[arcticbull]

I strongly suspect that would be a disaster for their stock price.

They remain priced at $837B market cap (even after a dramatic recent rout where Elon sold the top and is now under SEC investigation for doing so), while Toyota has a $300B market cap. Toyota makes ~8M cars per year [1]. Tesla made 400K cars last year [2].

Toyota made 20X more cars and has a market cap just 36% of TSLA.

There's a few ways cultists (err, sorry, investors) justify this valuation gap.

1. Self driving cars.

2. High margins.

If you give up on self-driving and you start making lower-margin cars, you start to look an awful lot like a car company, which would mean you'd have to reduce their stock price to just 10-20% of where it's at right now. From $800 to $80-160. And that's generous, leaving room for some of their fun pet projects like the always-next-year solar roof tile [3].

[1] https://www.statista.com/statistics/267272/worldwide-vehicle...

[2] https://backlinko.com/tesla-stats

[3] https://electrek.co/2022/02/02/tesla-supply-chain-issues-ext...

[Retric]

Tesla seems overpriced when you look at their Solar/EV/battery sales, on the other hand Toyota is still pushing Hydrogen fuel cells which suggests active mismanagement to many investors.

As far as I am concerned the majority of the auto industry is a dumpster fire of incompetence. I don’t think Tesla is a good investment at this point, but a significant growth premium is perfectly reasonable IMO.

[arcticbull]

Sure a significant growth premium is reasonable, which is why I gave them one when I valued them between $80 and $160 per share.

Without a growth premium they'd be valued at $40.

They're currently valued the same as the entire rest of the auto industry combined. Plus a few utility companies. Plus the battery arm of Panasonic. There's growth premium, then there's fanciful delusions.

[Retric]

> They're currently valued the same as the entire rest of the auto industry combined.

How much did you value the Chinese manufactures in that calculation?

[arcticbull]

Based roughly on this. [1]

[1] https://www.statista.com/statistics/1130533/global-market-va...

[spats1990]

Toyota is not blindly pursuing hydrogen fuel cells in anywhere near the way you suggest. https://www.motortrend.com/news/toyota-battery-bev-hev-solid...

They may have been dragging their feet in the last few years but they are still Toyota. Not to be underestimated.

[RC_ITR]

People seem to forget that until very recently, if there was an electric drivetrain on the road, chances were it was a Prius.

[syshum]

Like Toyota, I am still not convinced that our battery Tech is really there. We are starting to see more and more horror stories about Tesla battery Replacement costs on used vehicles, and recalls from major manufacturers.

The Resell value of battery cars may drop to Zero if very purchase is a $20,000 gamble if you will have have to replace the battery.

Personally I think hydrogen fuel cells is the better long term tech, but more than Toyota will need to adopt it

[Retric]

There are two different issues here. Assuming it’s a random risk you would expect car dealerships to offer some from of insurance/extended battery warranty.

However, if the batteries need to be replaced every say 12 years spending 16,500$ onto replace a 75kWh battery is less than gas prices over that time span. Further the labor is only 2,300 to replace a battery so falling battery prices could easily make that a pricey but expected repair that’s worth doing once.

Of course that’s assuming a full replacement is needed, the other option is to add capacity to adjust for reduced range. A 75kWh battery that lost 40% capacity only needs an additional 30kWh of batteries to be back to full capacity. An initial design leaving a void and appropriate hookups largely solves the problem of battery degradation.

[jodrellblank]

> "Further the labor is only 2,300 to replace a battery"

Why so much? Almost three working days at $100/hour?? Here[1] for example is a video of a Nio ES6 electric car in China with a battery swap station you can book on a smartphone, drive into, and it robotically swaps the discharged battery for a charged one in ~8 minutes, with possibly one person working there dealing with paperwork (of all things).

[1] https://www.youtube.com/watch?v=4bahXXZ6Lxs

[Retric]

Tesla had one car with that option, but currently use their batteries as a structural element to save weight.

Hot swapping batteries is a design choice, but it comes with real trade offs.

[jodrellblank]

https://youtu.be/DPVrraVbEIM?t=82 shows me that removing a Tesla Model 3 battery needs the front and rear seats, center console, and all the carpet and interior bits removed, because there are bolts going down to the battery pack. That explains the price.

