[citilife]

This year they appear poised to make $20B in gross profit, in contrast Toyota is poised to make $40B in gross profit... Toyota's market cap is <$200B

Both likely will not continue to grow at the same pace with the dropping availability of capital to consumers.

IMO a fair prices for Tesla is still going to be at Toyota's market cap or lower

[kjksf]

Where do you get Toyota's $40 B in profit?

Last fiscal year Toyota made $17 billion profit, which was less than $19 billion profit 6 years ago.

Profit growth rate is the crucial part of the info you skipped.

To simplify: market cap is ${CurrentProfit} * ${P/E}.

P/E is a reflection of profit (earnings) growth rate.

Since becoming profitable, Tesla has been growing profits at 50%+. They are the fastest growing large company in the stock market.

That growth is going to continue due to ramp of Giga Berlin, Giga Texas, introduction of cybertruck, Inflation Reduction Act which will turbocharge EV demand in US.

Toyota is not growing earnings at all.

Things are likely to go even worse in the near future. The EV market share is skyrocketing (25% in Europe, 30% in china) but Toyota has only 1 EV currently that isn't selling well.

It's rumored that they are scraping their old EV plans (make EVs based on current platform that was designed for easy manufacturability of both EVs and ICE cars in the same factory) and considering developing a new platform.

Platform that won't be available until 2026.

EV market share is likely to grow 50% YoY and during that time Toyota won't have EVs to sell. That won't end well.

Tesla is severely undervalued based on their forward P/E ratio, which is lower than for companies with much lower growth rate.

[JumpinJack_Cash]

> Tesla is severely undervalued based on their forward P/E ratio

"You might want to be friends with me, I'll become President of the United States one day. Up until then you can call me Future President Jack."

It maybe less speculative of a statement than all the above assumptions

[reducesuffering]

> Where do you get Toyota's $40 B in profit?

GP said gross profit, you're talking about net.

> Toyota is not growing earnings at all.

Toyota has still grown net profit: 2020 -> $18.7b ; 2021 -> $21b ; 2022 -> $25.4b

> Tesla is severely undervalued based on their forward P/E ratio

You should refrain from making individual stock picks, and buy ETF/index instead, when you're unable to distinguish the difference between gross and net profit.

https://www.investopedia.com/ask/answers/101314/what-are-dif...

[itsoktocry]

Imagine taking a handful of profitable quarters and extrapolating that out tho eternity.

Tesla's last 4 quarterly net income figures were 2.2B, 3.3B, 2.2B, 3.2B. That's what you're going to assume 50% from? Good luck.

[snovv_crash]

Yes, but Tesla's margins are much higher. This will probably drop if they ever manage to make a 90s Corolla equivalent and go downmarket, but it seems they still sell as much as they can make for the moment.

[epolanski]

Pretty much every carmaker sells out its cars the moment they leave the factory since 2020. That isn't limited to Tesla.

[bryanlarsen]

The carmakers are selling every car they make, but that's now because dealers are rebuilding their inventories. The number of cars sitting in dealer inventory has gone up quite a bit over the past few months. GM can count that as a sale, but at some point dealers are going to stop buying cars faster than they are selling them...

[m348e912]

This is surprising to hear since the interest payments on sitting inventory has been steadily rising due to rate increases.

[maria2]

At the same time people aren’t as flush with cash. During the pandemic, car dealerships were selling cars sight unseen and months from delivery. Buyers aren’t going to accept that anymore. The dealerships need inventory to show people.

[frumper]

Our local ford dealer went from 20-40 new cars on the lot in 2020-2021. They're at over 400 on the lot now.

[vgt]

From my experience the IONIQ5 is a much much better car than Tesla3/Y

[vanilla_nut]

The IONIQ5 is also evidence that if Tesla ever did have a lead on "design" of EVs, that lead is now lost. The IONIQ5 looks... cool. When I see one on the street, it stands out, and I want one, even though I don't really care for cars or EVs. Teslas had some of that feeling in the early days, but they seem very pedestrian to me now.

Could just be my brain being weird. Or could be the fact that there are Teslas freakin' everywhere in most of the (non-aggressively-red-to-the-point-of-drinking-gasoline) USA now.

[SyzygistSix]

That's because unlike Hyundai, Tesla can produce EVs in large numbers.

[epolanski]

I edited my previous comment but yes. What I wrote is that Tesla isn't anymore in a market where it's the only relevant EV maker and now Porsche, Mercedes and even Korean automakers make much more appealing EVs than what Tesla has in the lineup.

[nickthegreek]

Isnt that due to the chip shortage brought on by covid? Car companies wanted to and had the ability to produce more cars if they had the chips. I dont think that was Tesla's ceiling.

[denimnerd42]

Toyota weighs the cost of running individual wires (as a part of the harness) when building the Yaris. The margins are that hard at the low end. Adding any small tiny feature is hard due to the cost they are trying to hit.

