[stmfreak]

Tesla’s stock price is confusing if you compare them to a car company. But they are not just a car company. They are also a car manufacturing supply chain, having brought much of their component production in house. They are also an energy company, both generation and storage, but also distribution, like gas stations. Think Exxon, BP, Chevron, ARCO, etc.

They are probably a few other things, but this is the mystery of their valuation.

[dado3212]

For the record, their market cap is also greater than "Australia's Woodside Petroleum, Chevron, Exxon Mobil, Imperial Oil, Royal Dutch Shell, Shell Energy North America, Canadian Natural Resources, ConocoPhillips and French group Total [combined]" [1], so they're also valued kind of crazy compared to energy companies...and that was in January 2021 before the most recent spike. Sure, part of that is faith in renewables. But in any fair comparison their stock price is still a little confusing.

[1] https://www.tesmanian.com/blogs/tesmanian-blog/teslas-market...

[AtlasBarfed]

I might be a bit crazy, but you just mentioned a slate of companies that absolutely have no future at their current scale. Sure this won't happen overnight...

But my theory with petroleum is that it has so many HUGE economies of scale built into its production that a demand collapse will send it into a rapid tailspin.

A small version of this happened in the Dakotas when the Saudis started dumping oil to get it under a price, and the North Dakota oil industry collapsed. That was due to intentional oversupply, not necessarily due to collapsed demand.

But so much of the oil market is now pretty expensive extraction: tar sands, shale oil, fracking, deep offshore. The easy stuff is gone. That to me means that the industry rests on a certain price, and if it falls under that, the industry can't sustain it.

I think the big thing in this reverse economies of scale, where costs rise as the industry shrinks (and absorbs writeoffs) is that finance, already somewhat intimidated by the growing pressure to divest from fossil fuels, will rapidly abandon it once it becomes extremely risky due to collapsing demand and massive migrations of transportation modes to electric.

It's all vague decade-away prognostication, but you'll start hearing the violins playing for oil companies when some combination of this happens:

- charging infrastructure builds out (2 years to catch the current Tesla supercharger, probably another 5 years to get some semblance of every-50-miles availability)

- LFP chemistry hits a power density of somewhere around 200-250wh/kg (LFP is really cheap and has far less materials restrictions from cobalt) (probably in 1-2 years for mass production)

- various solid state technologies hit production (looks unlikely for 5 years)

- EV drivetrain cost (battery, motors, cooling, case, management systems, etc) drops to 2/3 of ICE (probably another 4 years)

- a carbon tax, a more substantial EV subsidy

The floor will rapidly fall.

I'm not saying Tesla isn't insanely valued. But the grim reaper is coming for all those oil companies.

[tappio]

We are so dependent on fossil fuels that I'm slightly more sceptical. Over 90% of global energy is created with fossil fuels. We often get fooled about the electricity sector which is something like 1/3 renewables. But electricity is only 30% of fossil fuel consumption. Even if the share of electricity increases to 40% because of ev's and we produce 80% with renewables, we still have ~70% that requires fossil fuel production. That 70% is not that easy to replace -- we are talking about manufacturing, logistics, agriculture, mining, etc. Getting rid of coal only increases oil and gas demand.

I'm not sure what is the percentage of consumer sales for any if those companies mentioned, but I suspect that even if it was 0 it would not drastically affect anything but profits. Oil will be less profitable -- yes, but it will be widely used as long as energy required to mine it is less than what is produced. It is unfortunate, but these companies are on a very good long term business (hard to say really because I don't know what are the global untapped oil reserves).

Manufacturing components to produce renewables require a lot of fossil fuels as well. We are not yet at the point where we can create new renewables without using fossil fuels.

I'm not saying the floor will not fall, but I'm afraid that if the floor falls we are in quite big trouble, and it is not because if the EV market.

[ZeroGravitas]

That 90% is much easier to replace than you think because its mostly wasted as heat and inefficiency.

Once you factor in the fossil fuels used to extract fossil fuels it all topples pretty quickly.

The main source of trouble will be people ignoring the issue until it becomes urgent and not planning a smooth transition, global procrastination rather than the actual task itself.

[tappio]

I like your optimism. I just don't see how we can produce and transport food, electronics, and specifically windturbines, solar panels and batteries on a global scale without using massive amounts of fossil fuels.

Actually, I would love to see a the real "energy footprint" of a solar panel. Like, how much mining, transporting, manufacturing and installing the panels consumed energy, and how many days it takes for a panel to produce more energy than the entire operation used. If anyone has such a breakdown I would be really happy to see it. If the numbers are good, maybe the future is still bright.

[ZeroGravitas]

You can find these online, they've been doing them for years. Though maybe note that "energy" isn't really the problem, it's the greenhouse gasses that have sparked this changeover. "Carbon payback time" is a common phrase. It's now getting into the "this is both cheaper and better regardless of carbon" phase, but it wouldn't have been pushed this hard if the numbers didn't stack up in theory.