(It doesn't explain the "only" $2300!)

[syshum]

>>if the batteries need to be replaced every say 12 years spending 16,500$ onto replace a 75kWh battery is less than gas prices over that time span.

That is a far too simplistic way to look at the issue, and one that is at odds with how the majority of people budget their lives. So even if technically correct (and I have not done the math to confirm) it has little relvance to the resell value of the car.

Reality does not often matter, for example certain model of cars have become known for being "trash" simply because of a 1% failure rate of a part. Most people will never have the failure but the resell value of that model takes a HUGE impact because of the perception.

If electric vehicles are PERCEIVED by the public as being unreliable past 10 years old, the resell value of older battery electrics will approach zero. You need this resell market to support new sales. The exception to this is normally the "luxury" market which is somewhat insulated by resell value because the owners typically do not care. This is also why most of the battery electrics are in that market.

But if you want to replace the Camry, or the F150, Resell value is Critical as most people only keep their car for 5-6 years, and the typical car is sold 3-4 times in it life.

As it stands right now, the battery powered car needs at least 1 full replacement to get the same life of a typical ICE car. That replacement, is more expensive than an engine for an ICE, and it typically more than the car is worth, that makes these cars a ticking time bomb to most used car purchasers. Even if the cost of gas is more over the 12-15 life. That plays no part in the metric of used car value

[Retric]

You say that yet EV sales and used EV sales aren’t facing that issue. A low mileage 2012 Model S is still worth ~37k, and 2013 are selling around 39k. It’s easy enough to see why, a 250 mile range * 1,000 charge cycles ~= 250,000 miles.

As to the underlying perception, I expect people will see old EV’s as being a great long term investment because they have vastly fewer bits that need to be replaced. People will be talking about slapping a new battery into an EV with 250k miles, and spend less on gas and repairs as you aim for 500k miles. Especially after a few more battery price drops.

[syshum]

Primary reason for that is battery issue has not reached the wider market, Tesla's are still a novelty, and owning one is an aspirational desire for many people, it is not a utilitarian car like a Camry.

Also you talking about a Car, when new in 2012 Dollars was $93,000 (that is $114,000 in today;s dollars), that is an EXTREME deprecation rate.

For comparison lets look at the Most popular vehicle in 2012, the F150. The most expensive F150 that year was the Harley Davidson Edition @ $53,000, That same truck 10 years later sells for $28,000 or 53% of its original value

The Tesla Model S Performance at a Original Price of $93,000 selling for $37,000 or 40% of its original price. Another Key factor here as well that tips this even more to the F150, is that the majority of F150s on the market from 2012 have 150,000+ miles on them, where the majority of 2012 Model S on the market have 1/2 that or less.

The Tesla Resell value is value is already in the tank compared to ICE, and that is with its cult like status symbol. Other Battery vehicles that do not have this cult like status are FAR FAR worse, and Tesla's will at some point see a similar fate if they ever become the next Honda or Toyota

[dclusin]

A majority of Americans cannot afford an unexpected expense of $1,000, let alone $16,500. The fact that its cheaper than the amount of gas you'd pay over that lifetime is irrelevant considering most Americans are not rich enough to shop comparatively like that. It's expensive to be poor.

[Dylan16807]

> A majority of Americans cannot afford an unexpected expense of $1,000

1. Those statistics typically use a very misleading definition of 'afford'.

2. It would be the exact opposite of unexpected, and even if you procrastinate you just get reduced range and the car keeps working.

And you could probably get a monthly payment plan for an electric car battery.

> The fact that its cheaper than the amount of gas you'd pay over that lifetime is irrelevant considering most Americans are not rich enough to shop comparatively like that. It's expensive to be poor.

You'd pay the new battery money after saving on gas for 12 years. Replacement batteries are not an "expensive to be poor" problem.

[syshum]

>>You'd pay the new battery money after saving on gas for 12 years.