[guenthert]

Can't speak of the Yaris. My 2008 Prius with more than 100kmi runs flawless though. Surely (even accounting for survivor's bias) there would have been ways to cut costs. Methinks there are other motivations in play then just maximizing short term profit. I believe Toyota is in there for the long run. I'm not so sure that Tesla is.

[kalari]

I have had Prii since 2001 (back when it was a sedan). Had good experience with them until recently: 2011 prius with 110K miles had to have it's engine replaced. Decided to do that instead of getting another car because anecdata tells me this was an aberration.

[reducesuffering]

Did you have the EGR valve and cooler cleaned? It's the most notable issue with the 2009-2015 that leads to head gasket issues. Although, some say it's fine until ~140k ish, it could happen earlier if oil changes weren't full synthetic, yearly, or less than 10k miles.

[timeon]

I drive Yaris with similar age, partly off-road. So far it is OK.

[fckgw]

Toyota also sells 10 million vehicles a year, 10x what Tesla does. So yeah, any small change to their model lineup is under scrutiny because it gets multiplied 10 million times over.

[vardump]

Just like every other manufacturer. Small costs add up.

[denimnerd42]

I guess. The luxury manufacturers, like Tesla, will just increase the price or add a subscription if they think they can market a feature. There's no money for that on the Yaris, the customers can't afford whatever it is.

[pwinnski]

Per the GP, Toyota is making twice the total profit. They might have to sell more than twice as many cars to do it, but as you acknowledge, for Tesla to make that much profit, their margin would also likely decline.

Total profit matters more than margins, unless you have reason to believe the margins will hold true at any level.

[itsoktocry]

"Selling every car they make" is what every manufacturer does, and they throttle production to accomplish it. This is not unique to Tesla. Do you think there are graveyards of unsold cars out there?

[devoutsalsa]

At the end of the day, current and future profits are the only thing that matter. I’d rather have 20% of $100 than 50% of $30.

[balaji1]

does any Tesla owner have an issue with how long it takes to charge a Tesla? And IIUC it has to be charged more often than a similar Toyota with a full tank.

[filoleg]

No issues, really.

Charging at a gen2 supercharger (not even gen3, which are available in the viscinity of where i live as well) goes at a rate between 300-510 miles of charge per hour (depending on the current battery charge) for me.

Charging at my apartment building garage is slow (given it only uses a regular 110v outlet, the same one you would use to charge your phone), but i just leave it overnight, so the speed doesn't matter much in that scenario.

The charger at work is somewhere in-between, but i can easily get about 70-100 miles of charge per hour.

And the costs make it very worth it for me. At the supercharger, my last fill up cost me $16 (i typically drive the car down to 15-20% charge, and then fill it up to 80-90%), and it went up to $20 about twice in my 3 years of ownership (when i was very close to empty). At the apt building and at work, it is free. Meanwhile, even pre-covid (aka before 2019, because that's when I switched cars), my Camry would routinely take about $40-50 to fill up (and I would try to get it filled once I have about 20% of the tank left).

[balaji1]

Ah right so there's chargers at work and at home, then you wouldn't notice the charge times. I have heard folks having to drive to and wait at charger locations, that is a hassle. So that's only until the charging infra at apartments and offices catch up.

[filoleg]

My apartment has no charging infra, it just has a few regular 110v outlets, the exact same kind people have in their houses.

As for superchargers being busy, I guess there might be some specific one that is busy at a specific time of the day? Because I have about 4 different supercharger locations within 7 miles of where I am, and that's not counting non-Tesla-branded chargers. For context, I am in Seattle area, and as I am looking out of my window overlooking Mercer St, at any given point in time, I can see at least 2-3 Teslas (not even counting other EVs), which tells me that a lot of people find EVs to be very viable in this area.

3 years ago, there was only 1 supercharger location within that same distance. Every other grocery store and a large public location where people park (like IKEA or a movie theater) has charging spots.

My musings aside, overall I agree with you. However, charging infrastructure these days is more viable already than what most people assume. Not everywhere yet, of course, but it is getting there.

[jp42]

I agree that Tesla has been overpriced. but comparing Tesla with other Auto makes is not apples to apples comparison. In addition to automake Tesla is in business of battery, AI, solar panel etc business, they are vertically integrated and I would say that why they are far ahead of other automakers and hence market cap bigger than other auto makers.

[thwayunion]

The legacy automakers are a lot smarter than Tesla investors gave them credit for. They've been making the right investments at the right times to capture the right markets at the right times. Tesla is too early and too up-market to win on a 50 year timeframe. The automakers went through this last century and their veteran survivor DNA is starting to show.

> AI, vertically integrated

This is true for most of the traditional auto companies, but they keep their self-driving divisions at arm's length and are more conservative with deployment into consumer vehicles. Tesla is starting to learn why. Just because it's a majority stake in a separate company doesn't mean it isn't vertically integrated.

> solar panel, vertically integrated [with car/AI]

Consumer: Why would I care that my solar panel and home battery are from the same provider as my EV and SDC? This is more like bundling than vertical integration, and it's not a bundling story that makes much sense to me as a consumer.