[fragmede]

Zooming out to a global level, geopolitics becomes important to consider as well. As soon as renewables are able to change the power dynamics between eg Russia and Ukraine (Ukraine is dependant on Russia for oil for heating in the winter) things get very interesting indeed. We are still decades away from that imo.

[throwaway210222]

Surely Ukraine just needs to allow EDF to build few nuclear power stations on long term agreements to end their dependence on Russian heating oil?

[vineyardmike]

Its surely just that easy... for a small and relatively powerless nation to product nuclear power under the watchful eye of a very powerful nation that doesn't want it.

[AtlasBarfed]

Oh yes! We won't care about the middle east, so none of that bizarre cowtowing to the Saudi king that the US Presidents always do (I think largely to get on the post-term massive slush money that flows from the Saudis to former presidents, which I have no direct knowledge up, but seems obvious)

The Navy will lose a huge reason for its existence: securing the seas for supertankers. There are so many countries we won't care about anymore. Iran. Iraq. Venezuela. Nigeria. Really, by extension, Israel, Egypt, Jordan, etc. Then again they'll just keep building up the China boogeyman to keep their money, regardless of its validity.

As you pointed out, Russia will face an existential crisis, I think oil revenue basically keeps Putin afloat. A total collapse of Russia is pretty risky due to the nukes, but we'll see.

[nebula8804]

I think you are too optimistic about Israel. These other countries can be dropped easily but Israel is a huge liability that I don't know how the US will get rid of. I do feel confident that the winds are starting to fly against them slowly but I don't have my hopes up. It will likely be a generational shift that finally does them in but IDK. What do you think?

[philistine]

The incredible thing is a calcified Russian system with access to way too many nukes collapsed within our lifetimes and the West adequately prevented nuclear disaster. We ended up with the current farce of a government as a byproduct, unfortunately.

[riversflow]

Yeah I'm not a domain expert on decarbonization or anything, but from what I've seen on the industrial manufacturing side of things in the US, electricity prices would have to be consistently very low for the cost of re-outfitting existing natural gas heating systems with electrical ones to make sense without fairly punitive carbon taxes, and even if you pass carbon taxes in first world countries to make it "worth it" to retrofit with electric heating, most of the domestic manufacturing will just go belly up without tariffs--good luck getting developing economies to enforce the environmental standards most of us would like to see on their own, and good luck getting the ruling body politik to think tariffs are a good idea. I ran the number on our facility and moving from natural gas boiler heating to electric would have been iirc something like 8-12x more expensive, even before buying the very expensive heaters, and I'm fairly certain that for higher temp operation(our steam system was low pressure) it would be even more expensive.

There are a couple other stand out problems I see with getting the industrial/manufacturing sector off fossil fuels. First, I don't think that we have the grid infrastructure to replace natural gas with electrification at the same time we do cars[1][2]. From what I understand its something of a problem already for electric car charging, and industrial use of gas for heat (and saying nothing of trying to replace the petrochemical industry, interesting read on all-electric ammonia production [4]) is pretty staggering as well; electric transmission is some substantial multiple less efficient then direct heating with Gas. I think this is kind of the opposite of electric cars which tend to be more efficient than ICE, but again I'm not an expert and am not at all sure that is true of cars, just my impression which seems reasonable intuitively, as turning fuel directly into heat has essentially 100% efficiency while turning fuel into motion can only be some fraction.

Second, super cheap electricity is extremely fungible, so it becomes a prime candidate for Jevon's Paradox[3]. I feel that there would have to be some "unfair" power rates for heating for electricity to supplant natural gas unless we implemented massive carbon taxes, in which case return to my first point about off-shoring.

I can see how it would theoretically make sense to put industry right next to large power generation sources, like dams, solar array/ battery installations, or nuclear power plants(lol), but a lot of these operations aren't exactly trivial to move, and our current climate of Environmental regulation makes moving these sorts of things that much more difficult. Also manufacturing requires a not insignificant amount of logistics/shipping so transplanting them to power generation sites has its own set of drawbacks.

All in all, I try to be a techno-optimist, but seriously worry that humanity's ad-hoc system of organization (that's rife with corruption) will be our downfall in this global climate crisis we've created. So far I can't see a way out of this without a breakthrough in power generation and a breakthrough in carbon capture or some other unforseen-by-me break through. Really I just don't see our current tech stack as being capable of getting us out of this mess. So here's hoping that high-temp super conductors bare fusion fruit, and this gallium catalyzed CO2 splitting is the real deal.

[1]https://www.pewtrusts.org/en/research-and-analysis/blogs/sta...

[2]https://www.nytimes.com/2021/01/29/climate/gm-electric-cars-... (has additional good links as well)

[3]https://en.wikipedia.org/wiki/Jevons_paradox (fun fact, I've used duckduckgo for many years now, and this required the rare !g to find without knowing what the paradox was called off the top of my head. my query was: "the cheaper something gets the more it is used", top hit on big G, nowhere to be seen in the DDG results)

[4]https://www.cleantech.com/green-ammonia-potential-as-an-ener...

