"While Tesla’s market capitalization has swelled in size, Ford still overshadows the Palo Alto, California-based company in most other financial metrics. Over the last five years, Ford has posted net income totaling $26 billion, while Tesla has lost $2.3 billion. Last year, Ford had annual revenue of $151.8 billion compared with Tesla’s $7 billion.
And when it comes to car sales, Tesla sold 40,697 vehicles in the U.S. last year, according to researcher IHS Markit. Ford sells that many F-Series trucks in the U.S. about every three weeks."
Ford: "We have no idea how to invest this money. I guess let's just put it in the bank."
Tesla: "We have so many idea for investments, we're only constrained by cash. Let's go back to the capital markets!"
Ford investors: "Let me soberly evaluate the company's present and future financial situation before I make any commitments"
Tesla investors: "TAKE MY MONEY"
Tesla on the other hand is a darling of retail investors attracted to the marketing machine of "Silicon Valley disruption" and they have already priced in a belief that Tesla will win the global automotive market. DDM? What's a DDM?
Meanwhile Ford, GM, and all the other automotive incumbents are investing in the same technologies as Tesla. Is it more likely that Tesla never falters (even slightly)? Or is it more likely one of the 10+ incumbents surprises with a self-driving/electric success?
I know where I put my money. Interest rates will be climbing at the exact same time as Tesla will be attempting to expand their market to a larger audience who always purchase new cars with an accompanying loan. Oil prices are showing no indication of climbing again for years to come. Consumers have just replaced their aging vehicles in record numbers and won't be in the market for a new one for roughly 7-12 years. Good luck Tesla.
(Personally I have no idea whether this is likely or not).
> Tesla: "We have so many idea for investments, we're only constrained by cash. Let's go back to the capital markets!"
I think becoming as big as Ford already is, is one of Tesla's most positive possible futures if all of their many ideas play out. But they are already valued higher than that. How can this possibly work? There are so many car makers, there is no monopole they could get. Same for solar and batteries.
The automobile industry will contract as we move from individual ownership to mobility. But along with that transition some manufacturers will keep up and others will not. Tesla is hoping to be one of the winners, taking perhaps 25% of the mobility market as the car buying market dries up.
Tesla's valuation is also based on the idea that clean energy will replace fossil fuels. If that happens, the battery market will grow by orders of magnitude. Tesla will basically take the market from coal and petroleum.
They don't need a monopoly in either of these to justify their valuation. Simply get 10% of mobility and 10% of electricity storage and they'll have justified well above their current valuation.
Remember mobility services will subsume much of public transit and shipping too. The borders between industries are moving around. You can't just ask "how much of industry X will Tesla get?" because whole industries will ascent and others will wither as we transition to sustainable energy.
What does this even mean? People like to leave stuff in their cars (e.g. mug, gym bag). They like them to be at their preferred level of cleanliness or disorder. Some even use them as a means of personal expression.
If "mobility" were so desirable, ZipCar would have taken off 10 years ago. The "mobility" market will be about the size of the taxi, bus, and train market.
- A personal, individual vehicle which comes to pick you up where you are and take you to exactly where you want to go is a much MUCH higher value proposition than public transit.
- Add self-driving to the mix, and the cost of that service will plummet.
- When the car providing that service can drive itself, then there is little to no inconvenience to the vehicle owner to offer that service, and significant financial incentive.
- Because car owners will be able to make "rent" from their capital investment, owning a car will start to look more like property ownership than a depreciating investment-- especially as maintenance and operation costs fall for electric vehicles.
- There will be very strong financial incentive to use self-driving ride pools instead of putting up a large wad of cash to own a car. So total car ownership will go way down, and will be done much more by the wealthy and much less by the working/middle class.
- Cost of ownership is especially high in cities (parking), and the market for ride sharing is highest. So probably many fewer city dwellers will own cars.
- Families that own can shrink to one car instead of two, since the car can drop people off or pick them up.
I think there are a lot of pretty good reasons why the vehicle market is going to change significantly in the next 15 years.
- Cost. All of the (limited) Tesla automation technologies cost more than my last car.
- Liability. Who is liable for mishaps? As Uber has demonstrated accidents and traffic violations happen with automated tech.
- Utility. The majority of users aren't high income people in SFO and NYC. We have parking, getting picked up is cool, but not high ROI.
- Pool vs own. As we've seen with transportation services as varied as stagecoaches, cabs, railways, and airlines, service based transportation models aren't cheap. Service price is always demand driven, it will cost more when you need it.
- Owning a car in the US is one of the greatest values available in any market. I can be at any point in the CONUS in <3 days for under $500 with most cars.
I think self driving cars may put the bullet in some cabs for good after Uber and Lyft implode, and may bring train-like scale to intercity transit. But the fantasy being sold today is just that.
plus there will be additional benefits
Safety: Less drunk drivers on the road, less accidents from fatigue, etc.
Cost: at a minimum, it will bring cab prices down
Efficiency: Less traffic jams as autonomous systems won't slam on the brakes when they see a police car, etc. Smoother flowing traffic, higher legal road speeds if reaction time is shorter
And then there are other non-car transport which will benefit: logicistics, mail, deliveries etc. Minibuses that could pick you up door to door through automated route planning etc.
Maybe there will be a stratified market for rental self-driving cars; one for "just this trip" and another for "five days of exclusive use for a road trip."
Cost is a short term problem. Costs will go down. Liabilities can be insured against.
Here is where I see it going:
Stage 1: Taxis start being replaced by self-driving vehicles at much lower cost. Car rentals too - liabilities potentially go down once they reach a certain level of safety as you don't face the risk of a poorer than average driver. Usage skyrockets as costs drop, and as services can cut pick-up times drastically by more optimally having a larger fleet parked around town and/or driving around town.
Stage 2: We start seeing pooling options from more and more rental providers to deal with high demand situations. E.g. Rental company crunches their numbers and see that my road => the local train station always maxes out capacity during rush hour and decides that rather than buying more vehicles, surge pricing coupled with offering a discount that brings the price back towards normal for each rider as long as it at most takes X minutes extra will be popular and more profitable.
Stage 3: They put in minibuses on some of the most congested streches and/or team up with the local bus companies to launch apps where you can tell them you're at the stop and get guaranteed pickup within Y minutes by either the regularly scheduled bus or a car. You pay a slight premium for the guarantee, which covers the car when the bus won't be there and a profit share with the bus company. (For me the only reason not to consistently use the bus is that if I need to be somewhere urgently, I can't always risk waiting for a bus that might be full; if I had a guarantee that if I press the button and walk to the bus stop, I will get picked up in 5 minutes, it'd make me use the bus more)
Stage 4: As self-drive increase in general, cities put the thumb on parking spots. E.g. in parts of London you already won't get planning consent for housing with more than 1.5 parking spaces per living unit as a means to cap car ownership. Expect to see that gradually driven down, with the expectation that people will buy parking space for their self-driven car elsewhere and/or forgo having one. Driving down the limits on parking will allow for denser developments, making ride share options etc. even more viable.
Stage 5: Youth grow up without depending on their parents to drive them anywhere from the moment they are trusted to go by themselves.
Basically, I see it as a process where the convenience of apps to get you somewhere will keep increasing to the point where people will find themselves increasingly opting to check these apps first and find themselves needing a car less and less. Some transport apps are already combining route-finding with then offering to order an Uber for you.
Expect to see more of that making it less attractive to get a car over time.
Especially as youth get used to a greater flexibility and level of freedom using these type of apps before they can buy a car. Car ownership many places represents freedom from parents driving you around, but more and more teenagers can expect to be in situations were parents opt to order them a car instead of driving themselves.
Before long, a whole generation will experience car ownership as irrelevant to the ability of liberating their transport options from parental control.
Sure, some people will still opt to own one, but many already forgo car ownership, and that number will certainly rise rapidly.
It does not matter if a car is selfdriving or not. To be recognized as available by someone means a utilization of about 30% by the providing company. But a utilization of about 30% does not drive down costs. You still of costs for producing and servicing the vehicle, which is way higher than just the energy costs.
Tesla has no experience in free floating vehilce fleets. Uber has no experience in such thing. ZipCar has. Car2Go has. Car2Go as an subsidary of Daimler even has experience in car production.
Now think of that.
1 - the zip cars available to me are a few blocks away to walk which isn't convenient if I'm carrying something or lazy.
2 - high cost. Taking uber right now is so much cheaper. Imagine if cars were self-driving. Costs would plummet
3 - parking. This can be very hard depending on where I'm going
4 - I have to pay for the length of time I'm out, not for my ride. I also need to return the car when I'm done.
These are the biggest pain points in my opinion. Also, not needing to drive myself is a huge bonus. The leverage of solving these pain points are huge, imo.
the bike shares solve this by driving trucks around, collecting bikes from areas where they aren't going to be needed and moving them to areas where demand is about to spike. it's hard to load up a truck full of cars to meet demand in the business district at 5pm, but it's very easy to send over all the spare capacity in your autonomous vehicle fleet.
Smoothing that out, so that you come to expect a car to be available very rapidly no matter what, with only minor inconveniences, may not end private car ownership but certainly will make a lot more people opt for alternatives - I know for myself (I don't own a car) the occasional lack of predictability in how soon I'll get picked up is the one aggravation that occasionally make me want one.
Comparing either of those or public transit to self driving cars misses the point entirely.
Self driving car networks basically can solve that.
But not necessarily shrinking the market. The cost of mobility goes down, consumption will go up. How high? I'm going to guess absurdly high. The reason US cities are sprawling messes is that they were built as the cost of mobility dropped off a cliff (cars and trucks replaced horses). Go read Clifford Simak's "City". People will live in self driving cars and commute in their sleep. It's going to be nuts.
If it's really self-driving it can go park wherever. Not very good for the environment, perhaps, but it completely solves that problem.
The end result is fewer cars owned by fewer people, but utilized much more fully, so the cars that do exist in cities spend more of their time driving and in-service, rather than sitting parked and empty for 98% of their lifetimes.
As someone who doesn't own a car, the only potential appeal to me of owning a car is shorter waits and predictability (always there). If the predictabiity and waits drop for rental services, my reasons for considering buying a car would rapidly drop. If the waits to use a car I own go up, my reasons for considering buying one would drop further.
It's like saying "I prefer my horse, I can feed it grass off the side of the road, but you have to find some fancy petro-chemical station for your auto-mobile? Insane! My gas grows next to the road!"
I get it, but try to put yourself in the place of someone younger who doesn't make decisions like "I would never replace my car because I keep spare diapers there!"
>If "mobility" were so desirable, ZipCar would have taken off 10 years ago. The "mobility" market will be about the size of the taxi, bus, and train market.
This is very Bill Gates "no one would ever need more than ..." argument. Come on!!
ZipCar has literally nothing on the future of mobility.
You (and many people your age, conditioned from birth to place massive value on personal car ownership) may never move past that paradigm. You might go to your grave in 50 years a proud owner of a vehicle in an era where almost no one owns.
I think, instead of sagely predicting failure, maybe try creativity, use that entrepreneurial mindset to solve future challenges.
You want to keep spare diapers nearby? Why not have a secure storage module in the vehicle, lets say the trunk can be split into 2 or 4 secure storage modules.
You order an autonomous electric vehicle to your location, ETA 5 minutes. You hit the "bring my secure storage container to my location" option, restricting the available pool of cars to meet your need to those close to your container, at a small additional fee.
Boom, the "insolvable" problem of personal storage in a vehicle is solved by commoditizing the storage and use the AI vehicle to transport it where you need.
I'm sure you could come up with a better solution if you tried.
I doubt I'll last another 50 years, but I'll probably live long enough to see the end of the current robot taxi fad.
Cars have not been. The earliest proto-human sought shelter from a storm. They did not seek personalized shelter during transportation.
I don't like the argument at all, and I think it's a cop out, a slippery slope argument.
>Do you AirBnB your bed (at hourly rates)? Do you AirPantsAndT your clothes? Most people don't.
This is just a very feeble slippery slope that ignores the very real differences.
Yes, clothing and shelter have been humans needs for far longer than civilization itself.
Can you say the same for micro-space in a personal transport?
Were humans owning personal space inside of pack animals 10,000 years ago?
It's a bad argument. There's no slippery slope here. Homes and clothes are fundamentally different than cars.