How do you figure? For example lets look at my buying pattern

Some One leases a new Vehicle... 3-4 years later they return it, that is when I come in, I buy a Lease Return almost every time. I keep that for 5-6 years. At which point I sell or trade for another lease return. the car is typically about 9-10 years old at that point. Someone Buys this from me or the dealer then 2 years later is hit with a $16,000-$20,000 bill

People do not normally keep a car for 12 years... So you would not have "saved" for 12 years

>Those statistics typically use a very misleading definition of 'afford'.

It is not really, as it is based on cash savings of a person to incur the expense with out using debt. If we are talking about a $16-20,000 expense on a 12 year old car, it is unlikely anyone will finance that expense has it would exceed the cars resell value. No lender is going to give you a loan to replace the battery. This problem exists today with many hybrids.

[grecy]

The stock market doesn't value a company solely by what it's doing today, but also by what people think it could do tomorrow.

Toyota is rock solid and stable. In 10 years you can bet they'll be making the same number of low margin cars they do today (same as 10 and 20 years ago) and making the same amount of money. (again, same as 10 and 20 years ago) Their stock price is reflective of that - there is essentially no plan or path to "growth".

Tesla is growing MASSIVELY. It's basically a certainty they'll be making 2+ Million high margin cars by 2023, likely up to 5 Million in the next 5-10 years. The stock price reflects that massive growth.

It's gambling, and people are betting that Tesla is going to grow massively, and that Toyota is going to stay more-or-less constant.

[arcticbull]

> Tesla is growing MASSIVELY. It's basically a certainty they'll be making 2+ Million high margin cars by 2023, likely up to 5 Million in the next 5-10 years. The stock price reflects that massive growth.

So 5-10 years from now they'll still produce half as many cars as Toyota. Assuming they can do so without reducing their margins, and that in the interceding decade, not a single other mainstream automaker will produce a competitive vehicle. That's quite an assumption.

Based on their growth trajectories, they won't reach Toyota's production rate until about 10 years from now - in spite of being valued the same as the entire rest of the auto industry put together today.

There really is no justification.

[grecy]

> That's quite an assumption

Saying that makes no more sense than saying "putting $100 on that horse to win is quite the assumption."

It's got nothing to do with assumptions, it's gambling plain and simple.

Right now, evidently, plenty of people are taking the bet that Tesla is going to do very well in the future.

[arcticbull]

It's like if the odds of a horse to win are 1:10 but you're betting 100:1. It's irrational and has no basis when compared to other similar companies.

They're not betting that the "company will do great in the future" - that's not really how this works - they're betting number go up.

There's a lot of ways for number to go up, some to do with the underlying business, and some to do with short-term price action gambling. The difference is the former is sustainable over time - positive sum even - the latter is not, and the market will usually drain the latter out.

[vagrantJin]

> Tesla is growing MASSIVELY

Tesla is a good company. But Toyota can't really grow much more because most of humanity has ridden or owned or knows someone who owns a Toyota. Short of selling Toyotas to alien civilizations, "GROWTH" here comes off as a weak shill for TLSA stock.

[dashmeet]

I think you misread the article. Tesla produced over 930,000 vehicles last year (2021). The link you sited was for the first 8 months of the year.

Source: https://ir.tesla.com/press-release/tesla-q4-2021-vehicle-pro...

[arcticbull]

Ah good catch, thank you. Doesn't really change much of my analysis though.

[Dylan16807]

Well, 300k a quarter is 3x as much as 400k per year, so if you keep everything else the same it turns your estimate into $240-480 a share and that would be a much more survivable drop.

[kragen]

3. Growth. It makes sense to value Tesla at 3 times Toyota if starting three years from now Tesla is selling four times as many cars as Toyota at the same margin. Might not happen, but I think that's what a lot of investors were betting on. Not to say there aren't a lot of cultists too...

[bluGill]

The other auto makers are also in self driving '.they are only doing quiet R&D, but if you are betting on automation Tesla isn't the best long term bet even before you look at potential upside.

[arcticbull]

Yeah, Uber had this realization a few years ago too. If you recall, they were also developing self-driving technology in hopes of reducing their cost basis. However, they abandoned the project after an internal report leaked indicating that it wouldn't get them more than, IIRC, a 5% uplift - for exactly the reason you say. Once one company has it, the rest will not be far behind.