[kieranmaine]

Air source heat pumps are more efficient than gas boilers so total energy usage would decrease [1]. Running costs are also lower, but installations cost are currently higher.

You would need to generate more electricity, although this could be mitigated through improved insulation and smart control of heating systems (for example turning off the heating for 30 minutes during spikes in usage, assuming the temperature is above a certain level).

[1] https://www.edfenergy.com/heating/advice/air-source-heat-pum...

[riversflow]

I'm not particularly thinking of domestic heat production, I agree that heat pumps (ground source, or a pool if you have it, works even better!) are the future of domestic HVAC. I'm thinking about heating for industrial processes, turning off the factory for 30+ minutes during a useage spike is a minor catastrophe if unplanned, you'd either have to design your shift around it (we had time-of-use power pricing and did this) or just close down. I won't rule out heat pumps as being part of the solution out of hand, but from your source:

>Lower output temperature than conventional boilers – you may need to update your insulation and invest in bigger radiators too

is a pretty big problem when you are trying to heat industrial quantities of things up to industrial process temps at industrial rates.

[fragmede]

- People realize what a game changer it is to charge your car overnight and start every day with a full tank of "gas". It's a tiny detail, but a car that can only go 100 miles before needing to refill the gas tank is annoying. A car that starts every day with a 100 miles of range is terribly (for the oil companies) convenient.

[TeMPOraL]

That one is complicated a bit by housing situation - but if, if, cities and freeholders get serious about ensuring every possible parking spot (including unmarked ones) has a convenient electrical outlet nearby, that would be a game changer.

In a sense, this would be much cheaper and more convenient than supercharger stations - but what it trades in infrastructure saving, it costs in getting myriad of land owners and councils to make it happen.

[fragmede]

You're totally right but again thinking globally, different cultures handle housing in a manner that supports that. I'm thinking of Japan, where they rebuild houses every few years because they're old. Which results in most houses having electric car plugs in them. I have no such hope for my SF condo that I'm writing you from. Maybe I can run an extension cord out of my window to my car parked on the street?

[fomine3]

> I'm thinking of Japan, where they rebuild houses every few years because they're old.

This is myth. 35yr loan is pretty basic, most loan supports up to 50yr. We can see many houses built 35yr ago. Anyway, installing EV charger is easy task for own house. It just takes about from $200 if 200V line is available. I believe mostly available unless the house is very old.

More importantly, there are many condos and parking that's hard to install charger due to it need to be approved in condo committee.

[AtlasBarfed]

I don't worry about a lot of the NIMBY with self-charging. It'll be like bike lanes, once people discover they increase property values, or at least keep them from sinking, it will be a done deal.

[nebula8804]

>But my theory with petroleum is that it has so many HUGE economies of scale built into its production that a demand collapse will send it into a rapid tailspin.

THIS! Thank you for bringing this up. Few people talk about this coming death spiral. This is really going to mess up a lot of countries incomes and may have severe worldwide political ramifications. In your opinion when do you think it will trigger? It feels like when it does actually happen, its going to happen quickly. From my vantage point in the US it still seems like the majority are not realizing what is coming. Hell Companies like Ford are still introducing new vehicle platforms in ICE configuration only (Ford Bronco for example) and people are buying them up without any consideration as to the future so I suspect it won't happen this decade.

I don't know enough about the economics of the fossil fuels supply chain to make a reasonable calculation.

In terms of your other calculations your targets seems very reasonable. Its amazing at how Tesla is iterating so fast on things like Battery and Motor design. Its super sexy to see the new stuff they keep pumping out(even if the founder seems like a jerk)

[breakyerself]

Anyone intentionally investing in fossil fuels today is delusional. These companies should have died years ago, but they've managed to delay the inevitable by lobbying to delay action and protect their massive subsidies.

Tesla has shown electric cars can be superior to gas cars in all but one metric (road trips) and they're closing in on that. Wind and solar are now cheaper than coal and in some markets cheaper than natural gas. At peak times electricity from renewables is so cheap its creating a gold rush to develop low cost energy storage to soak up all the dirt cheap electricity that's being produced.

Theres also companies who can produce synthetic liquid fuels with co2 from direct air capture using renewable energy. With a decent carbon tax they could compete directly with fossil fuel companies but eventually renewable energy should be cheap enough that they won't even need a carbon tax.

Fossil fuel companies are as good as dead. They just dont know it yet.

[dado3212]

I think that’s definitely true for some of these, and I wouldn’t be as surprised by TSLA having a higher market cap then all of these companies. It’s the combined bit that’s weird. I think ExxonMobil would position itself more as an “energy company” than an “oil company” for instance, and I doubt it will just roll over and die.

[AtlasBarfed]

I'd agree, but what's the oil company play for relevance? I believe algal biofuels are a failure. Even plastics are under assault, so they can't retreat to materials. Nukes are too far from their backyard. All their carbon capture is pump-into-the-ground and pray/lie to the regulators.

Honestly though, I think this is what they have going for themselves:

- a large amount of smart, if unprincipled, engineers.