You cannot live a civilized life without a home and clothes. You can live a civilized modern life without a car. Obviously we approach higher order needs differently than lower order.
> Cars have not been. The earliest proto-human sought shelter from a storm. They did not seek personalized shelter during transportation.
Are you familiar with New World Economics' discussion of "really narrow streets"? One thing the author points out (in "Let's Take a Trip to an American Village") is that even in the 19th century, the US was very interested in what he calls "My Personal Means of Transportation" -- the fashionable thing to do was to have a carriage house, no matter how little you actually needed a carriage. I think you see less of this pattern elsewhere in the world (or else you just see less wealth; consider how "pedestrian" seldom has positive connotations and "equestrian" never has negative ones), but there's definitely an enthusiasm for personal transport in the US.
The need for transportation is just as ancient as the need for shelter. Before cars, it was a horse, or camel, or a chariot, or something else on wheels.
I think you underestimate the strength of car culture, and the value people place in personal space (at least in the US).
And as with so many things, why can't these unnecessarily-competing worlds coexist?
There are millions of overly confident entrepreneurs rationalizing millions of wacky, over-engineered money-grabs and only a few of those ideas have strength to be so culturally and socially transformative as the world you describe. Is the end of car ownership one of those lofty ideas? I am not so sure.
Edit: and on a more personal level, I see ideas like that -- the end of ownership, whether it be cars, software, or land -- as an attack on individual ownership, so that moneyed interests can instead own everything and lease it to the peasants at their leisure (and profit). The world needs the opposite: to make ownership easier and less costly, and to restore the the increasingly-stratospheric costs of everything* down to levels that put ownership within reach of the common man. Not owning cars is just another step towards feudalism.
* As for how, there could be much to gain simply by analyzing the cost structure of stuff and stripping out unnecessary middlemen, expenses, and materials. Adopting a more restrained form of capitalism, like what one sees in tight-knit economic communities or in idealized small-business environments, could perhaps foster a business culture centered around balancing customer, employee, and shareholder value. The current system of only maximizing shareholder value creates much of the turmoil, unnecessary innovation, and naked profiteering we see today.
Yes, it's great to have personal space. But you know what? People sacrifice personal space for spending less money all the time. And for convenience.
Consider e.g. London - a city awash with money, where a lot of even people who could afford to be driven around by a personal chaffeur will opt for public transport for convenience.
As another example for London: People will opt to smell someones armpit on the train in the regular train carriages rather than pay a few pounds extra for a seat in the First Class carriages all the time. The value of personal space when travelling, as it turns out, is deemed by large parts of the public to be very low.
People tend to opt for personal space mainly when the public transit options are unusably bad compared to driving.
Places like London are perhaps the areas where this transition is most likely to start: Places where those who even own cars often own cars as a "contingency" for those times when the bus doesn't arrive or you're going somewhere odd that just doesn't work well with public transport currently.
In those cases, for a lot of people, it'd be very attractive to e.g. pay a membership fee to guarantee a certain level of "contention" for cars to be able to just press a button and have one arrive "fast enough". Even more so with the ability to do that on either end of a train ride. For a lot of people this will make a car pointless.
And in environments like this "personal space" is moot, as almost everyone are already used to using public transport some or most of the time.
At the same time, it is somewhere where local authorities are clamouring for ways to reduce parking and make car ownership less desirable. Expect housing units to start coming without parking spaces or with very few parking spaces in high density areas as cost saving measures, or because they'll sell some of those parking spaces to ride share companies, or make residents who want them buy them separately.
Expect planning rules to start reducing the maximum allowable number of parking spaces.
Places with plenty of space, sprawl and a strong culture of cars as independence will certainly experience this change last.
But consider e.g. the impact of a generation of youth who will eventually grow up with a situation where they may be able to rent a self-driving car on demand from before they are able to (afford to) buy one, and where e.g. parents may opt to just order a journey rather than driving them somewhere once old enough, and who will grow up increasingly likely to get used to some car taking them somewhere without needing to take the step to car ownership to get that freedom from parents driving them around. The "liberation" may become to be able to sign up for your own account so your parents can't see your every journey.
I think that the whole culture where car ownership is seen as a rite of passage and signifier of liberation from your parents could change far faster than you think.
Different people have different values. Also I'm quite young, so I don't think age is a strict delineation.
Self driving shuttle services will be a great new way to transport us, especially in metro areas, but this won't work very far from the center of those so if the valuation of that market is too optimistic in regards to Tesla the holders of their stock will pay for it.
If you look at the number of US car companies that have started from scratch in the past 70 years you don't see many still standing (pretty close to none). Tesla has a very different model though so we can't lump them in with most all of the others.
In my own humble opinion, I think Tesla's fate will be decided by how fast they can produce a low end, very affordable and dependable car for the masses. If they can deliver that within the next 3-4 years they've got a very good shot at moving up to competing with Ford and GM.
If they instead try to compete with higher end cars they'll find that's a hard road to travel. At some point soon the big players will produce a car that's a competitive option and dilute their market and they'll die.
It's worth remembering that both Honda and Toyota captured market here with affordable dependable cars, not luxury cars. Those came quite a few years later.
I fully expect Tesla will produce an affordable car though, and it would make perfect sense if they called it a "Model T".
Yes I did point out that most Americans and many people are conditioned from birth to value car ownership, even when it's a poor financial decision.
"Perfect example where Uber fails - I can't take my dog anywhere
As I told the other guy: Stop predicting failure based on problems, put on your creator and builder hat, and solve the problem.
Why not have pet friendly vehicles available at a small charge, guaranteed clean?
It bothers me that these problems are so easy to solve and yet people are so willing to write off a future possible technology without so much as thinking through any of the solutions.
Regarding the dog, I'm just pointing out something that currently doesn't work for me. Until they fix it I don't care - right now their solution does not help me and nobody has done anything to address it.
My point is simple. Right now owning a car is better than not owning a car for me. Until that changes I will want to own a car. If you don't want to own a car then good for you - different people have different desires.
A teenager doesn't just "want a car." He wants that freedom that car gives him... to go somewhere without bugging his parents or friends for a ride. If you're in a big city or someplace where this is not the norm, I could see you believing otherwise.
(And I laughed at "guaranteed clean." Right. All that means is you get a refund when you find the dog turd in the back seat.)
Precisely, and this is why owning the car isn't that important. This teenager presumably still has to pay for the car and fuel, or bug his parents for it. Paying for the (cheaper) self driving ride is no different.
It is different. If you're relying on someone (or something) else, waiting around, you're not "independent."
Really, this doesn't seem like much of a stretch.
You might have noticed that people are hoarding a lot of stuff, that are of little value to them. It's probably an intrinsic value to most people to own things. It might vary a little between cultures, but it seems to be a common trait.
If you don't - great for you.
However. It might happen that you one day walk by a car on display in a mall, and notices the nice paint, a practical laptop holder, the particularly nice storage boxes for diapers and what not, and thinks to yourself - "I want that car."
And I was just pointing out that your personal experiences with today's ride sharing aren't relevant to a hypothetical discussion of an unrelated future transport technology.
I'm defensive because you're continually derailing a thread about futuretech to list your personal experiences with todaytech. I don't get why you derail this conversation to make it emotional and personal, so I get defensive about the track of the conversation of solving tomorrow's problems. Stop taking it personally, think bigger! Solve a problem!
I literally did share a solution in this post, and the one before.
- Commoditize storage and transport it to you on demand
- Offer pet friendly cars
As I also wrote: "I'm sure you could come up with a better solution if you tried."
Is this hackernews, where builders come to talk about exciting ways they're solving tomorrow's problems?
Am I on the wrong site?
You haven't solved anything until you've demonstrated a working solution. If it were so easy to fix problems in the real world, politicians would have our economy constantly booming, there would be more jobs than people, and the Middle East would be the most peaceful place on Earth.
Anyway, I don't think we're going to agree on anything. I'm exiting this thread.
By the same standard uber as a whole is not a working solution.
Why must some people see new inventions always as colossal destroyers of products they don't like instead of the more humble 'enriching ones freedom to choose'?
If self-driving cars has as massive an impact on car ownership as e-books have had on the paper book market, that will be a dramatically noticeable change in most cities.
I know many people who keep golf clubs in their car because sometimes a salesman is looking to round out a 4-some. I like going to walmart/lowes... over lunch and leaving my treasures in my car.
Car sharing won't actually work out anyway because everyone needs their car during rush hour. Everyone is driving then anyway, and then the cars sit idle.
Mom takes service to work, possibly carpooling. Dad takes uses family car to drop off kids and goes to work. Car drives itself to mom's work for her to use to pick up kids and commute home. Dad takes service home. Or whatever. The point is kids can always be in the car with the extra diapers, with safety features parents want, etc.
The other part of this that people ignore is that a car sharing service could open up a lot of flexibility. For example, maybe our dedicated family car is just a sedan, but on this particular weekend with the grandparents in town, we can use the car sharing service to get a minivan and have everyone ride together. Or I want to pick up a piece of furniture and request a truck from the service. Or it's my anniversary, and I can request a luxury sedan to drive us to the restaurant for a touch of opulence. I'm sure there are many other examples people can think of.
Like you say, car sharing won't cover everyone's need, especially at first, but eventually, the big players in the space will have enough sophistication to cover many cases, especially for a second car.
Car sharing starts to make sense when you want the car outside of rush hour. Want to go to the store for an hour at 2:30, no problem there are plenty of cars free. Want to get to work every day - you are paying peak rates for a car that will probably be used exactly twice that day, once to get you to work and once to get you home.
(This assumes that you're also from the US, for rhetorical convenience.)
At this point in time, I think it's wise to avoid laying costly new tracks with the dawn of driverless cars on the horizon.
In fact, this is a perfect use case for driverless cars. The problem with trains everywhere is the wasted time not on the train and the million stops along the way.
It gives us exactingly detailed information on what journeys people need. The dataset will be immensely valuable in allowing the companies that sit on them to first start doing quasi-bus services:
Order a bunch of minibuses. During peak hours, offer an option: Wait for the next dedicated car to be free, or ride share with quicker availability and a discount. Limit detours strictly - there'll be plenty of "Follow road X and pick up 6 people on the way to station Y" type stretches that will make people happy (little time lost; feels efficient if there's not lots of turning off).
Then you can see them partnering with bus providers to dynamically fill in during peak hours, or even bidding for bus franchises and proposing contract changes that would allow for more dynamic, demand-based scheduling.
Ultimately this can feed into planning train type services - companies offering these type of drive share will be able to e.g. let people order "end to end" journeys of the type "pick me up at address 1, get me to address 2" where they show journey options that include rail when it makes sense. The key beying that if they do so, they will know the entire desired journey, and would be able to offer insight into the most efficient interchange locations or other changes to train services would be most desirable.
The raving reviews you'd get the first times people order a car and are told instantly "your car is already waiting right outside your door" would be rather interesting.
Get in, and your favorite radio station or music is playing.
And for colder climates: Your car is already pre-heated. I remember too many winter mornings during winter in Norway when even ensuring our car would actually start in the morning was an annoyance (even with a garage, space heaters in the garage or motor heaters is sometimes necessary).
Yes they will; the magic trains you're thinking of are called streetcars. And, with the oddities in oil and the difficulties of maintaining suburbia, we'll be moving back to dense streetcar suburbs soon enough.
We still have typewriters around too, and some people ride horses. Old tech doesn't die, it just diminishes to a smaller niche.
Car seats will be a bigger problem: they are unwieldy, legally mandated, and require careful installation to be effective. Unlike diapers, even the small boosters used for older children can't fit in a shoulder bag.
A young couple expecting to have children in the next few years might balk at these inconveniences, and that could depress adoption of the 'mobility' model. You have to keep prospective purchasers in mind, who are evaluating their needs over the use-life of a car.
Maybe poor people will take the robocab from hell, with sick on the floor. Most people will not.
The difference being that poor people will have the "robocab from hell" alternative rather than have nothing they can afford, and that more people will afford said high end sedan when it's self-driving, and will be able to justify it more often, and more people will afford to trade up to even more luxurious services.
There is already a marked class difference in commuting in London: Low paid people take the bus four two hours+ for commutes that'd take less than half that if they could afford the train from the outer fare zones (bus-rides cost the same within the entire London fares area), so transport is already today segregated by income. A lot of the longer bus lines makes no apparent sense until you realise that low paid people often can't afford the train, or a car.