Biz: There is a solar+charge infra+EV van/truck play but Ford will win. Ford has a more compelling story here, because their Transit vans are best-in-class, the EV F-150 actually exists (and cybertruck will be an F-150 consumer competitor not a F-150 commercial competitor) and Ford has the SMB sales penetration and general knowledge. I don't see Tesla understanding this market before it's too late.

> battery, vertically integrated

This is the competitive advantage, but it's eroding quickly. The clock is ticking.

[citilife]

Toyota (or partners they are heavily invested in) also do all the items you just mentioned, it's why I used them as comparison. Although they may not directly operate all those businesses, they are heavily invested in multiple companies in the space (impacting value).

[hef19898]

Batteries are, mainly, Panasonic (initially) and other suppliers. Solar roof is a joke compared to other panel OEMs and is still alive only because Elon used Tesla to bail out his cousin. AI is, generly, overhyped. And if Tesla's FSD is any indicator of Tesla's AI prowness, well, there doesn't seem to be much to it.

And let's not even talk about things like build quality or similar things.

[daveguy]

Their AI so far appears to be a cagey failure. Waymo and Cruise are easily outpacing them in self driving capabilities.

Yes, battery and solar panels are a good additional business. But are they going to make strides better than companies who solely focus on those? Both of those are still high R&D efforts.

The more electric vehicles become commodity the less advantage they have. Tesla started with virtually no competition. Now Toyota and almost every other car manufacturer is a direct competitor.

It seems that Tesla increasingly provides vertically integrated mediocrity.

[thwayunion]

Also, to GP's vertical integration claim: Cruise is a division of GM!!! GM's choice to not apply their badge to Cruise is very intentional and very smart. Tesla is the naive player here, not the other auto makers.

[leesec]

>Waymo and Cruise are easily outpacing them in self driving capabilities.

No they are not lol. Maybe in 2 specific cities you mean?

[daveguy]

In capabilities. Not in guinea pigs. Tesla has way more guinea pigs. But they don't even publish their miles between disengagement.

[dragontamer]

Hyundai literally owns Boston Dynamic's, and their robots are way more advanced.

Honda's Asimo demo was also like 15 years ago. Their proof of advanced robotics is really old, yet the Tesla Bot can't do anything like the 2008 era demos.

[jolux]

I believe the original Asimo demos were more like 20 years ago at this point.

[hef19898]

But they didn't dance half as good as the person wearing Musk's robot spandex suite, did they?

[arcticbull]

> In addition to automake Tesla is in business of battery, AI, solar panel etc business, they are vertically integrated and I would say that why they are far ahead of other automakers and hence market cap bigger than other auto makers.

It really doesn't matter. The value of a battery business, the value of a solar panel business - are tiny compared to Tesla's current valuation.

The world's #4 battery maker is Panasonic, and their entire business is only worth $20B. The world's #2 battery maker is LG Chem and their entire business is only worth $36B. And both Panasonic and LG Chem do a whole heck of a lot more than make batteries.

The second-biggest solar company in the world, Canadian Solar, has $3.2B in revenue and a market cap of $1.6B.

So if we staple these together:

- Valuing Tesla like Toyota gets us $20B.

- Adding in the world's #2 battery maker plus the entire rest of their chemical business get us $36B.

- Adding in the worlds #2 solar company gets us $1.6B.

That's $57.6B market cap vs Tesla's $500B. So another 90% downside to fair valuation assuming they're able to become as big in batteries as LG Chem and as big in solar as Canadian Solar.

"Vibes" don't make a $500B valuation target in 4% interest rate market. Sorry.

[reducesuffering]

While I'm no Tesla investor at a $500b valuation, saying "valuing Tesla like Toyota gets us $20b" is a bit wild.

Tesla last year net profit: $5.5b; last quarter net profit: $3.3b.

Toyota last year net profit: $25b; last quarter net profit: $3.1b.

Toyota market cap: $200b

If you value Tesla based on annual profits, entirely ignoring realized and unrealized growth, They'd still have 23% valuation, $46b.

If you value Tesla based on quarterly profits, ignoring unrealized growth trajectory, they'd have similar valuation, $200b.

[arcticbull]

Ok so if you do that it gets you a 50% downside instead of a 90% downside.

I think future growth in Tesla involves significant margin contraction as they move down market, and as more entrenched players enter the EV space we’ll see margins on existing revenue go down too. This is peak value for them based on first mover advantage alone and it won’t last.

So yeah bear case 90% overvalued and bull case 50% overvalued. And this is after a 62.5% drop from peak value.

[schiffern]

> Tesla has been overpriced

I think you mean to say legacy automakers have been underpricing.

I haven't heard of a single legacy manufacturer selling their EVs for more than they cost to make (aside from vague predictions about future margin targets).

Before anyone says it: new Chinese EV makers are not "legacy."

[FredPret]

How wild is it that they've grown to 50% of TOYOTA