- a huge apparatus for government lobbying

- maybe a lot of capital, or at least some window to invest in switchover?

- generator knowhow (turbines, etc)

- global logistics systems

The government lobbying is the key. If there is one industry that could get LFTR/NextGenNuclear off the ground it would be the oil/gas people. The legacy nuclear industry has no ability or desire to produce a nuclear power gen solution that is competitive not only with current day alt energy, but the alt energy that will be in ten years.

I'm the guy that tells every pro-nuclear post on HN that its infeasible to chase whatever gee-whiz design is being discussed because of the ten year lead time and that storage/wind/solar are still on nonlinear cost improvement curves.

But the oil/gas industry DOES have the political juice to chase that at the multiple levels of federal/state/local/military/civilian that it would require to get a cost-effective small-scale nuclear reactor solution like a LFTR/MSR.

But that really is a pipe dream. That would require foresight from the executives, and executives in fading industries almost always just ride the companies into irrelevance, and most importantly for the executives, retirement/pension, and of course huge out-the-door "retention bonuses" in the dying days.

[dado3212]

Turbines, nuclear, fusion, renewables is the play for relevance. That and squeeze every last drop out of the last century of fossil fuels. Many won't survive, but some of them will pivot in time/have enough burn to pivot later than they should have.

[julosflb]

Exactly what Total did: they rebranded themselves few months ago as TotalEnergies...

[grecy]

With many developed countries passing laws to ban the sales of petrol and diesel passenger cars by 2030 or 2035, do all the companies you mention actually have a strong future of growth?

Do you want to buy stocks in companies that have a strong future of growth, or who have always made a lot of money doing one thing, and expect to keep making money doing that same old thing, even though it's clearly not going to last.

While they're not going to die overnight, I suspect they're not going to be worth all that much by 2050, and ~nothing by 2075.

[azinman2]

So if they’re so big now, why can they throw more weight around than energy companies in terms of getting rid of the fossil fuel lobby?

[jjeaff]

Because market cap is just the crazy value investors have attributed to the company. It doesn't mean the company is any bigger or smaller.

[chii]

But it means their cost of capital can be lower - for example, by issuing new shares to capture some of that high market cap. Then they can expand much easier than a competitor who cannot get such good rates for new share issuance.

[ZeroGravitas]

They kind of can.

Example: the australian PM who repealed their carbon tax, is now working with his coal baron buddy on a green hydrogen plant. He's now calling for a ... brace for the irony ... carbon tax to help his new business.

edit: correcting myself, getting two PMs mixed up, Turnbull scrapped new Carbon Tax plans while PM, under pressure from Abbot (who he replaced as PM), who in turn had scrapped an existing carbon tax. Still demonstrates the slow shift of the well-connected politicians to follow the money.

[dangus]

One way to explain this is that “goodwill” is an intangible that shows up on the balance sheet, which must always be balanced. Assets = Liabilities + equity.

Goodwill is on the asset side of the equation.

Basically, Tesla stock owners consider the company to have ambiguous secret sauce of the right employees, IP, brand recognition/reputation that makes it more valuable than its current on-paper business activity.

Or, it’s just a stock that they believe they can find buyers for – a belief which has been proven to so far be true.

[TearsInTheRain]

They are also an innovation engine. You have to value all of the things they havent created yet but will.

[cinntaile]

What part of their market cap is unrealized tech dreams and what part is substance, in the traditional value investor sense, in your opinion?

[vineyardmike]

>unrealized tech dreams and what part is substance, in the traditional value investor sense

Companies like Tesla are not for traditional value investors. Bonds and boring stocks or ETFs serve that purpose.

[cinntaile]

That's just evading the question.

[trhway]

Tesla price to revenue is 20x - a pretty normal for a tech company.

[listenallyall]

Tech companies generally sell software or ad space with near-zero marginal costs. Tesla does not.

[trhway]

Not really. The modern tech companies, FAANG, and many doing SaaS, etc. consume highly expensive labor and consume it while not linear, yet still in some significant correlation to the revenue, thus one can see that they have kind of significant marginal costs. While Tesla's marginal costs will more and more will be dominated by the R&D.

[Bombthecat]

I uhhh you are kidding right? Sounds like those metaverse crypto scams...

[roguas]

Well people can short Tesla. I heard this under evaluation among solo traders. But Tesla is having a lot of money in crypto afaik. So it often may seem, their profit in cryptos increases their total val.

[rtpg]

Maybe what you're saying is true regarding the company itself, but it's a meme stock. You go down and talk to people, people will say that yet wouldn't actually invest in the basket of companies of those industries.

It's not a problem for Tesla or Elon per-se, but we shouldn't assign intelligence to people basically voting for their favs with their wallets.

[TeMPOraL]

Shouldn't also blame these people, because the stock market is as much prescriptive as it's predictive: if enough people "vote for their favs with their wallets", those favs may actually start (or keep) doing OK because of that, if they're not completely incompetent.