Please show your math.
>Tesla will basically take the market from coal and petroleum.
And you base this off, what, exactly?
Sometimes I think that half of HackerNews didn't even know solar or battery backups were a thing before Tesla. These are competitive spaces where Tesla has essentially no market share (just like cars).
I think Tesla will be successful, but I doubt they end up market leader in any of these things.
I'm genuinely curious if the numbers reported by SolarCity represent the full picture.  shows SolarCity with ~35% national marketshare while the closest competitor is at just over 10% (Vivint). This was in 2015, but it still appears to have a significant lead.
Last month Tesla sold 10,000 electric vehicles to Fords 2,500.
If we are serious about climate change, then sometime in the 2030s  we have to stop building new combustion engines.
The entire technology platform on which these 6,7 million Ford sales rest is about to be swapped out in little over a decade.
Or there might be a breakthrough in carbon capture, converting atmospheric CO2 into petroleum and we can drive combustion engines forever.
CO2 capture is an area of active research and it's entirely possible that advances there will make Tesla and Solar City moot.
I don't know how likely that is. Even if carbon capture comes through, the low hanging fruit of fossil fuels are gone so now we have to get more invasive in harvesting the hard-to-get ones (strip mining, fracking, etc). It's likely that even with C02 emissions taken care of that we'll want electric vehicles and renewable power in general.
The battery is the thing that makes an electric car "expensive" today, but it's following a consistent downward price curve. In ~5-7 years, it will cost more to make an ICE car than an EV car, and then ICE dies. Simple as that.
Energy density. Jet fuel has about 25x the energy per kg as the best lithium batteries. Perhaps batteries will be able to match carbon fuels some day, but it's a long way off.
CCS + Power2Gas + synthetic fuel is unlikely to be cost competitive. It's not like climate scientists don't consider that option. In fact the only half way plausible scenarios for reaching the two degree target involve going carbon negative after 2050. And synthetic fossil fuels are probably the only way to make airtravel carbon neutral.
Full de-carbonisation requires a multi-pronged approach, and cars are at a point where electric vehicles are already very close to conventional vehicles. Within a factor of two or three for range, so totally sufficient for most needs, and not much more expensive. It's one of the better options we have to de-carbonize a huge sector. Second only to the energy production sector itself.
Compare to food production which looks absolutely hopeless (the two degree pathways often assume we manage to implement massive dietary changes see e.g. here http://tool.globalcalculator.org )
Any likely method of CO2 to petroleum is likely to be below 50%, more like 15-30% efficient. Round-trip efficiency an entire order of magnitude worse than battery. That's why batteries are better for ground-based applications and will remain so.
Regardless, if any of the biological/algal methods of CO2 to fuel techniques become successful, why would we care if 5%, 50%, 100% of the solar energy received makes its way to the end product. It's basically free energy at that point. The only thing that would matter is real estate to house the facilities.
But predicting the future is hard.
> Dozens of other companies around the world have battery-powered cars on the market, and more are in development. Investors “act as if Tesla has some sort of patented product that cannot be replicated,” said Dave Sullivan, an analyst at researcher AutoPacific Inc.
> “By the end of this decade, there’s going to be some significant choice for consumers looking for an electric vehicle,” he said, calling Tesla’s valuation outpacing Ford’s “mind boggling.”
Ford doesn't have any good ideas for the future, they are too busy with the here and now and haven't shown an ability to do anything but incremental improvements with their R&D spending. Like we don't expect much more from IBM, we don't expect much more from Ford, but we do from Tesla.
according to who? your average HN reader who basically hates cars? yeah, sure. the guy who hates cars is bearish on ford, shocking.
what about all the people buying raptors and gt350s and fgts and fists and fosts, hand over fist?
do you even know what i'm talking about? do these insanely popular cars even register on your radar?
it sounds like you're not-a-car-guy-but-a-tech-guy which makes up for a huge portion of tesla fans. and you're exposed when you make shit up like "ford doesn't innovate" or whatever your thesis is.
-not even a ford guy. porsche, there is no substitute.
I will also avoid buying a car connected to the Internet/which has a tablet-like dashboard for as long as I could, and I say that as a guy who has done web-programming for the last 10+ years.
People who "just want to get to work" aren't buying cars that start at $35,000, either.
People misunderstand post car like post PC: it doesn't mean the market is going away, but merely that it is no longer growing. Therefore, WYSIWIG on earnings, because they aren't going to change dramatically. Ya, Ford might have record earnings that are slightly more than last year, but no one sees them doubling before inflation makes that happen naturally.
> do you even know what i'm talking about? do these insanely popular cars even register on your radar?
I have to admit, I prefer Japanese cars and would never consider buying an American brand. I found them unreliable in the past, and got burned more often than not. But I still don't see the Japanese companies pulling a Tesla in the future, they are fairly stable companies with stable market share and profits. They don't change the game.
> -not even a ford guy. porsche, there is no substitute.
German cars break down too much. Ya, you can get one, but after the warranty is up, you are toast. Better to lease instead.
india and africa will be china in 20 years. this is the market that tesla is fighting for a fraction of, not the other way around. you're out of your mind.
people like cars. people will spend an irrational amount of money on their cars. they don't give a shit if it pollutes, or kills people, or doesn't because it drives itself sometimes. the trends show this, decade after decade. guess what? teslas pollute also. how many tons of CO2 was emitted extracting all of the rare earths and other super toxic shit that makes a tesla?
i'm sure tesla will be super successful. the rest of the brands aren't going anywhere either. and toyota was the first tesla. look at the prius figures. someone will do it again with electric cars. it won't just be tesla. you can't be serious if you think that.
India and Africa are going to buy Fords?
China has been really nice to Ford, it has kept them afloat while the American market tanked at home, BUT let's not delude ourselves about how Chinese JVs work. Also, China has some weird tax games going on, so its not clear where demand will eventually settle (disclaimer, I lived in Beijing for most of 2016). Other countries have and will follow similar home-grown biases.
You seem to have a bullish outlook on Ford, I don't know. I don't see them as a tech company, they make cars, they always have and always will, nothing will change for them. They aren't aiming for a shot at more greatness than they already have.
do yourself a favor and never own or run a business. record breaking numbers do not happen by accident or because of inflation. you have a fundamental misunderstanding of what is actually going on here.
the analogy you are looking for is "right before the car showed up the record sales of horses looked unstoppable." but you're not putting the pieces together in a coherent manner.
also, ford will make whatever the car is. doesn't matter if it's electric or gas or diesel or bio.
Ford Focus is insanely reliable. I have a 2002 with a bazillion miles on it and it's still running like new.
To be fair, Japanese cars are generally great as well, especially Hondas.
Ford's P/E ratio is 9.89.
IBM's P/E ratio is 14.02.
Facebook's P/E ratio is 40.79.
Tesla's P/E ratio is infinity since the E is negative.
I'm sure Ford has done many incremental innovations, I didn't say they didn't. IBM does the same thing, and has "record profits" every few years also. Its just the market isn't expecting the next big thing to come from Ford, while they are expecting that from Tesla.
If you think the market is wrong or too irrational, you can make a killing by shorting Tesla and buying cheap Ford stock.
I don't short stocks because I don't believe in trying to time the market. I actually think Tesla could move well north of where it is currently trading. Not because I think they are going to grow to justify the valuation, but because I think lots of people will look at the $45 billion valuation and will incorrectly compare it to Amazon, Facebook (as you just did), Alphabet, and Apple and think $45 billion is low.
However I am long Ford. In fact it comprises the largest percentage of my personal portfolio. I continue to add more to it with every drop and just added more a few days ago. While the value has been dropping over the past couple of years, I've been collecting healthy dividends along the way ($F pays out now over a 5% yield), and am happy to sit and wait to see how long people will wait for Tesla to move beyond a niche auto maker and into the mainstream market.
Edit: One other point- this recent run-up is attributable to Tesla delivering more cars this quarter than expected, not because they just unveiled some new technology the market wasn't previously aware of. TSLA has been extremely volatile whether you've been long or short over the past 2-3 years. All it takes is one missed earnings report and it'll send this stock down at least 25%.
The only thing happening now is that investors seem to be extremely worried of 'missing the boat' on automated driving. See the big investment in Uber, a taxi company with an app that essentially anyone can copy. But they raised billions on the promise of automated driving.
The only thing here is the idea that the organisation that perfects automated driving first will dominate every transport sector. That seems far fetched to me though.
But hey, I'm just a regular person too. So maybe I'm dead wrong.
Shorting is the way you capitalize on a stock that you think is overvalued. It is an advanced maneuver but can be done for the long term as well.
IBM...man, IBM is a tech company that got rid of most of its R&D to focus on consulting and accounting tricks. But ignoring that, IBM has a huge R&D division but has been unable to come up with any breakthroughs for quite some time now, it is the canonical mature tech company that isn't going to have rapid growth like a startup.
And it makes sense: a high P/E ratio indicates high potential. The lower the earnings, the higher the P/E ratio. But if earnings went negative, then the P/E ratio would automatically go negative (since that is how math works, as you say). So if my stock price is $100, and I earn $1, my P/E ratio is 100...so much potential! If I accidentally lost a dollar instead, my P/E ratio automatically becomes -100 even though not much changed in my earnings.
the market can remain irrational for longer than you can remain solvent!
The likely long-term outcome is for Tesla to be bought out for a pittance (maybe $20-$30 a share? $10 would be surprisingly low, $50 surprisingly high), by a mature automaker interested in the marque; in the meantime, the way to make money off Tesla is to realize that all the people who are zealously pumping their money into Tesla are leaving everything else under-valued.
Tesla is making larger swings and potentially accepting larger risk. Ford is... iterating.
Plenty of other manufactures are doing innovative things with automation, technology, etc. Not to mention most of them can build a higher quality interior/driver experience for far less than what Tesla wants for a Model S
Seems like the most basic, obvious, easy to implement feature but they still can't manage it. Apparently because it's "illegal in Germany" to have a car running without an operator behind the wheel. What a joke.
Tesla will wipe the floor with them.
I know it's not very innovative but if the incumbents can't even do this then how are they going to leapfrog Tesla at, say, self driving?
Electric vehicles prior to the Telsas where research projects and low torque ultralight budget vehicles. Listing the differences between a Telsa and its closest successor, if you could pick one is not an easy task. Listing the difference between an F-150 and and F-150 with and aluminum was already done this sentence the hardest part was spelling aluminum.
You can pick an threshold for choosing what is evolution and revolution, I am just trying to choose a reasonable one.
That's what I'm kinda waiting for - I don't want a car; I like having a pickup. Ideally, it would be 4WD (and my next pickup will be - right now my off-road vehicle is an Isuzu VehiCROSS that I'm pouring money into). I would love it if my next pickup truck was a self-driving, off-road, 4WD electric beast.
But I don't see that happening any time soon - at least not before I get to the point of replacing my current truck.
The market could be wrong, Tesla could fail to achieve their vision, Ford and other existing big companies could somehow turn themselves into organizations that aggressively pursue ambitious new visions.. but the market is betting not. You're welcome to make an opposing bet.
Suddenly we believe in a rational market when it comes to Tesla? Everytime I ask basic valuation questions in these threads, I get touchy-feely answers about "potential". And HackerNews is supposed to be a data/tech place. Imagine what average Joe thinks?
I don't know about 'we', but I don't believe in an irrational market - the market may well be wrong, but it's not usually wrong for unreasonable reasons. And potential is all investors ever care about: they're looking to put their money where it has the most potential to turn into more money. Predicting the future is necessarily uncertain and involves ambiguous judgment; you can call that touchy-feely if you want to be dismissive, but there is no such thing as data on things that haven't happened yet.
In the case of Tesla vs Ford, there is probably a sense in which the longer the market is 'irrationally' convinced of the value of Tesla, the less irrational it actually is - it's a bet on Tesla's viability and vision, and the longer it seems like a good bet to most people, the more likely it is that it is a rational bet to have made.
That said, it's not like they are exactly just making small refinements to gasoline engines, while SV companies are the only real innovators, chasing electric and self-serving vehicles. We just tend not to talk about it as much on HN (compared to Tesla, for example):
Ford does normal science , Tesla does revolutionary science .
