentiment I gathered from my travels.
How is that really any different from any Silicon Valley company raising a new round of money? So long as the valuation goes up enough to compensate for the dilution, the per share stock price will be the same or higher. I'm not saying the valuation is correct but the fact that dilution happens and stock price goes up isn't that had to reconcile, right?
>So long as the valuation goes up enough to compensate for the dilution, the per share stock price will be the same or higher
But per stock price is the "valuation".
My comment re: being detached stems from the fact that on Day X, you can buy Tesla for price $Y. Then Tesla sells more shares (dilution). So now each individual share represents a smaller proportion of company ownership...yet the next day people are willing to pay more for that smaller ownership.
Obviously there are far more dynamics at play; but generally, dilution should cause the price to drop.
It seems to me that people viewed Tencent's purchase as signifying confidence in Tesla from a legitimate, cash-stacked player.
As a result, it was all aboard the hype-train for retail investors to secure their seat in yet another speculative rocket ship.
Tesla's ability to deliver has been in question for a bit. This cash will be used as fuel to prevent the rocket ship from experiencing a sudden, gravity-induced trajectory into the earth's crust
One of life's little mysteries is that you almost always lose money if you invest internationally. A friend of mine says it is because the locals know what is going on better than you do.
Tencent was a major investor in Magic Leap and the Saudi Sovereign Fund invested heavily in .coms in early 2000. It is definitely not a sell signal, but I would not buy what Tencent is buying.
Most of my investments are in stocks and funds outside of where I live (Netherlands). Guess which parts of my portfolio aren't doing so well? The EU bonds.
I see this move as a blessing for Tesla to gain market share in China. The stock is valued for growth far into the future, and achieving that outcome is really iffy without a robust China market.
[edit] I'm speculating, but I don't think TenCent could have gotten as big as it has without the blessing of the Chinese government. That is the basis for my view.
> I see this move as a blessing for Tesla to gain market share in China.
Yes, and Tencent is betting on it, since Tesla Chinese market sales has just broken $1B [1], soon Chinese market will be Tesla's biggest market with Chinese government's policy leaning on supporting EV industries in a MAJOR way. Win-win!
> Tencent is a prolific investor. It holds equity in Snap, this year’s hot tech IPO, among others following an early investment. While that interest in messaging makes sense since Tencent’s operates China’s dominant chat app — WeChat — it isn’t immediately clear whether the Tesla investment has strategic undertones.
This was my immediate question as well. Is this purely an investment for its portfolio or is there a strategic element as well? I imagine being able to send/receive messags on WeChat as the beginning of something more.
There may be some synergystic stuff from time to time (ex: Yahoo! Japan), but most of the time it's a pure investment move to amp up their returns.
Berkshire plows the cash flow from their insurance business into acquiring businesses (though they get a controlling stake), Softbank plows its telecom cash flow into speculative VC bets, and Tencent seems to be plowing its own revenue into VC bets as well.
Could be a portfolio diversification move- not sure how they financed it but China's currency is pretty inflated, we've seen a lot of large equity investments from the Chinese in the past 2 years (in Hollywood, for example).
If the CNY crashes for whatever reason they can dump the stock and flip the currency for a lot.
Having access to the internals at Tesla is interesting and potentially powerful -- significant ownership share brings many benefits that are by no means small. Albeit on a need-to-know basis and through a peephole, it is nonetheless advantageous.
It may cost $1.7B but it guarantees continued access, whereas throwing technical exfiltration (ie: hacking) and manual exfiltration (ie: mole in Tesla staff) whose resources are limited and unpredictable.
This is my understanding as well. I get great info talking with smallcap to the just barely midcap companies if you ask the right questions. Heck, usually, I am able to get a conference with a VP or CEO if my questions go above paygrade. I am no whale.
In practice, you will not get the same level of info on larger companies if you are not institutional or in a group of retail investors holding a decent share-count. Information obtained is usually a small amount above what is found on the conference call or via google.
As mentioned by the other comment, board members get preferential information sharing. I would haphazard to guess that Tencent balked at the purchase price of a seat on the board of directors (eg: 20% stake or something to that effect) or Tesla opposed it on principle. Probably the latter and then Tencent moderated their stake offer.
However, shareholders are afforded access regular updates on the financials of the company, which Tencent may be satisfied with on its own.
Yes, that's the real question. If Tencent obtained a board seat as well, then I could think of all sorts of scenarios that could benefit Tencent in China, but not necessarily Tesla.