(Myself, if I had some funds that are not already earmarked for something more important, I'd dump some into TSLA just as an expression of support to Musk and electrification of transport. I'm sure many people did just that, with no expectations of return.)

[moksly]

People are generally shifting toward green investments in their long term portfolios in my little sphere of the world, but Tesla typically isn’t one of them because it’s considered too risky.

That risk is what made a lot of people rich of course, but investments in green energy companies in Denmark have seen a 15-35% increase in value, year by year, over the past decades without any real risk. It’s been safer than index funds here.

All energy companies have really, but you feel better when they are green.

Tesla may yet revolutionise batteries the same way the personal computer or the smartphone became something we all have, and thus be the best investment you could make right now, but it also might not.

The energy companies on the other hand aren’t going to stop selling a steady flow of energy to people. Why we let investors benefit from utilities is another discussion, but as long as we do, it’s going to be some of the safest investments you can get into.

[guiriduro]

Isn't Tesla one of the least capital efficient ways to invest in transport electrification? How much of that will end up in genuine R&D and furtherance of your aims, as against paying for transient meme interest and massive risk loading?

[panick21_]

Tesla spends like 5x as much per car on R&D.

They literally developed a completely new battery manufacturing factory and cathode plant from the ground up. Plus of course their own batteries with their own chemistries. No other car company comes even close to that.

They are vertically integrating to the point where they themselves are building their own battery manufacturing equipment.

They are even slowly getting into mining themselves. And of course solar, stationary storage and so on.

Hard to see what company is doing considerable more. Tesla is doing a pretty large amount of innovation.

[guiriduro]

I don't know where your figures come from. I've seen Tesla's 2020 FY R&D expense was $1.5Bn, but that is dwarfed by the other players if the linked data is correct[1]. So apart from paying a massive premium, dollar for investment dollar you'd get much more R&D for your money buying a basket of non-Tesla automakers than tesla.

[1] https://www.statista.com/statistics/566060/automotve-firms-b...

[panick21_]

Per car their investment is very high.

We will see if they sustain that, but it looks like that is their plan.

[jonathankoren]

Every car manufacturer is a supply chain and and owns their own component production. Ford owns Motorcraft. General Motors owns AC Delco.

Tesla doesn't have nearly the size of the distribution network of any of the oil companies.

The fact is Tesla was trading at 1000x historic earnings, and 161x future earnings, or to put it another way, 10x any other car manufacturer, and this this was before this deal. [0]

This simply doesn't make any sense.

[0] https://www.tradestation.com/insights/2021/04/08/tesla-overv...

[Seanambers]

As long as Tesla can grow at or around 50% a year all those numbers you are using are useless. They will be halved every year from the current level. Yeah right now its seems crazy, and it is a unbelievably high valuation. But its more a sign of things to come.

The other OEMs are laden with debt, which Tesla doesn't have so any comparison there would be at the EV level which doesn't make Tesla look that out of line considering it is about to overtake in 3-4 years most of the companies it is compared with. Also that debt the other OEMs have, was used to build ICE factories and technologies which are quickly becoming outdated.

If and its a rather big IF I'll grant you that Tesla manages to achieve what they aim for which is 20 million cars in 2030, thats effectively 1/5 market share globally. Add into that the energy storage, charging network, solar roof tiles, AI and FSD.

However any signs of growth weakness or interest rate changes will wreak havoc for sure.

Even if Tesla falters, the other LICE OEMs are destined to fail, maybe 1-2 survives (GM/VW), the cat is out of the bag and what looked like a totally entrenched industry has been blown wide open by Tesla, and loads of other startups are following through.

[jonathankoren]

Tesla needs to execute, and I’m not sure that’s their strong suit. Sure they identified that it was finally time for the electric car, and made an electric car that wasn’t ugly as sin (gdiaf CitiCar and EV-1), but theiyre plagued with manufacturing delays and poor workmanship. The other manufacturers simply are better at putting quality cars out the door.

Sure they were late to the game, and but it’s not a foregone conclusion that Tesla (or any startup) is going to dominate this market.

As for AI and FSD, I’ll put my flag in the sand. We will not have production fully autonomous self driving cars (ie cars without controls) on uncontrolled surface streets in 20 years. From what I understand, the technology has hit a plateau, and there’s just way too many edge cases. If this wasn’t the case, you wouldn’t have people like Andrew Ng going around telling people to redesign cities to make it easier for robot drivers.

If it does happen, it’s not going to be Tesla. I don’t think they’re the technology leader here. Last time I read something, Cruise and Waymo were leading, and Elon’s insistence on not having lidars was holding Tesla back.

[Seanambers]

Well, the fog of 'war' is thick right now. I've chosen to place my capital and belief with Karpathy and Elon. Tesla seems like to best multivariate bet and it's priced like a winner in that respect.

With regards to execution, I don't think anyone has done a better job of scaling physical production faster than Tesla? And you don't have to like Elon but he sure does know a thing or two about this.