Tesla on the other hand, has millions of potential customers who would and will buy one once they become a little more affordable and the charging infrastructure becomes more built out. We already saw how fast the pre-sales for the Model 3 went. And that was just people who were willing to put down money on a car that wasn't even available yet.
It's not just about innovation or not. Tesla has a lot of room left to grow. Ford is about as big as it's ever going to get.
Yeah but it's not like people buy one car, and never buy one again. Ford sells over 800,000 units of just the F150 every single year.
Now it's true that they don't have as much potential for growth because they've reached a sort of stable place in the market. Maybe sales can grow a few percentage points year over year but Ford is unlikely to jump by 20% the way Tesla can.
But that's not really saying much as Ford is a mature company with a complete lineup and Tesla is only on its 4th model of car.
But they are already trading at a higher valuation than Ford.
So unless you think that Tesla can command much higher margins than Ford does, then shouldn't Tesla only trade at a similar valuation when they are making similar amounts of cash?
Sounds like they may be trying to compete with Android, Apple, and Tesla on the software side. And QNX has a good microkernel architecture for an automotive OS.
Incremental changes is what most senior management folks at places like Ford can do because that is what they teach at MBA schools using linear growth graphs.
Self driving tech is really novelty thing now. And nobody expects it to work anytime soon.
The real deal now is mind-blowing battery tech. Batteries that are rugged, can charge quickly and a car that can give a big range on a charge.
Meanwhile talking of how efficiently somebody can build an ICE based car is really like someone talking about how quickly they can produce horse carriages. Doesn't really matter because that disruption is happening else where.
Apple was making billions in profit on the iPhone at launch. Tesla has never made a profit and sold 70k vehicles last year. Companies like Ford and GM have huge numbers of loyal customers and move millions of vehicles a year and quite profitably. So while it sounds great to pretend that the automobile industry is dying and Tesla is capturing their market share by sheer innovation, the numbers tell a different story.
It's based on nothing other than the weird contempt you see for large, established corporations in the SV crowd. Big established corporation = big established rule book and management hierarchy = stifled innovation. Nevermind the fact that most of the major technological breakthroughs of the past 100 years were developed by the research wings of big corporations (Bell Labs, defense contractors).
Based on committed capital, I think this is at least partially correct.
As anyone who has every used software will attest to: Most of the time, we can count our lucky stars if our commercial software 'works' for a year and a half.
Cue all the: "If Microsoft/Apple/Google/Facebook/Snapchat made cars" jokes.
I've contemplated the idea of my next pickup being a commercial vehicle, if I can get one (as a single unit and not a fleet sale) - which I probably won't be able to, but I can dream.
It seems like that's the only way (except for going used) that I'm going to be able to get what I want: A standard-cab, short-bed pickup, ideally 4WD.
I don't have kids, and won't have kids. I have no need for four doors and an extended cab. I don't need a long bed. I want a short wheelbase. So far, it's either buy a used pickup (back when they made and sold these kinds of trucks) or go with a commercial vehicle (where you can still sometimes find them - sometimes).
The other perk about a commercial version is that they are stripped down to the bone. Nothing fancy in the cab, just the bare basics for a radio, cloth interior, non-electric controls for windows and seats. Basically, eliminate all the fru-fru stuff to make that much more reliable for work-based usage.
In other words, I want a truck to be a truck - not some fancy "I only go to the mall to show off" substitute for a minivan. Add in some basic 4WD with manual hubs (again - nothing to break) - and there ya go. That's my dream truck (ok - if there were a Raptor version of it that'd be nice, too - but I can't afford that, so who really cares).
But you're right -- there are no Chevy S10 or Ford Ranger type pickups anymore. The closest you'll find is probably the Toyota Tacoma, which has more than I would want or need.
So I just got another Corolla. It does have some fancy features I enjoy, but luckily they aren't reliant on the internet to function. And it's cheap.
I, for one, kinda like driving a car that doesn't require an internet connection, doesn't have forced OTA updates, doesn't send analytics data back to base, and won't potentially be bricked if someday the manufacturer goes out of business. Other manufactuers are starting to do the same thing but I'm going to enjoy my "dumb car" for as long as it lasts. Hopefully when fully electric vehicles become more mainstream and affordable there will still be an option to get a "dumb" version.
How? Uber has passed as a software company by making its drivers pay for capital and depreciation. Tesla currently sells physical cars to individual people. They may be aiming for "self-driving," but if they ever get there, there's still the question of who pays to build and maintain the cars. Compared to that, the value of the controlling software seems fairly small.
I think you just don't read about it because you don't care about Ford, but you read about it for Tesla. And it's not entirely your fault; there is definitely publication bias as well.
Here is an article from literally today:
However changing from petrol to electricity doesn't seem to be a drastic change. An important part of car making is changed (engine and energy), but it's not a radical shift (the rest of the car is still the same).
Today, Tesla represents a very small fraction of the number of cars produced in the world. There are still quite expensive, even Model 3, and there are not as convenient as current gas cars (long recharge time and lower autonomy). EV are definitely interesting but they are still in their infancy.
It's still to early for big car markers to shift completely. But the shift will come in 5 to 10 years, then it will be an interesting moment, we will see which companies have prepared enough to jump in the good wagon, and which companies will die.
As a side note, cars, either gas or electric have always amazed me, and not in a good way, from an energy and ecology standpoint. A 1500Kg vehicle to move on average 1.5 persons or 120Kg seems a huge waste of energy.
I do see their usefulness in low density environments such as rural areas as it's a system that doesn't require a complex infrastructure. But in dense environments like cities, transports needs could be far more efficiently provided by public transport and coherent urban planning. I truly hope that cars will not be as common in the second half of the XXI century as there are today.
Ford bet $1 billion on Argo.ai to build self-driving cars, and they also acquired Chariot. They are planning on using these to roll out self-driving vans in 2021 to compete with Uber, Lyft, etc.
Is that true? $100 is such a small amount of money that you're completely at the mercy of the supply chain. When you have $100B to spend, you are the supply chain (or at least a major part of it). Big money always makes the rules. They're either making money off of you now or planning to in the future.
Now you might say, "but wait, plenty of products/companies have done poorly because I wouldn't give them that $100." But that's not true. In reality, product success is always in terms of big money -- it's just spread out over enough consumers who individually have the $100 buy/don't-buy option.
Another objection: "yeah, but I always hear about big money wasting $30M (for example) on something stupid." Maybe so, but remember the scale. $30M waste on $100B is the same as $0.03 on $100. Moreover, the stupid thing they're wasting money on may not be that stupid -- you just might not be privy to all the details.
All that may sound like it's bad, but I think it's pretty great system. I sell my products at a markup to get small money, then have the discretion to buy or not buy somebody else's stuff with the money I made. En masse, I form a part of the "big money" consumer group at Home Depot, Amazon, etc. that has power over the more centralized big money.
You can skip to 3:00 for an answer.
Make no mistake, as much as Tesla is loved by the Tech crowd they are currently nothing compared to Ford and other established auto makers.
Tesla ships nowhere near as many cars as Ford. Doesn't matter what you may see locally or what "blends in", but there is nothing generic about the number of cars Tesla produces (which is very small compared to Ford, and other major Auto companies). Tesla has nowhere near the level of business as the other major auto companies.
As mentioned elsewhere in the thread, there is nothing generic about:
"Tesla sold 40,697 vehicles in the U.S. last year, according to researcher IHS Markit. Ford sells that many F-Series trucks in the U.S. about every three weeks"
Ford sells that many trucks every three weeks. Every three weeks, versus an entire year for Tesla.
Maybe the Model 3 will change that, but I do not have high hopes with how thinly spread Elon is.
Ford has been in business for almost 120 years, and has contributed untold billions to the economy. What a terrible company, am I right?
Rainy day funds look like such a waste of money until the roof starts leaking.
1. Telsa has many investment ideas
2. Tesla spends massive amounts of CAPEX
3. Tesla incurs large amount of depreciation
4. Tesla's net income goes down
How do they spend in relation to the other car makers? Do you think that auto manufacturing capex simply turns off one day? It's a capital intensive industry.
Ford share holders, presumably, received a return on their investment in the form of a dividend. While Telsa haven't and won't in the "foreseeable future".
So your overly simplified analysis is complicated somewhat by the individual investor carrying out a risk assessment and deciding which companies should or shouldn't be in their share portfolio.
Look at the sad tale of post-bankruptcy Kmart, and how they used hype, valuation and newly available credit to gobble up Sears. Predicable trainwreck ensued.
Tesla is alike and different. They have an amazing management team, Apple-like religious fervor/hype machine, but a marginal product category. Their continued growth is only possible as long as they can convince people that they aren't a commodity like any of the 50 other car companies.
However, Tesla today is an integrated energy company. They make Solar Cells (the part of the business formerly called SolarCity), Stationary Battery Systems (generally referred to as Tesla Energy) that range in size from residential to grid sized and of course cars (which ultimately also use batteries).
Comparing them to car companies is like comparing Amazon with bookstores. Yes Tesla is a car company and yes Amazon is a bookstore. But both both of them are so much more than those simple comparison.
In fact I suspect the Amazon comparison here is rather apt because Amazon is now in the situation where Amazon Web Services is essentially able to prop up the retail business. I suspect Tesla Energy will be able to prop up the car business in the near future.
End of the day, even with all they have achieved, the whole machine blows up once the hype train pulls to a halt.
Come to think of it, that almost sounds like what Tessa is beginning to achieve with large scale electrical storage. 
People love the machines they make.
Ford can add body stylings all they want, but they can't match tesla or spacex or solar city.
I just don't think they have it in their DNA - I'm actually surprised we haven't heard of any of the big three going all out attempting to acquire tesla.
What would be a very interesting event would be when Tessa builds a long haul delivery truck/trucks in general. There is no way they haven't thought of a general platform chassis which can have modular tops put on them.
Wouldn't it be great if tesla sold a chassis to boutique shops like there were in the 20s...
I'm not. The big three don't have enough cash to pay the market cap multiple needed to gain control, especially now that Tesla is bigger than Ford.
No sane lender would loan the money to one of the big three to do it either - first, the money would be better spent just buying Tesla stock and second, there is no way that Tesla would be run better by pulling it into one of the big three car comnpanies, none of which have a strong non-incremental innovation culture.
When electric has a positive ROI, it will be just another drivetrain from Ford.
But Apple won people over with the actual product, not with a great product promise that has been implemented haphazardly.
Market cap is the value of the equity. Enterprise value is the value of the business (ie including debt). Tesla's EV is $52bn. Ford's EV is $150bn.
Not even Warren Buffet thinks this. In economics, the correct measure of a value of a business is the future discounted expected value of cash flow and external utility. There's almost no way to measure this directly so major simplifying assumptions are made when applying this definition in practice.
The market cap is closest to its value representing what it takes to control/own/sell the company.
Enterprise value is also market cap + net debt, not its cumulative present value DCFs.
DCF is indeed a method to estimate the fair value of a company's EV, not it's market cap. People will usually do a DCF, then subtract net debt in order to get an estimate of equity value from the DCF. Here's a citation: http://macabacus.com/valuation/dcf/overview
It isn't the EV either, though
The significant extra value of Ford is ignored when you focus the cost of getting control of a company rather than total value.
Ford has all the infrastructure that Tesla is attempting to build now (aside from the batteries, but that is something that Ford could easily partner with another manufacture to get). They know how to mass produce cars (granted right now, ICE cars). That's not an easy feat. They have a large manufacturing and maintenance base that, frankly, Tesla can't replicate. The bet is that Tesla will be the first successful company to market, or that they will hold some patents which will prove valuable in the future. The market is not betting that they'll beat Ford or GM.
> Nearly everything changes when you opt for a fundamentally different power train, so GM’s greatest advantage—more than a century of experience building cars—was all but moot. Car structure was different, since they were building around a battery, not an engine. The brakes, steering, and air conditioner were powered differently. New systems, from electromagnetics for the motors to onboard and off-board charging, each came with its own learning curve. The engineers didn’t have established tests to follow. Just turning on the car required finding the perfect sequence of electrical signals from more than a dozen modules. “Oh my God, it took us forever to get the first Volt to start,” Fletcher says.
This is why Ford is unlikely to succeed at pivoting into the electric car market. The power and pull inside their company doesn't want them to. It will take superhuman leadership to overcome that force.
