The question is, can we see how Tesla can get yearly earnings of say $5 billion to justify the valuation?
Maintaining a high profit per car seems to depend on selling a premium product, or presuming that other car makers cannot compete. When shifting to the mass market (more than say 1 million vehicles per year), surely the profit per vehicle has to decrease sharply - even if Tesla can earn more than the industry $1k per vehicle (from the quote below).
From 2017: "Recently, Tesla’s valuation surpassed both Ford’s and General Motors’. BMW is among the other major carmakers in the rearview mirror. The logic of this is intriguing, given that Ford, for example, is coming off its second-best year in its 112-year history, earning $4.6 billion while selling more than 5.5 million cars worldwide. General Motors earned $9.4 billion selling 9.8 million vehicles." From article: https://www.vox.com/the-big-idea/2017/6/26/15872468/tesla-gm...
> Model S has been out since 2013 and there’s still nothing as good on the market from any other manufacturer.
Sales of the S are flat and the profits hardly make a dent towards my suggested $5 billion earnings.
> They have a huge head start
In some areas.
Hybrid cars have much of the same technology and no charging station limitations - they compete with full electrics. Hybrids sold 4 million in US 2016 compared to Japan's 5 million sold.
> To say nothing of their charging network and the issues legacy brands will have fighting with dealers.
Sure, but it looks like Tesla needs say 10x more sales to get $5 billion earnings. Another competitor only needs to deploy a little faster to catch up.
TSLA is the exact same position as AMZN a decade ago. They don’t need to make profits. They need to invest in assets and scale, which is exactly what they’re doing.
Except AMZN was cash positive and their lack of profitability was due to the fact that they were investing money they were generating from sales. TSLA on the other hand have to raise money from the market to fund their operations, let alone invest in assets and scale. The two companies are not in the exact same position
It's not different. Not even a little bit. TSLA has sold equity and debt to pay for assets to scale. It does not lose money on its sales. AMZN sold equity and debt to pay for assets to scale.
>People have been predicting failure for Tesla since the beginning.
This is such a bizarre argument. Things don't fall apart overnight, until they do.
Are you a software engineer? "People have been predicting our app will collapse under the burden of technical debt since the beginning. Hasn't happened yet!"
It is certainly not bizarre. Extrapolating from the past is almost always the best baseline for predicting future. I put emphasis on the word baseline.
To clarify they’ve said each step was impossible and that Musk was basically a fraud or a liar and each step has been executed so far.
I place the people predicting failure with those predicting a stock market crash - given a long enough time horizon you’ll eventually be right, but otherwise it seems to have mostly been nonsense so far. I suspect people outside Tesla are either just bad at predicting their ability to execute or have other reasons to want them to fail.
>To clarify they’ve said each step was impossible and that Musk was basically a fraud or a liar and each step has been executed so far.
This is a nonsense narrative that some people tell themselves to justify hanging on for dear life.
Sure, there was some skepticism about EVs, but it was mainly around whether there was demand and whether they could be built profitably at that level of demand. Who Killed The Electric Car? came out in 2006 and the entire premise was the feasibility of EVs.
So what has Tesla done? They've demonstrated that EVs can work, and that there is some demand there. They've burned through almost $20BB in subsidies and shareholder equity to get there. They are certainly not near profitability. In fact, they are changing their entire business model as of a week ago, apparently. Why, if they've proven that EVs can be so successful?
It's hilarious that the fanatics claim to think "long term", but then in the same breath claim Tesla has has nothing to fear because they haven't gone bankrupt yet, therefore they never will. Enron was the 7th biggest company in the US at one point, and won multiple awards for The Best Company to Work For. It doubled revenues between 1999 and 2000, and was set to do it again in 2001. Then it disappeared. "Nothing to fear!" right until the end...
>given a long enough time horizon you’ll eventually be right, but otherwise it seems to have mostly been nonsense so far.
By what metric? Most owners haven't owned the car for a year yet. If you bought the stock in the past 5 years, you're underwater. Do you consider that some ridiculous time frame for an investor or business? I certainly don't.
I'm not sure what to tell you, basically nothing you've said is true.
There wasn't 'some skepticism' about EVs, very few took them seriously back then.
During the roadster the main narrative was it couldn't be done and if they could do it nobody would buy them.
For the Model S there were constant reports of Tesla not having the money to build them etc. the same thing was said repeatedly about the Model 3 (they would never be able to manufacture enough, they didn't have the money, they were going to fail).
Tesla pulled EVs from the future to now in spite of it being a very hard market to enter with massive up front costs. Along the way they also built out a charging network and made huge improvements in car software and getting rid of the dealership model.
The next shift is autonomous driving and the pivot to it is because any car without the tech when it happens will have negative value.
I'm not claiming that there's nothing to fear because they haven't gone bankrupt yet, they could still fail - but you're not arguing in good faith and people have been saying the same thing for years even though Tesla has proved them wrong at each previous stage.
At each stage saying they’d fail and not be able to execute. Every time so far they’ve been wrong.
I like my model 3 a lot so I’d recommend one - I don’t think the people speculating on Tesla are particularly good at it.