I've heard both the quality argument and the Tesla killer argument for so long that I no longer believe it to be true. If they could, they already would - I would suggest that you drive a Tesla for a couple of days, then go back to ICE. All the revving of the engine and performance hooplas seems so last century after that. A comparison kills the ICE alternative (except for long ranges atm).

The consumer will if given a choice (Tesla supply is restriced) choose the best offering at the lowest price and everything is lined up for Tesla to be just that.

The big joker from my perspective is what the EU / US / Japan / Korea will do to ensure strategic production capacity / industrial strength capacity, enormous subsidies are definitely on the table.

China is all in on electric so they have nothing to lose.

[jonathankoren]

> With regards to execution, I don't think anyone has done a better job of scaling physical production faster than Tesla? And you don't have to like Elon but he sure does know a thing or two about this.

Does he though? Elon's hand can be traced directly to production and safety issues. Lest we forget his hubris in trying to do final assembly with robots, a task that was tried and dismissed by multiple "legacy" manufacturers, and directly resulted in defects and manufacturing slow downs. He's not even technically a founder of Tesla. He partially financed the A round, and then started telling everyone he founded the company. Even SpaceX widely seen as Gwynne Shotwell's baby. I will say that he he's enough money and a fan base to make a bunch of meme stocks. That's something.

As far as driving a Tesla, I have. I test drove a Model S several years ago. I thought the regenerative braking was weird, but something I would have to get used to. I liked the exterior of the Model S, but I did not like the interior. I thought it was ugly and empty (a personal preference), and the infotainment system a cruel joke that not only lacked features common on cheaper cars (CarPlay), but was filled with knockoffs (Slacker instead of Spotify or Pandora, and Google Maps without Google turn-by-turn in particular) and pointless gimmicks (Paint). Even with their v10 update that brought Spotify to the US (finally a win), also brought a bunch of video streaming services that only work when the car is in park. (Why bother? Just use your phone.)

I think you should compare a Model S to a Porsche Taycan. They're comparably priced plugin electrics, but the Porsche is well... a Porsche, a finely made automobile with attention to detail. A Model S is slapdashed together; but you're right, Tesla buyers don't seem to care. Also, for some reason Tesla owners purchase their cars instead of leasing them, the only electric car owners to do so. I can't explain either of these facts.

[fma]

I also question the quality and flexibility of the supply chain Tesla has. During the start of COVID, Tesla GM and Ford said they'll manufacturer ventilators. 2 out of 3 reconfigured their assembly lines to mass produce ventillators. One bought CPAP machines from China that hospitals had no use for.

[patd]

On the automotive side, they are also a worldwide dealership network, a nascent insurance company.

[jonathankoren]

Name a mass market international car manufacturer that doesn't have a worldwide dealership network and an absolutely massive financial arm?

[acchow]

AFAIK, the major car manufacturers' dealership networks are franchises. Yes, they have massive financial arms but they are for financing the vehicles, not for insurance.

[jonathankoren]

Car manufacturers aren't by an large allowed to own dealerships in the United States. The point is, the number of dealerships is a good proxy for demand and sales. Also, dealerships by and large don't make much money on the sale of cars (due to having to purchase the cars from the manufacturer), but rather they make their money on the service and repair of cars. Even then, they're not really rolling in the dough.

General Motors's old financial arm was GMAC, now Ally Bank. Under General Motors's ownership, they offered credit cards[+], mortgages, and were in the insurance market since 1939. This is not an innovation.

[+] This was the only credit card my parents had for over a decade.

[panick21_]

> but rather they make their money on the service and repair of cars. Even then, they're not really rolling in the dough.

Car companies already make huge money on service. Plus in sum, all dealerships combined make huge money on service.

Once Tesla has an large aging fleet they will make an absurd amount of money. Something people don't yet consider is that Tesla has been losing massive amounts money building out their global service network and because of having no fleet, making little money from it.

Tesla has industry leading margin now, while having negative margin on the highest high margin business for traditional companies.

[kragen]

It's not a good proxy for comparing demand and sales between Tesla and, say, GM. GM has a network of franchisees and Tesla doesn't, because Tesla wants the profits (sales, service, whatever) for themselves, but state laws won't let them own dealerships.

So, if you want to compare GM and Tesla's market caps, you need to lump the appropriate fraction of GM's franchisees' market caps in with GM's in order to make them comparable.

[jonathankoren]

I've already addressed sales. It was trading at 161x future earnings before this deal. That's an insane multiple.

As far as summing up dealerships, let's go!

Tesla has 438 stores worldwide. Toyota has 1500 dealerships in the United States alone. GM? 4500 in the United States.

Do you honestly think that if we summed up all the Toyota dealerships in the world, it would be worth $750 billion? I don't, but that's how much they'd have to be worth to give Toyota a market cap of 1 trillion dollars.

Or to flip it around, even if we spotted Tesla manufacturing 2x Toyota. (Toyota is the most valuable manufacturer by market cap at $240 billion.), that would mean those 438 stores have to be worth over a billion dollars EACH.