Start with a hybrid Ranger billed as "torque+" marketing slogan "it'll tow a mountain"
By your logic Tesla would have been locked out of the VC/investment market due to Big Oil. Money flows like water.
I guess you could say the same for Kodak, Blockbuster, and Borders?
“The reason is that good management itself was the root cause. Managers played the game the way it was supposed to be played. The very decision-making and resource-allocation processes that are key to the success of established companies are the very processes that reject disruptive technologies: listening carefully to customers; tracking competitors’ actions carefully; and investing resources to design and build higher-performance, higher-quality products that will yield greater profit. These are the reasons why great firms stumbled or failed when confronted with disruptive technological change.”
 - https://www.goodreads.com/work/quotes/1468535-the-innovator-...
Ford has primarily focused on hybrids and there EV offerings are either fleet-only or compliance cars.
Oh wait sorry this is HN. Ya, those idiots at ford will die to the great Elon. hahahahaha any company older than 25 years is worthless old school idiocy and will die within 5 years of a startup coming in.
History is littered with companies that refused to pivot into new technology until far later than they should have, because they were too heavily invested in the old way. American car companies suffered from this in the 70s, where they got thrashed by competition from small imports for quite a while before they could be convinced to stop concentrating on land yachts.
Companies seek to outperform themselves relative to the last quarter and year. Long term strategy like this takes a backseat, if it gets attention at all. It certainly doesn't get the luxury of a whole company pivot that could tank short term value.
Need proof? Look at all of the American companies that got caught with their pants down shipping nothing but bigger SUVs when the price of oil shot up back in 2008.
They've also ditched the high-end SUV market right as that market exploded all over the world, thus missed out on massive profits because they no longer sold an Expedition. They openly admit to ceding the market to GM in their annual letters to shareholders specifically because they don't see gas-guzzling SUVs as long-term investments.
They also lead the market in fleet and industry-oriented products. They offer both technology and core-products designed to keep the incredibly lucrative fleet buyers happy.
In this regard, Ford is akin to Microsoft: their consumer products aren't mind blowing, but their corporate products are so well entrenched that they will be a practical ATM for the next decades. Ford sells six times as many F150s as Toyota sells Tundras and they own the entire small cargo van market.
I would highly recommend the book "The Innovator's Dilemma." It provides case studies of disruptive innovations across many different industries -- from farm tech to disk drives.
I think the economics aren't really there yet for them to bother with an electric platform (vs retrofitting electric drive into an existing platform). If they thought it made sense, they would be able to be producing at large volumes in a few years.
That's an incentive not only to produce an electric car, but to produce one that people buy instead of buying petrol/diesel cars.
Also, don't discount the importance of the cashflow from pickups. The only reason Chrysler and Dodge still exist is because of their anchorage to Jeep and RAM. Ford could eliminate their entire car division and still retain like 80% of their profits.
Well that's what you get for buying a car that has Microsoft software running in the infotainment system. The MS-designed Sync system had all kinds of terrible reviews at the time, and it was so bad that it brought Ford way, way down in the "initial quality" surveys, from #1 down to near the bottom IIRC. Do you not do any research before spending a giant amount of money on a car? I spent several months researching my last purchase, a Mazda (I didn't actually spend several months continuously researching it, but I was doing research and test-drives for several months before committing).
To be fair to Ford, though, my understanding is that the latest generation dumped Microsoft and switched to QNX, and should be much improved. While they were using MS, there was no way in hell I'd buy one of their cars. After they switched, I did look into a Focus, but was deterred by all the reports of problems with their DSG transmission.
What about a Bolt?
My sleeper is MB though, overall.
You mean largely trouble-free engines that run on ultra-cheap gas?
ICE has environmental issues, of course, but the idea that electric is universally superior is questionable. There's no range anxiety with gas and any backyard mechanic can fix most issues. Your locked down $100,000 IoT car is a completely different beast.
>Much of this will be of zero value in the near future.
Says who? If anything everyone is bearish on electric since gas prices have fallen and how range and recharge times will always be less convenient. Electric might replace gas but it won't be in the near future and nothing stops Ford from launching an electric line of its own. Electric cars are a solved problem if you can convince people to pay the premium and deal with the range anxiety and long recharge times. Ford has already announced an electric Mustang and F-150 on top of the $30,000, pre-rebate, 2017 Focus you can buy today. Tesla has no monopoly on electric tech. The barrier to entry is non-existant for other car companies.
edit: saying that the government will ban ICE isn't a market statement its a regulatory hope and for most nations a far off proposal. The idea that Tesla can only succeed with the government literally making their competitors illegal isn't actually a pro-Tesla argument. You guys are much less convincing than you think you are.
It is foreseeable that ICEs will become banned, at least in Europe. Right now there is still too much lobbying by the traditional car makers, but long term there is no other choice for reaching climate goals.
Edit: See e.g. http://bigthink.com/scotty-hendricks/the-end-of-the-internal...
He uses the thing as a commuter vehicle and to tow boats every now and then. The reason he gets a new one is that the dashboard computer systems on these things get updated from year to year and he prefers to stay up with the most current technology.
For most vehicles, 100K miles is nearing end-of-life. For an F series truck, 100K miles isn't even the halfway point.
Copied from another comment I made on HN:
Nobody really understands lithium-ion batteries. One production run might have substantially higher or lower capacity. Some batteries might explode. Some batteries are high discharge and some are low discharge. The "explanation" for all of these things is 'heat'.
Imagine that happening to any other industry (for example the auto industry.)
- "Why did my car just explode!?" "Heat"
- "Why does this car last a tenth the lifetime of this car?" "Heat"
- "Why does this car go a thousand times faster than any others?" "Heat"
- "Why is this entire production run of cars not working?" "Heat"
People say "heat" for two reasons: 1) because nobody understands li-ion batteries and 2) because yes, the real answer does have something to do with heat.
Batteries are one of the most important industries and critical to every company on HN. But the state of the art of batteries is putting together random metals with a bunch of random chemicals and watching which ones don't explode.
Imagine talking to the CEO of Boeing: "We just did our millionth test, engines made of cheese and wings made of coconut shells. It crashed during takeoff, of course. We haven't had any improvements in over a decade, but we're sure we'll get there eventually - we've spent billions on research so far. Wanna come watch test 1,000,001? We're trying engines made of cheese and potato-chip wings next!"
Engineering takes time, Tesla has spent a lot of time building and testing battery tech that works. And they are using it across multiple applications.
If you get reliable electronics in, then without frequent oil changes, and tubeless tire. A electric quite literally is a zero maintenance car.
And EVs are absolutely not zero maintenance, that's just a fantasy. Even in dream-world where we have tires that never need to be replaced and no oil changes, batteries are always going to be a large part of the car's cost and only last a few hundred charge cycles.
The basic premise of an electric "engine" is simpler than that of an ICE, but when you actually make the car, it's nowhere near as simple on paper. Just look at the issue people have had with getting Tesla's repaired... the "mechanics" don't even know that you have to keep the battery charged.
Also, don't ignore the fact that we have 100+ years of experience with ICE.
Also, I would argue electric motors have been around far longer than ICE because it is simpler. https://en.m.wikipedia.org/wiki/Electric_motor
I've been through the CRT -> Flat screen television phase in India.
Arguments were typically like these. How will TV repairmen fix these new TV's which have move like plug and play internals. Therefore new flat screen TV's won't sell?
In the end it didn't work out well for TV repairmen. If its easier to identify and swap the malfunctioning part, you need lesser and lesser skilled professional to service these goods. You can dumb down the process to a point anybody can do it.
If that is done so "easily," why is Tesla building a Gigafactory?
The bet is that Tesla will be the first successful company to market, or that they will hold some patents which will prove valuable in the future.
Patents? Have you been following?
You are right about some of their resources, however I think it is a mistake to glibly discount the importance of the battery supply and manufacturing (and by extension, the charging infrastructure) -- that is arguably the hardest and most important part of an electric vehicle, and with Tesla's Gigafactories, that could represent an important advantage of Tesla.
Hypothetically, it would cost Ford/GM much less to put a "SuperCharger" at every existing dealership than it would for Tesla's entire basic roll out.
Tesla has been successful at marketing thus far, not manufacturing.
As matter of fact, that was my whole point: Rather than growing "a lot" they may end up just holding on to their marketshare. Whether that is a mark against them or not is for you to decide, when researching investments.
Ok true, but Ford is way past "post-ipo". Growth is not the metric to measure them by (they will grow, but no where near as much as Tesla). That's pretty much agreed upon by market analysts.
All of the existing manufacturers have better infrastructure than Tesla and are getting into the hybrid, electric, and autonomous car marketspace. Even if Tesla survives long enough to make a profit I see no way this company ever justifies it's current valuation. Long term I expect huge price drops in Tesla stock.
Ford also maintains an extensive dealer network which can disincentivize some painful adjustments that otherwise might need to be made to be more aligned with future sales, etc. People talk about direct sales for Tesla usually in a negative connotation due to institutionalized friction (re: lawsuits / political favoritism), but I think it's a strong asset in a savvy marketplace, and can illustrate how established infrastructure isn't always for the best. One less mule for the cart to pull, IMO.
I also think there are some signs that existing manufacturing practices can be / need to be rewritten around an all elective drivetrain. For instance, Tesla plans to operate its lines at full-speed using some new "invasive" robotic procedures that the full-glass roof of the model 3 will afford. This has dramatic labor and capital consequences for an automaker with a diversified fleet. Might be costly to rebuild the machine that makes machines.
We're also making the assumption that charge-battery-drive-the-car is the future
Battery power is an evolution of car tech but it isn't a revolution. Tesla is building wired telephones when the majority of the market is using wired telegraphs. A substantial improvement to be sure, but to suggest a company such as Ford is not able to grow is very short sighted-- they aren't standing still either. Tesla could increase production and sales by an order of magnitude and still have a minuscule market share.
Of course Tesla will grow, but they don't have a monopoly. The future value of Tesla is certainly greater than today's value, but to discount everyone else because we are analyzing this through a specific lens of perception is a folly.
Even if it would work out for them, Tesla is pushing really hard to be a major battery supplier, so they could end up benefitting either way.
It's true, but I don't think it matters. Traditional automakers rely on suppliers for all kinds of parts on cars: headlights, wipers, tires, glass, airbags, and many electronic modules (auto-dimming mirrors, blind-spot radars, etc.). However they do tend to always keep the body/chassis and the drivetrain in-house (sometimes they'll outsource the transmission, like to ZF).
I don't see how this would affect them moving to EVs. Going from ICE to EV means two giant changes: the chassis (to make room for an entirely different layout, esp. because of the batteries), and the drivetrain. Well, the automaker controls both of those. All those other things, like glass, headlights, electronic safety add-ons, etc., are going to be the same either way. You don't need a different blind-spot monitoring system or windshield wipers or tires just because the drivetrain is electric.
Tesla building its supercharger network was a brilliant move because it means that Teslas are comparable to most petrol-fuel vehicles (as far as where you can go), and everybody else isn't.
If I buy a Ford, can I drive it to see my family in Northern Minnesota? Because I know that I can take a tesla.
That's a really big deal.
I know there are 3rd parties in the US trying to compete with tesla's superchargers (a very close friend of mine was an engineer at probably the largest one until they went bankrupt), but as far as I can tell they're nowhere close to Tesla.
Originally I said North Dakota, but it looks like even Tesla doesn't have chargers there yet. BOO! Well luckily I have plenty of family in Northern Minnesota too!
That said, Tesla is pursuing the angle of enabling customers to install their own charging station requiring negligible maintenance, and no supply; charing networks are only needed for longer trips which most customers don't need. That is a game-changer for many industries.
>Ford has all the infrastructure that Tesla is attempting to build now
As for the charging stations, that's an investment that ford would have to make to stay viable, which they would do
I really don't think there is any difficulty in making EVs now, its finding enough to support the market. While 200 is great for a base range I find it the absolute minimum for any pure EV and to be honest I won't go pure EV till I see 400+ (Drive a Volt now). Not all want/need two cars and even many families are constrained based on size/packaging of the car which led to my surprise when the 3 was a sedan which is not a growing market.