Is that true? I've never read the SEC rules or looked into this in detail but my understanding was that information sharing only becomes a problem if you actually trade on that information (ie. insider trading). I didn't know the rules actually tried to limit what was shared. How does that work with employees etc, who will almost certainly have access to a lot of preferential information and many also be investors or significant shareholders? Would love to know more!
Tencent Holdings is more of an investment/VC company. WeChat is just one of its subsidiaries it funded that became wildly successful. Its primary focus is still investment in technologies. Pretty sure it can find some synergy with Tesla among its wide reach of portfolio. Does it hold solar related companies?
tencent has 2 primary competitors in china, primarily alibaba and baidu. baidu's business model is to copy everything google (so google maps, youtube, self driving cars, etc), but these 3 companies are converging on a lot of these things as baidu gets into self driving cars, was an investor in uber, etc. i think because they have a huge amount of capital, that they can make these types of investments to prepare themselves to take on alibaba and baidu head on in the future.
I suppose the administration is going to argue this move supports Trump's claim that global climate change is a Chinese plot to undermine the American economy.
Is this showing that they haven´t found a Chinese company that could compete against tesla? China is investing a lot in Solar energy, batteries and have car companies that want to become global players, and most of Tencent investments are on Chinese companies that make products focused on China and Asian markets. I do not know if they buying in open market tells more about Tesla potential or about China future in cars and energy.
A $2B investment doesn't really preclude other similar future plays for a $200B company. So I think there's not enough information to draw that sort of conclusion.
When I first read this, my head saw "Fifty Cent"...
And I thought "A _rapper_ has just bought $1.7billion worth of Tesla shares???" and was all ready to make "Has Tesla already become the Cristal Champagne of car brands?" gags...
Still, half a billion return in two weeks on a 1.7 billion play is pretty nice money...
Fifty Cent got a minority stake in Glaceau instead of a payment for endorsing their Vitamin Water. When Glaceau sold to Coca-Cola, that equity was worth somewhere in the neighborhood of $100 million.
Smart move. Tencent's investing but not controlling strategy make it good supporter of the new generation of ambitious entrepreneurs against AAAAF(Apple Alphabet Amazon Alibaba Facebook):
- JD
- Didi
- Snap
- Meituan-Dianping
……
Okay, but that's kind of an unfair comparison since Facebook, Google are corporations. Elon is a person. But if the point is tech founders should actively invest on their own outside of their company, okay that's fair. I am not sure how often Jack Ma, Mark Zuckerberg or Jeff Bezos invest in for-profit companies outside of their company's investment arm, but I think they do.
this just shows how distrustful are Chinese about their own currency that they seek any way to store money abroad in safe harbor away from RMB and Chinese government
I think they knew solar is the future, all around the world.
China has massive pollution, and most homes/businesses that have access to direct sunlight. (Yes--I know solar works 50% on cloudy day. It doesn't work well with a lot foliage coverage. China looks barren of trees--sadly.)
My hope is those solar tiles come down drastically in price. My hope is the average roof will be cost effective to put said tiles up.
I think those solar tiles will be Tesla's Trump card. It will probally be in four years, or more in the United States. We will need a new president. (I was for Trump putting Coal miners back to work, until I found out the problem is not regulations, but automation. Actually, I want clean air. We need a better way of supporting people affected by the elimination of old ways of doing things; like a Basic Income.). Sorry about being all over the place, but there are no simple answers. Trump is just finding this out.
I think Tencent saw a long value in the stock, even though their citizens will not likely buy Tesla's tiles. They will buy the cheapest knock-off as usual, but the rest of the civilized world will buy Tesla's product.
(I don't know what patents are on these new Tesla tiles, but I bet they are seen as a valuable commodity, even to a cheating society like China.)
> For Musk to hit all of his targets, Tesla would need to build about 430,000 Model 3s by the end of next year. That’s more than all of the electric cars sold planet-wide last year.
> Even if half of the Model 3 inventory shipped to other countries, 2 U.S. sales under Musk’s targets would outpace the BMW 3 Series and the Mercedes C class—combined.
> To sell that many $35,000 sedans in the U.S. “would be absolutely unprecedented based on what we know about car markets today and how people spend their dollars,” said Salim Morsy, electric car analyst at Bloomberg New Energy Finance. “It could happen. I’m pretty sure it won’t.”
If they could pull this off this might be a great investment by Tencent.
It's also great for the car industry and environment as well. Especially considering their work on automated driving. If they get that many cars on the road it would give them a ton of data and a big advantage/lead in AI over other companies. But it could also be setting the bar too high and setting them up for failure (even though they might otherwise have nailed targets).
Regardless, as a design fan it would be interesting to see so many Teslas on the road. They are great looking cars.