It's even worse for General Motors. Their market cap is only 84 billion. The entire worldwide network of dealerships would have to be 11x General Motors proper, or over $900 billion dollars.

https://finance.yahoo.com/quote/TM/

https://finance.yahoo.com/quote/GM/

[patrickk]

Most other OEMs don’t own much dealers. Tesla is more like Apple by owning their own retailers and controlling the whole value chain.

[albatrosstrophy]

Exactly what so many people are missing. Unlike other car companies, Tesla run almost the whole value chain themselves, from software to hardware. In a way, they're an amalgamation of Blackberry and GM and Exxon and whatever in between. And they're also going into AI robots and home solar.

While these may be hits or misses, they underline the immense market penetration of Tesla. They're not just cars, which is why many investors project a much higher valuation for them in the coming years.

[rich_sasha]

That’s true. But also, presumably, these companies outsourced their supply chains etc because it was (or seemed) profitable.

There is still a disconnect for me. First everyone outsources, apparently successfully for automotive, and that’s great, all these joint ventures between car makers etc. Then Tesl comes along, integrates everything, and poof that’s also good..?

[jjeaff]

I'm guessing the automotive industry benefited more from outsourcing because they were heavily unionized. Outsourcing parts allowed them to get the parts from sub-contractors that didn't have to pay union wages.

Tesla started much later and didn't have this problem.

[rich_sasha]

So is Tesla another labour rights arbitrage at heart? That would make me sad.

It feels to me that even taking the company at face value, this valuation is just silly. And I thought that for years, so clearly as a short-seller I’d be toast. But the more the price levitates, the more unreal it feels.

[panick21_]

No it isn't. The difference between union and non union is far smaller then people have in the idealistic fantasies.

Tesla employees are payed just as well, and with stock options they actually historically have been paid WAY, WAY better.

The thing about Tesla is that its forward looking for a long time since they have a stable leadership with a clear long term plan. This leadership has been leading the company for more then a decade and all their plans have worked out.

Tesla now certainty is worth now what they were valued at a few years ago.

For myself, I would already consider electric flight as part of their future revenue. Its a logical next step but it will take 10 years. Of course I can understand that other people think this is crazy. But flat out, for me, I see them growing 50% a year for many more years with no end in sight.

[sofixa]

> For myself, I would already consider electric flight as part of their future revenue. Its a logical next step but it will take 10 years. Of course I can understand that other people think this is crazy

That's extremely unrealistic. The aeroplane industry is extremely complex, and there are heavy regulations where (hopefully) Tesla's "move fast and break things" + use commercial grade stuff and refuse warranty ( was it the chips in their screens or the screens themselves in some models that were not made for constant use in a car) approach won't fly. 10 years is a decent development time for a plane, if you skip the parts that Tesla have no experience with it and there'd be plenty of R&D to make them work. For reference, Bombardier, a company with decades of aeronautics experience and an established supply chain, started work on the C-Series in 2004. First flight was in 2014, first commercial service in 2016, and it nearly banrkupted them. Unless Tesla are already currently working on an electric airplane, i call bullshit on them having one in 10 years. Considering they already have the truck and semi which are oversold and underdelivered/delayed, do you think they have the capacity to tackle such a huge undertaking any time soon?

As to your other comment that Airbus won't do it - they've been on it since 2010:

https://www.airbus.com/innovation/zero-emission/electric-fli...

If one of the biggest companies in aviation has been working on it for a decade and doesn't have anything commercially viable yet to show for it, and estimate it will take them another decade for this, what makes you think a company with no aeronautics experience and history of overpromising and underdelivering can do it all in a decade?

[panick21_]

> That's extremely unrealistic. The aeroplane industry is extremely complex, and there are heavy regulations where (hopefully) Tesla's "move fast and break things" + use commercial grade stuff and refuse warranty ( was it the chips in their screens or the screens themselves in some models that were not made for constant use in a car) approach won't fly.

People said the same about SpaceX. And yet they beat everybody. Tesla already works with SpaceX in a number of ways.

Do you think Musk or Tesla are not able to adjust to different industry? Are they so bull headed that they will say 'we make cars like this therefore we make planes like this'.

Tesla and SpaceX working together have the technologies required and the financials to do it, and just as important, the will to do it.

> was it the chips in their screens or the screens themselves in some models that were not made for constant use in a car

That this is still the example of 'look at this terrible company' is just embracing. A relatively young company on its first mass produced car made a mistake. Therefore for the rest of history they can never accomplish anything and they will forever be known as 'the company that selected the wrong screen'.

> it nearly banrkupted them

Tesla has better finances and ability to raise money.

> Unless Tesla are already currently working on an electric airplane, i call bullshit on them having one in 10 years.

Maybe that is the case, I don't have a fixed timeline. What I care more about is who will have it first, who makes the best and at what price can they produce them.

I don't think the existing companies will push hard enough.

I do think they are already working on battery chemistry needed for the airplanes. That is very much most difficult and unknown part about electric flight.