> Ford has all the infrastructure that Tesla is attempting to build now
* no battery production facilities
* no charging infrastructure
* no vertical integration (unlike Tesla, Ford has to sell through the dealershits - I see it as a big disadvantage)
> They know how to mass produce cars
Yes - but can they produce the car the public will want in three years from now, when affordable all-electric, high-performance, autonomous Model 3s will redefine what modern car means?
> They have a large manufacturing and maintenance base that, frankly, Tesla can't replicate
I admit that they have some hurdles ahead, but what would stop Tesla from being more efficient at manufacturing than Ford? It is one of their objectives - and their track record is pretty good, to say the least.
My, what a strong argument.
>> How much is Ford expected to grow?
> If they can properly pivot into the electric car market, a lot.
I don't think anyone has any trouble telling a story in which Tesla is ultimately a more valuable company than Ford. And I agree that's a big deal. But this comment thread suggests the market cap comparison is some kind of milestone. It's hard to articulate what that milestone would be.
I'm a huge fan of Tesla and think that they will succeed, but saying that the stock is "priced for perfection" is putting it mildly.
Realistically they more often invest on their perception of others perception of the promise of future value. How those perceptions get linked together is interesting but it is not nearly as objective as you imply.
How much stationary energy storage did Ford sell last year?
"Tesla CTO: our energy storage is growing as fast as we can humanly scale it [Gallery of new Powerpack station]"
Disclaimer: Own a bunch of TSLA.
Fuel has a marginal cost. Stationary battery storage soaks up power when power is cheap, releases it when the cost is higher and energy demand is higher and has a 10 year minimum life.
You must be a blast at cocktail parties then.
>Stationary battery storage soaks up power when power is cheap, releases it when the cost is higher and energy demand is higher and has a 10 year minimum life
I think you're making a few unsubstantiated assumptions here. Primarily that the cost differential in electricity (or the availability of renewables) is broad enough for the Tesla tech to be significantly profitable.
I ran the numbers: a Tesla PW2 gives you ~20.3MWh throughout it's useful life for $5500 limited by power availability and recharge rate. A slightly more powerful Ford generator at $1500 with $4000 worth of diesel fuel would yield ~8.9MWh of anytime power with the ability to run on waste oils and a comparatively perpetual lifespan.
So, 44% the power cost with a power wall but a substantially higher upfront cost, a considerably lower salvage value, and a number of restrictions on it's usage (hope you don't need power during sustained outages in the Northeast).
Any more chuckles?
"The Kauai project consists of a 52 megawatt-hour battery installation plus a 13 megawatt SolarCity solar farm. Tesla and the Kauai Island Utility Cooperative, the power company that ordered the project, believe the project will reduce fossil fuel usage by 1.6 million gallons per year."
"On Thursday, Tesla announced that it had been chosen “through a competitive process” to supply utility company Southern California Edison with 20 MW (or 80 MWh) of battery storage. In May, regulators ordered Southern California Edison to invest in utility-scale battery networks after natural gas provider SoCal Gas leaked 1.6 million pounds of methane into the atmosphere when a well ruptured at its Aliso Canyon Natural Gas Storage Facility."
"California will shortly bring more Tesla energy storage systems online in Southern California Edison’s (SCE’s) service area.
The 50 MW projects (utilizing Tesla’s Powerpack 2) are conducted by Macquarie Capital, the corporate advisory, capital markets and principal investing arm of Macquarie Group (a global finance corporation)."
"With the confidence of a well-oiled pizza shop, Elon Musk “seriously” said that Tesla could deliver a more than 100 MWh Powerpack project to Australia in 100 days – or it will be free."
"Considering a large part of the 100 days will be for shipping the Powerpacks and other equipment from Nevada to Australia and then installing those packs, I wouldn’t be surprised if it means that Tesla and Panasonic already have a capacity of over 100 MWh per month at the Gigafactory. That’s a significant 1.2 GWh annualized rate."
Chuckles remain firmly in place ;)
Combining the 5 largest auto manufactures on earth and you are still well short of a trillion dollar company.
Or at least that is how I understand it.
A trillion dollars? For a niche/luxury car company? What fantasy is that based on?
> it's biggest current hurdle is getting it's production up to meet an enormous demand
While enormous to Tesla, actual demand is pretty small compared to other car companies.
It doesn't help that even the most "affordable" Tesla is far more expensive than the average competitor's EV or hybrid vehicle, let alone it's base price (not final sale price) starts off above the average new car purchase price (final sale, after upgrades, etc) for the entire industry.
There's a lot of hype around Tesla, but that doesn't mean they're going to take over the auto industry, let alone become larger than the largest auto makers around who produce "Everyday Joe" cars for the rest of the population.
That's a big IF.
Also, it ignores the fact that every car manufacturer already has a plethora of fully electric, or hybrid models available (and they are, on average, far cheaper than the cheapest base model Tesla can offer), and the markets still don't buy them.
This also ignores the fact that many companies make great batteries, and Tesla is only recently sitting down to that table. Why wouldn't Panasonic be that "trillion dollar" company? Or Sony? Or Fujitsu?
Edit: No, really. Ford sold over a million vans, pickups and heavy trucks last year, a market that Tesla has no apparent interest in entering. The Toyota Camry alone sold 428,000 in 2014, the Honda Accord 328,000, the Corolla 340,000, the Ford Fusion 306,000, the Nissan Altima 336,000, and the Honda Civic 326,000. The Tesla Model 3 will presumably be in that latter market (although those are roughly $10,000 cheaper), and if Musk is right about scaling his factory to 500,000/year, it will take a big chunk of it (but still, it's $10,000 more). (If it's in the BMW 3-series/Merc. C-class/Lexus range, 500,000/year would eat all of that market.)
It didn't take Apple much to take Nokia out of the game. Nokia had smartphones on the agenda for a long time. The problem was that wasn't their only focus. Apple went all hands into the iPhone.
But I mean, couldn't GE do that too? Or Samsung/Murata/Vishay/Maxwell/Panasonic/etc.? It kind of seems like the stocks are trading largely on the strength of Musk's vision. I am kind of okay with letting mad scientists-cum-Bond villains like Musk and Bezos run amok with billions of dollars, though. I mean why not, it's a bit of a wildcard and it makes about as much sense as anything else that's happening right now.
Sure. So could Martha Stewart, or Jeff Bezos.
That hard part is actually doing it and doing it well. Is GE better positioned to do it than Tesla? Not really. It's a complex problem involving advanced software, engineering, branding, customer service, talent retention, supply chain, and myriad other challenges. Tesla is better at some of these things, worse at others. But they're going for it. GE, GM, et al don't appear to be moving aggressively towards these goals at all.
Or space elevators, or flying cars.
This is the goal:
All made/sold by Tesla.
If Apple can be a multi-billion dollar company making laptops, phones, and an app store, I don't really see the Tesla "could be a trillion dollar company" as too far-fetched.
I mean this is the era when SnapChat is "worth 25 billion".
Anything could be anything. The challenge for Tesla is that they validated the electric car market and managed to carve out some market share, but now they are in the sights of every car manufacturer in the world. It's a different ball game for them. Car companies know how to make cars at scale, Tesla doesn't. It's a big challenge.
Tesla is reminding me a lot of early Apple—equally rapid supporters and detractors. If anything, that means people find your work interesting. (Wonder if Elon will send out a staff note mirroring the note Jobs sent when Apple first passed Dell in market cap.)
Nothing is everything. That doesn't negate the fact that:
Tesla Passes Ford by Market Value.
"Ford tops list of automated driving leaders in Navigant study. Tesla ranks 12th"
Like parent said, market cap isn't everything.
I worked for this lovely company once where we paid hundreds of thousands of dollars to a consulting company to "research" how we were the dopest, only to have pretty much written the entire document for them. Go figure...
The 3 is going to be a real test here. Not that they can make the car but that those expecting to get one at 35k actually get one and on a timely basis. Then throw in, is there any profit at that price point when factoring in all related costs?
There's no sane scenario where a car company that sells cars in the tens of thousands over-values a car company that sells cars in the millions.
It was true if you held Google stock.
When two companies have wildly different capital structures, you have to compare them on enterprise value, not the market cap of their equity. So while I give kudos to Tesla for building a valuable business, it still has a long way to go to catch up to Ford.
> When two companies have wildly different capital structures, you have to compare them on enterprise value, not the market cap of their equity. So while I give kudos to Tesla for building a valuable business, it still has a long way to go to catch up to Ford.
That is not necessarily true.
Market cap and enterprise value are two equally valid ways of measuring value or worth. There are even more ways to measure value, such as DCF or value of assets. All of these have their pros and cons.
In this case, my personal opinion is that market cap is a very meaningful way to measure Tesla/Ford and that it's noteworthy that Tesla has passed Ford.
I think it is very meaningful because it (loosely) implies that the present value of Tesla's profits (i.e. net profit after tax) is higher than Ford's. Even on a risk-weighted basis. Or, at least, that's roughly-kinda-sorta what the market believes.
I would argue that enterprise value would be more meaningful that market cap if we were talking about which company was 'bigger'. However, the interesting thing here is that Tesla has become more 'valuable' than Ford, for this definition of value.
2: Equity Value therefore represents the market's perspective of the Net Present Value of the future cash flows less the value of the debt. Those flows, calculated using a discounted cash flow spreadsheet, could be from profits, or could be from sale of assets.
3: The analysts will forecast the Enterprise delivering a certain IRR - annualised percentage return, which is split between the debt and equity. This total return is called the weighted average cost of capital - WACC.
4: Debt is cheaper than equity, and it also has a lovely tax shield effect from the interest expense.* Debt holders get the company when the value falls underneath the total value of the debt though, so you don't want to issue too much.
5: Equity (shareholders) demand much higher returns than banks, but accept the greater risk for it. e.g. VCs have much higher expectations than banks about their returns.
6: The more debt you have the higher the returns - and risk - for the equity. Think about the leverage you can get on a house - an asset with low % returns can deliver high value (or high loss) by using a lot of bank debt.
7: There is a body of work around finding the optimum level of equity and debt for a company - basically you want to balance the risk from having too high debt (and the company value falling underneath that value and using all the equity) and the benefits of higher returns to equity=holders from having higher debt.
Going back the the original post - EV is the real value of the company, not market cap. Ford could sell down their debt by issuing more equity, Tesla could issue debt and reduce the share of equity. It all comes back to EV.
*This makes the weighted average cost of capital vary slightly as the amount of debt changes.
EV is one way of valuing a company. As is market cap.
> Ford could sell down their debt by issuing more equity
Absolutely. It's logical to say that a company with less debt is worth more than a company with debt. And the same applies in reverse.
Other ways that EV can be distorted, and market cap can be preferred, is whether the company choose to purchase capital assets financed via debt or lease them. For example, a company with big capital assets financed via debt could note that the company would be more profitable if they sold them and leased them back. The company is now more profitable, and its reasonable to say its 'better', but its EV has gone down.
With Tesla, there's an obvious path for potential massive growth. It's not guaranteed, but the potential is obvious.
With Ford, it's like any other auto manufacturer. What surprises are we expecting? What new products or innovations? Does Ford have any path, even hypothetical, to massive market share growth relative to its current position the way Tesla does? It seems clear to me that the answer is no. Even if their Bolt is a success, they're not about to dominate the market, double their sales, and double their stock. They don't have any Model 3 type event on the horizon.
So all these comparisons of financial metrics on current value, to me, seem pointless. This is the only thing that should matter (along with whatever analysis you want to use to gauge whether Tesla is likely to be able to execute on its plans, which is a more complex question-- but performance so far makes it clear that they are experiencing steady and dependable growth of production and sales with clear, well-defined plans for further future growth.)
The question isn't necessarily "can this company grow?", it's "what is the value of this enterprise as a cash-generating vehicle?"
That is the basic idea behind value investing and what made Warren Buffett the 2nd wealthiest person in the world.
I think it's a very tortured definition of "value", though... I don't have a Bloomberg terminal in front of me anymore to check, but I'm guessing Ford's bonds are generally trading closer to par than zero. In which case the bondholders are telling you they think there is about $100 billion worth of additional value to Ford's business beyond the value of the equity. That's a really big piece of context to this story.
I agree with you in principle that market cap is a perfectly valid metric, but when you're comparing a majority-equity company to a majority-debt company (assuming the bonds are valued as non-distressed assets) it ignores something very, very significant.
