Please help me understand TESLA, I do not get it.

by 1000_mark

I am honestly asking, because I do not understand it. Mind you, I also thought Microsoft was insane when they bought 1.6% of Facebook for 250mil. All numbers following are taken from the 2019 TESLA 10k.

Tesla has not made profit in any year since its inception. While it might in 2020 (or not), the losses of the past 5 years alone amount to about 5.3 billion dollars.

Whenever I ask people about Tesla, they insists that it is not just a car company, but also has great potential with its solar- and energy storage tech. But currently this only amounts to about 7% of its overall earnings, with Cars (20bil) and car services(2 bil) widely superseeding this sector (1.5bil). So while yes, Tesla does other things besides selling cars, it does not really account for that much.

Another argument I hear often are the steep sales perspectives in the following years. Tesla itself projects to sell between 360-400k cars in 2020. That’s not bad, but also pretty underwhelming considering that KIA (KIA!) sold over 500.000 cars in 2018 in the US(!) alone. Cars dont scale like software, so at least in my opinion it is a bit unrealistic to expect Tesla sales to suddenly completely explode compared to other manufacturers. They are still selling a comparatively expensive luxury product with a high lifestyle factor.

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One thing that Tesla definitely had going for it was its battery tech and motors, that is true. Tesla’s efficieny was almost unmatched until last year, only Hyundai can currently beat them (the electric Ioniq uses only 11.5kWh/100km according the WLTP). Audi and Benz have both built pretty horrible cars when it comes to efficency. But, as I said, Hyundai has managed to build a car (that you can buy right now) that only needs 11.5kWh/100km. The VW id3 has 82kWh in its heaviest configuration and manages to squeeze out 550km or 14.9 kWh/100km. (the lightest 48kWh version gets 14.5).

BMW just announced their i4, sporting a 80kWh battery and a WLTP range of 600km. This would mean 13,3kWh per 100km acc. to the WLTP. For comparison, these are Tesla’s numbers:

Model 3 max range/performance: 14.1 / 15

Model S range/ludicrous: 18.9 / 20

Model X range/performacne 20.8 / 22.6

This means that Tesla’s original advantage of efficieny is, well, gone. Other manufacturers have managed to at least create a level playing field in terms of efficiency. Tesla has the best charging network, which is another huge advantage that is often mentioned. But at least to me, this appears like a competitive advantage that could be solved by other manufacturers literally just throwing money at it. The tech exists and at least in Europe they are already building IONITY stations like crazy. So while this might bring people to buy a TESLA over another competitor, how long will this advantage persist, maybe another 2 years at this rate?

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So just by looking at the numbers we have a company that makes 93% of its revenue in car sales, has a product that apparently is technically not superior anymore to its competitors and burns through tons of money trying to grow in a market where many analysts do not see much more growth prospects. (peak car).

Again, I am not trying to shit on Tesla, I just want to understand why people think it is worth 130 billion dollars. Where do you see the potential that TESLA will reach a P/E of 25? How would their trajectory in the following years look like to achieve this?



Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.