> Considering they already have the truck and semi which are oversold and underdelivered/delayed

The primary issue is battery supply. More products with a fixed amount of battery-supply does not mean you make more money. Overcoming battery supply and improving battery quality is the primary task right now.

> As to your other comment that Airbus won't do it - they've been on it since 2010:

Just as existing car manufactures had been working on EV since the 1970s. I think they are adopting some wrong strategies and they have very little intensive to kill their existing business.

The German car manufactures were still committing Disel gate when Tesla was producing EVs.

> estimate it will take them another decade for this, what makes you think a company with no aeronautics experience and

Maybe my estimate is wrong, but the earnings potential is there even if it takes longer. And Musk and SpaceX have lots experience.

How much experience did Tesla have in battery design and battery manufacturing 10 years ago? Almost non. 10 years later they literally have the highest output and fastest battery manufacturing line in human history producing their own cells with their own chemistries.

How much experience did SpaceX have with space capsule designs? Non in 2009 and in 2020 they launched humans. Lets consider relanding rockets, in 2011 they started working on it, they did it in 2016 and its totally routine now.

You can do amazing things if you have the will, the financials and the people to put behind an effort.

> history of overpromising and underdelivering can do it all in a decade?

People are so obsessed with that. They under-deliver because the promise insanely ambitious things. And even when the underdeliver, the results are still great. Should I be mad that they didn't deliver the Semi yet when instead the manage 50% YoY growth without it?

Why is nobody impressed that they are hitting their buissness targets WITHOUT interducing new products. That seem to be totally ignored, specially when 'lack of demand' was the main criticism of Tesla for a long time.

As it was with the Model 3, first people believe it want happen. Then when it does people say it wont scale. And then it will come on big. The Semi when it comes out will be just as demand constraint as rest of Tesla cars. Tesla will be a huge part of the global Semi market, I have little question about that. Its not like the other players in that space are rolling out massive amounts of electric semis yet either.

And anyways everybody will be battery constraint so for everybody Semi in large rollout will be tricky for everybody.

Again, I don't care if people don't agree with any of this. I don't give investing advice. Don't gamble with money I can't lose. There is a big chance this wont happen.

[penjelly]

youre right that at least one person thinks thats crazy. Strange how we all see what we want to see in the end. Myself included.

[panick21_]

My thing is that I invested where the stock was way lower, so even if it goes down a large amount I am in the black.

I simply believe in leadership, no company with Elon as a CEO has really failed to grow. The closest is maybe Solarcity but he was not CEO.

Tesla threw Elon has strong connection with SpaceX. They already share material science. SpaceX uses Tesla battery technology. The connection is strong. Electric flight (not flying taxis) is a clear next step for both companies and Elon has been wanting to do it for a decade. It will take another 3-5 years before this is a serious project, but I don't think any other company is really up to it. Boeing and Airbus are not gone do it.

Until then I see continue 50% growth for a long while based on EV and Storage.

If Self-Driving works out, its massive. I am not counting on that. Even just as a advanced level 2 system its a great asset. But if it works out, the potential value is huge.

[nuerow]

> Tesla’s stock price is confusing if you compare them to a car company. But they are not just a car company.

Tesla's stock price is confusing because it cannot be explained, let alone justified, by any market analysis, results, or market price calculation. It's purely willingness to pay driven by meme stock speculation.

> They are also a car manufacturing supply chain, having brought much of their component production in house.

This assertion makes absolutely no sense given that Tesla's market value is currently greater than Volkswagen's market value, and by no means is Tesla even comparable with Volkswagen in terms of any of the criteria you've brought up.

[seanmcdirmid]

Stock prices are more about growth potential than existing size. Tesla is valued more than Volkswagen because it is expected to be bigger in the future (or VW is expected to be smaller in the future, or a mix of both). We’ve been through this before with tech stocks, and the enthusiasm for future growth has shown to be often correct, and also often incorrect. Playing the market is a bit crazy like that.

[freemint]

If your business model is an affine combination of other business models your valuation should also be an affine combination of the valuation functions of these business models. This is not the case for Tesla.

[nebula8804]

Do we actually have a detailed document explaining how much of their component production is actually in house? It seems like there are A LOT of common components between Tesla and others while at the same time they are clearly doing a lot of in house things that others dropped decades ago. (eg. Seat Production, having metallurgy department to come up with better alloys etc.) These are things other OEMs tossed to the curb decades ago.

[tw04]

> They are also a car manufacturing supply chain, having brought much of their component production in house. They are also an energy company, both generation and storage, but also distribution, like gas stations.

So basically a car company. GM makes their cars in-house. They own their own parts supplier (acdelco) and charging/distribution network (Ultium Charge 360). Ford and Stellantis are working on the same.

[jiveturkey]

Like other car companies, also their own finance arm.

[oxfordmale]

Tesla is an amazing company, however, still hasn't reached the peak of inflated expectations. As a seasoned equity investor put it:

"Tesla the stock isn't being valued by any metrics that make sense and today investors are paying too much for their future growth which is dangerous."