The "market" (albeit a more limited one) also believes that Uber is worth $70B - almost 1.5X the market cap of Tesla.
How meaningful is that?
Obviously both are worth the same amount: each company has an "enterprise value" (the value that all investors in all securities place on the underlying enterprise) of $1,000,000. The only difference is that company A has only one class of investor, while company B has investors that own a riskier asset (the equity) and a less risky asset (the debt). But assuming the two companies are otherwise identical, an investor in company B can easily financially engineer themselves into a financial position that is identical to an investor in company A: for every dollar of company B equity they buy, they simply buy one dollar of company B debt. Owning $1 of company B equity and $1 of company B debt is identical to owning $2 of company A equity.
Since the choice of equity or debt financing is (theoretically) arbitrary, when comparing two companies that have very different capital structures, like Ford (mostly debt-financed) and Tesla (mostly equity-financed) you have to control for those differences. The simplest way is the add the value of each company's net debt to the market value of their equity, which gives you the total market value of each underlying enterprise.
A simple example we're all familiar with is home prices. Two neighbors might own nearly identical houses on the same block in the same town. One might have a mortgage and one might own it outright. But no matter the financial situation of the individual owners, the value of the two houses should be about the same: the value of the asset is separate from the financing of the asset.
There's an important issue that you aren't taking into consideration. The value of the equity is ultimately based on the profit that remains after interest/debt has been paid.
In your example, it is perfectly valid (if not MORE valid) to say that Company A is worth more than Company B.
The investors in Company B figured that at the end of the day they will only be eligible for half the cash that investors in Company A will be eligible for. So they paid a lower price.
You're insisting that debt is another form of investment, and depending on what you're looking at that makes sense, but when talking about 'value' it doesn't always hold true.
This sort of intuition is seductive, because we're generally told "debt bad, equity good!" But it's not correct, for the very simple reason that debt and equity are, in many ways, fungible: each type of financing can be utilized to replace the other.
To go back to the company A & B example: Company A could decide tomorrow to borrow $500,000 and buy back $500,000 worth of stock. Company B could issue $500,000 worth of stock and pay down its debt. Then, just by shuffling some papers around, the capital structures of the two companies will have been reversed! Yet nothing in the underlying business will have changed for either of them.
But don't just take my word for it! Franco Modigliani won a Nobel Prize for his part in the Modigliani-Miller theorem, sometimes called the "capital structure irrelevance principle" (seriously): https://en.wikipedia.org/wiki/Modigliani–Miller_theorem
It's certainly a complicated subject, but debt is very much a real part of a company's capital structure and can't be ignored when comparing two different companies.
Debt can be viewed in many ways. I'm not saying that it's wrong to view debt as another form of financing - like you I studied Modigliani-Miller, just that there are other ways to view it.
My point is only that it's not right to disregard market cap entirely in preference to EV. EV is generally a "more comprehensive" measure of company value, but it doesn't supersede market cap.
EV, for example, is susceptible to distortion between leasing and buying capital assets. For example, a company with big capital assets financed via debt could note that the company would be more profitable if they sold them and leased them back. The company is now more profitable, and its reasonable to say its 'better', but its EV has gone down.
Yes, this is an excellent point. The next-level thing to do when modeling companies that make extensive use of operating leases for capital assets is to capitalize those operating leases, for exactly this reason.
I'm not sure what you mean by this - can you clarify?
> A company that raises money via loans typically has more obligations than one that raises money via equity. Doesn't the option value for repayment count for anything?
Certainly the equity of a highly indebted company will behave differently than the equity of a debt-free company. But "different" isn't necessarily "better". To go back to my company A & B example, if both companies double in enterprise value, the equity holders of company A will get a return of 100% ($1,000,000 profit on capital of $1,000,000), but the equity holders of company B will get a return of 200% ($1,000,000 profit on capital of $500,000). Conversely in a scenario where each company loses half of its value, the equity holders of company A will still be left with half of their money, while the equity holders of company B will be wiped out (to first order - reality is more complicated than this usually).
So in some scenarios the company A equity looks better and in some scenarios the company B equity looks better. Which you prefer overall depends on your individual risk preferences - some people want a higher potential return at the cost of higher risk, some people want less risk at the cost of a lower potential return. There's no objectively "best" structure.
Even for companies with no debt at all you'll see investors who artificially create financial leverage by buying options on the company's equity. Different strokes for different folks, or as my dad likes to say, there's an a$$ for every seat. :)
So I'm wondering how enterprise value prices risk compared to market value.
Consensus on the price of risk, yes. Consensus on risk preferences, no. :) I.e. two people can agree that a one year US Treasury Bill paying 0.50% interest is worth exactly par, and yet come to completely different conclusions about whether they want to own it at that price.
I.e. you're absolutely right about achieving a consensus on how to value an asset, but people's differing risk preferences are a major reason we have markets in the first place - it's not just zero-sum wagering on what will go up and what will go down.
> So I'm wondering how enterprise value prices risk compared to market value.
To the extent a company has debt, the risk (and expected return) of its equity will always be higher than the risk (and expected return) of an identical company without debt: the equity holders have levered up by borrowing and magnified their risk and potential return. I don't know if that answers your question or not, though.
Enterprise value is the value of the business (the thing actually generating value) separate from the cash & debt it's holding.
For example, if I have a banana stand worth $250K, but inside the banana stand is a briefcase with $245K, then the $250K is not really the value of the banana stand - it's mostly the value of the cash inside. The Enterprise value of the banana stand is only $5K.
With the debt, the idea is the same but the sign is opposite. So if Ford is worth $50B while holding onto $100B of debt, that implies that the enterprise value is $150B.
Comparing the valuations of Ford and Tesla without subtracting out cash and debt is like running a race without mentioning that the losing racer started a half mile behind. Though they 'lost' by one metric, they're still the faster runner.
GM and Ford have 200k+ employees each and so much legacy baggage where-as Tesla, even with Scty, only has around 40k employees.
And they mostly tend to be fanatically hard workers.
Also, I know from experience Ford uses their ability to generate cash and borrow cheaply to give "buyouts" to large chunks of retirees at a time (ie. They offer a lump sum of $1 million dollars today instead of a pension. This almost always works out in the company's favor).
- Electric Cars (most visible. Also don't undervalue their unique direct sales channel, which is a huge competitive advantage)
- Batteries/Energy Storage (not just cars - utility scale energy storage, with capacity coming online that will double global output of lithium batteries)
- Solar panels and solar roofs (both residential and commercial, a market with a hockey stick growth curve coming)
- Self-driving AI (head to head with Google on one of the most fundamental changes to transportation our society has seen in a century, and they have the hardware driving around us all the time already, rapidly learning and improving)
Ford, GM, et al are irrelevant and poor comparisons. This is SpaceX for Terran energy and transportation.
China now employs over 1 million workers making solar panels. And they're ramping that up as fast as they can, and shelving coal power plants. We've reached that critical tipping point for PV solar to go vertical, and Tesla/SolarCity just built their own factory in Buffalo to take advantage.
> "to the point that it no longer makes sense to not have solar everywhere. It's cheaper than coal, and will soon be cheaper than all the other fossil fuels as well, and will continue to go down, never up."
Then the market should automatically have shifted to 100% solar by now.
Solar is getting cheaper yes, but it is dependent on hours of sunlight available, which like wind energy, is unreliable and doesn't work at periods (like night). Further, the capacity of a solar power plant isn't its produced electricity, because the capacity is mainly peak capacity, which is only reached a few hours a day.
> China now employs over 1 million workers making solar panels
Don't know where that figure is from, but I guess china must be covered in solar panels by now. 1 million is large number of people. Unless your figures are deceiving. For example, walmart sells solar panels. So, you will count every walmart employee as a solar panel retail employee.
65% of new capacity in the US last year was wind or solar. The world doesn't change overnight, but expect that trend to continue.
Renewable energy growth is only being slowed by lack of storage. As battery production and other storage techniques come online, it allows higher and higher % of energy to come from renewable sources.
>Don't know where that figure is from, but I guess china must be covered in solar panels by now.
Pretty good summary of the situation here: 
"In 2015, China installed half of the world’s wind power and a third of its solar photovoltaic capacity. Last year, solar capacity jumped 81.6 per cent and wind capacity grew 13.2 per cent. Greenpeace has said that China’s renewable energy growth rate is equivalent to installing one wind turbine and covering one soccer field with solar panels every hour. Five of the world’s top six solar manufacturing companies and five of the 10 biggest wind turbine companies are in China. By 2020, half of the country’s new electric generation will come from solar, wind, hydro and nuclear power."
Look at developing countries, only a fraction of new energy sources for India are solar, even though our coal is inferior quality.
I'm pretty sure that coal is still cheaper than solar
Alberta does have quite a bit of wind generation though. They blow pretty consistently off the mountains and we have a pretty low density population in the south end of the province. Hopefully under the NDP (left wing) government, we can see some expansion of this. Prior to this, oil sands was the only game in town.
They acquired Cruise Automation: https://www.getcruise.com/ or https://fortunedotcom.files.wordpress.com/2016/09/cru10_c.jp... .
- Your first point is cars - there are a ton of evs for sale from many large companies and direct sale doesn't seem to sell more cars than indirect.
- Tesla is partnering with battery companies just as GM does on the bolt and volt. Nothing special here as their battery business is pretty minuscule.
- Again a niche market that compares to GMs after market crate motor program in revenue and size.
- Self driving tech doesn't belong to Tesla and Google, most luxury car companies had automated cruise systems when Tesla was making the roadster. Gm has a large fleet roaming around Detroit, Chrysler is partnering with Google with their Pacificas, and Ford has a fleet of fusions as well after billions in investment.
The larger point is that elon and his 16 companies seem to do no wrong and avoid comparisons to the existing car companies, he should focus on getting market share in the extremely competitive automotive market instead of making a space/AI/brainlink/tunnel/solar/ev company.
2. Tesla is partnered with Panasonic, but they're practically married with communal property. They haven't outsourced this, they've put billions into building a gigafactory. What part of "doubling global output of lithium batteries" is minuscule to you?
3. In 20 years, probably half the world's electricity will come from Solar PV. Was coal a niche market? Because this will be bigger.
4. Most other car makers are licensing systems from others, not building their own, and they don't have the self-driving hardware in any cars yet. Tesla has 10's of thousands of cars on the road right now (25k just in Q1) with their second generation system, while GM and Chrysler are still fiddling with prototypes.
If you don't see how all these things connect, then I understand your view. But when you recognize how they're all interconnected it makes complete sense to me to be building all of them at once, otherwise a failure in one dooms them all.
2. Im saying the current business is minuscule, if we looked at elons promises as gospel (which you apparently do) we would have had a model x three years ago. LGchem and Samsung SDI are more than capable to meet the demand of the current lithium battery market without panasonic.
4. Tesla has a SAE level 1 system which is the same as my VW golfs adaptive cruise with lane assist. They sell the car with the "hardware" and you think they are done? -> " All we have to do is build the controls and software now!!" By this logic throwing a couple cameras on the car means it has "self-driving hardware".
2. Several billion dollars worth of capital investments disagree with you. And what's important isn't the current market, but the future market - these things are growing and production bottlenecks kill growth.
3. Again, look at the trend lines not just what it is today.
4. A golf you buy today will keep lanes, and will never do anything better. A Tesla has all the hardware needed for Level 5 autonomy (which they've demo'd, but requires regulatory approval), and it's a software update away. And their whole fleet is sensors-on all the time, whether you're using it or not to enable that, which is not true for any other vehicle manufacturer. Google is the only other company that's close.
I'm no disciple, but I can see where the puck is going to be.
> A Tesla has all the hardware needed for Level 5 autonomy (which they've demo'd, but requires regulatory approval), and it's a software update away.
Audi, BMW, Google etc. demoe'd similar capacity as the tesla did 2-3 years ago. Do you even understand how difficult problem it is? It's not a problem you engineer away. Do you think Tesla made machine learning breakthroughs that Google or CMU (Uber) researchers couldn't? Tesla beating Google at Machine learning?
> And their whole fleet is sensors-on all the time, whether you're using it or not to enable that, which is not true for any other vehicle manufacturer.
Does it matter what kind of sensor? Almost everybody else agrees LIDAR is necessary. And what use is random data from useless sensors? It's like saying that you'd put cameras in a pedestrian crossing, and soon you'll process it to make a human level intelligence.
And that is still level3 or level4. Level5 is inarguably far far away.
2. You want to speculate on the future market, go ahead, I dont think Tesla has any special position on lithium batteries.
3. Solar is not a hockey stick, not sure what trend lines you are talking about.
4. Talk to anyone working on self driving cars and they will tell you level 5 is at least 10 years away. Can a tesla drive on icey road in northern canada in blizzard conditions with a couple failed sensors? Nope, then it is not level 5.
After a while, usually decades, commodity producers take over the lions share of the market. The high end is captured by one or two of the market leaders. Being first to market helps you get there, but you still have to fight for that position.
Look at iPhone. It was the best and the cheapest smartphone for probably a decade. Now Apple only has what, 20% of the market? But they have all the profits. The other 80% goes to commodity manufacturers but they don't make any money.
Tesla hopes to be that for mobility and home energy. Even if they fail, they'll still make a huge amount of money in the ramp up, before the commodity manufacturers eat their lunch. They're the market leader right now, so the prize is theirs to lose.
It's another when the range is $12,000-$100,000, margins are much more competitive with way more competent adversaries, all the while car ownership is changing drastically to rental/ride sharing for a great many people.
At that point, you don't necessarily care the car you hired that day is a Tesla or Ford, because you experience it for 20 minutes and are done. The buyer in this case is the fleet owner not an individual, which does not necessarily favor Tesla.
I don't think that you can compare Tesla's product to Apple's (not to mention Apple's software ecosystem permeates so many more aspects of one's life if you are a part of it, Tesla not so much)
On the other hand, there were some major successes as well. Amazon got its start in the bubble and is now gigantic. eBay is doing great. So is PayPal (which is relevant here, since without PayPal we wouldn't have Tesla).
Sometimes these ridiculous valuations are completely unjustified, but sometimes they do come true. Figuring out which is which ahead of time is, well, hard.
>Books-a-Million - Saw its stock
>VA Linux - .... They set the record for largest first-day IPO price gain; after the price was set at $30/share, it ended the first day of trading at $239.25/share, a 698% gain (9 December 1999)
I don't think we are quite in the situation where valuations are based on updated websites. Nowadays it seems like monthly active users drives valuations which when your revenue is ad based, is a smart metric. In Tesla's case, they are actually shipping cars.
These days, it's more like excessive optimism. People actually understand this stuff, at least vaguely, and if they're getting it wrong it's just because they don't see the downsides.
'Sometimes' is being generous. If we can only cherry-pick the world's biggest tech successes all of whom can be counted on one hand compared to the thousands, if not tens of thousands, of other over-valued companies, then you're really not saying much here. This is like saying, "How are there poor americans, look how rich Bill Gates is!"
A few exceptions don't invalidate we're in a bubble or justify the practices that get us in a bubble - traders trying to outfox other traders by reading the tea leaves of hype and ignoring the actually profitability and practicality of the business.
Back then you could take an MBA with a powerpoint, put the word "Internet" on it, and they could conceivably IPO for hundreds of millions with nothing more than that. All of these companies valued at $100m, $1b, $10b with no more than a promise of "one day we'll sell x online and make a lot of money." A couple companies full of genius technologists (Amazon, Paypal) made it through the rubble, but for the most part it was all smoke, mirrors and charades.
Contrast that to today. Certainly there are overvalued companies; there always are, but there are also companies that are proving to be worth the hype, and severely undervalued. The Internet is 20x as large, there's real revenue coming in, real profits, and the scale that companies can hit when they land on something solid is incredible.
People were crying Bubble when Facebook was valued at $30B because it wasn't making much money. Now it's bringing in billions easily and still growing http://www.marketwatch.com/story/facebook-profit-tops-1-bill..., now valued at $400B+. So some companies were undervalued, even when everyone was crying "bubble."
As an asset class today tech is tiny. The valuations of every tech "unicorn" combined today would be less than Microsoft. Would you rather own every single tech startup that raised venture capital in the past couple years or Microsoft? You could have that discussion, but you wouldn't be crazy to take all of the VC-raising startups. And today the total amount of venture capital raised is a rounding error relative to the rest of the economy. (There's also a discussion around how all asset classes are highly valued today and even bonds are returning negative yields, but we'll save that for another day).
Tesla is certainly expensive relative to where it's at today, yet I still put in my entire net worth at $180 http://www.marketwatch.com/story/elon-musk-to-the-guy-who-in... (this is not a move that would be recommended by your financial advisor; my net worth is something I could replace quickly enough that it's not a big deal). Tesla is, in my opinion, building a fortress. It's combining the technology needed to incredible electric cars at large scale with the biggest battery factories in the world, solar-powered roofing, a nationwide charging network, and just some incredible innovations. We've seen Tesla do the impossible an innumerable amount of times in recent years.
So the price of Tesla right now is very frothy, but I still think in 10 years I'd rather own 100% of Tesla than 100% of Ford. If you disagree, then Tesla is overvalued, but no one truly knows who will be right. Such is life as a growth stock.
Was your decision based on cold rational logic? Or was it simply "from the gut"?
There's so much unknown that Tesla continuing to de-risk the business step by step gets them in line with the current valuations, and forward-looking it should go up.
So I figured that at $180 (a very low price for Tesla historically) that if they did what they were predicting (which no one thought they could) that they would crush the current stock price. They have since hit (or come very close to) all of their targets.
Now the entire question short-term is around how the M3 performs. Long-term Tesla is playing a game no one else even sees, so we'd be OK with a couple stumbles.
The analysis upon which you went "all-in" on Tesla rests on a non-GAAP "delivery" figure (rather than a sales number), covering a few quarters, 1 year before the first model 3 is even built? I'd be interested in seeing that work. What did you think when they missed 2016 delivery estimates by 5%?
I was a little concerned that they missed 2016, but the stock actually went up that day; most thought they would miss by more.
Big car OEMs have so much invested in terms of R&D, brand and emotionally in the combustion engine that I think most are just not going to be able to make the jump to EVs. Nissan and BMW are trying, but they are still making really baby steps.
Nissan "built the gigafactory" a decade ago and it didn't work out for them at all.
In 2007, Nissan and NEC entered into a joint venture just like Tesla/Panasonic's: they created AESC, Automotive Energy Supply Corporation, and built a $1.1 billion lithium ion battery factory near one of Nissan's manufacturing plants. Nissan committed to buying the plant's output for some years. These became the batteries and battery packs for the Nissan Leaf, of which they've sold more than 200,000 to date.
However, AESC eventually lagged at least a generation behind Panasonic (and now several others) in chemistry, process and price, which significantly worsened Nissan's position in the market. It took them some years to get out of that arrangement (relatively recently) so that they can buy batteries for the next-generation Leaf and other Nissan-Renault vehicles at less than 1/2 the price from other suppliers.
There's no guarantee that 10 years from now, we'll look back and say the Gigafactory was a wise investment for Tesla. They feared insufficient supply or being locked out of adequate supply for batteries, but now that everyone's seen the writing on the wall that EVs could become a big chunk of the new car market in the 2020s, it seems far less likely that battery supply will be a short-term issue.
Boston Power, BYD, Foxconn, SK Innovation, Samsung SDI, LG Chem, etc have built, broken ground or committed funds for over 150 GWh of annual vehicle battery production over the next 3-5 years. Tesla will not be the only major player in that market, and Panasonic is free to supply batteries to other car makers than Tesla from their other factories.
Why don't Ford produce a 60KWH car as cheaply as they can?
It's like McDonalds selling an organic, grass fed burger. If they talk about the quality of the beef, they're basically saying the Big Mac is low quality beef.
I'm not sure what that says about your analogy. Perhaps Ford should have gotten started on this a long time ago and taken the hit then. Perhaps once Ford gets serious about electrics, their response will be equally as weak as McDonald's.
For instance: The government of Sweden just announced suggested legislation for june 2018 that will severely punish any new registrations of non-electric vehicles (the tax penalty is linear to the co2-emissions/driven km above a certain treshold.) I think it goes sort of halfway towards Norway's current policy. (Which is rather extreme, and something they as a nation can afford, being a major oil exporter.)
cars sold by yr, Margins.
battery wall, solar sold by year. Margins.
multiples assumed on revenue and earnings by yr, and at mature phase.
dilution of equity assumed to scale production.
Can someone address those things without hand waiving them away for me? Again, I'm not long or short the stock, but havent heard a coherent argument with math for going long.
Tesla's car business is quite profitable and has huge growth...that's what matters http://greyenlightenment.com/another-correct-prediction-tesl...
In the late 90' during the tech bubble, companies that had negative cash flow operation were bid to the stratosphere. Tesla and Amazon however have positive cashflow for operations and huge growth.
People said the same thing about Facebook in 2012-2013 and Google in 2004-2005: how will they (Google and Facebook) justify their valuations? Well, they did. Wall St. sometimes get it terribly wrong (Infospace in 2000) and other time very right.
Sometimes it doesn't make sense...but there is a method to the market's madness.
U.S. residential electricity use is 1.4 trillion kilowatt hours (kWh) per year.  At $0.10 each that $140 billion dollars.
Americans travelled about 3 trillion car miles in cars per year.  At $0.50 per mile (what the IRS lets you claim for mobility) that's $1.5 trillion dollars.
That's just the U.S. These markets are enormous. There are all kinds of ways for them to carve out $7 billion a year in net income to justify their market cap.
Put differently, the long argument is a qualitative one, not a quantitative one. This doesn't make it any less intelligent, just harder for people to put into words. See an earlier comment I made about the kind of thing that's meaningful but which is difficult to attach a number to.
And conversely, if you can predict something with numbers, that's a sign that it's stable and less risky, but then the price/ROI will reflect that safety.
I am basically seeing an argument that Tesla is smart and will figure out ways to make money to justify a 50B mcap. That may be true, but I was hoping for more.
I will likely buy puts on this once the squeeze subsides.
All arguments so far I would basically describe as hand-waving which gives me more confidence that the market is too optimistic.
All that said, if you have been long this, congratulations.
Remember that Tesla have by far the best dataset for building self driving cars and this is going to give them a huge time to market and/or safety advantage over their competition. If they launch an Uber clone as well (which they have implied they might) I think they could be able to replace a lot of car journeys with their service instead of paying drivers, something Uber's lofty valuation is entirely based upon.
Lol. Yes, the second most unprofitable tech company in the world should clone the first most unprofitable tech company. Why not.
The man who has executed the most impressive technological achievement in modern times (reusable rockets), said he would rather die than fail.
I think it's crazy to be betting against this guy. your only chance is if he dies in the process.
In 20 years Tesla may produce more cars than Toyota. They may have self-driving AI that is safer than any other. They may provide more taxi rides than Uber. But the total market for new cars may be half what it is today because no-one will own cars in future.
Rich people will still buy classic cars and Germans will still buy ICE BMWs. The vast majority of daily commute hours will be split between Teslas and whichever other manufacturers who get off their butts before it's too late.
Being long Ford is making a bet that the future will look pretty much the same.
Being long Tesla is making a bet that the future will look different. (Plus the risks of believing that they can do what they say they can, and that their vision is more correct than not)
If you are a Ford investor and want Ford to be investing in the future, you should be ashamed of them for being either too scared or too stupid to know what to do with their piles of money. Then again, the largest carmakers in the US (incl. Ford) were making a loss just a few years ago, and unlike Tesla, they were making that loss while doing ZERO to invest for the future.
So maybe Ford should be scared.
Or maybe they should be pivoting faster so they don't return to not-making-a-profit, because unlike Tesla, they still aren't spending very much on the future, are they?
We can argue about whether or not Tesla has a good plan or a bad plan, but Ford has shown before that they more or less have "No plan." Their reliance of SUV profits almost killed them in the mid 2000's (and did mortally wound GM, only to be resurrected). Will Ford's reliance on the F-150 (or on ICE expertise while outsourcing most other things) do the same thing in the future?
I've been holding Tesla for a long time. Currently I'm more optimistic about the company than when I bought it, which seemed fairly risky.
I think the room for growth and market expansion (Important Electric Things and energy future) is very large. I think trying to compute how the math will get there is a mistake, short of making sure that they are not going to run out of money.
Being long technology stocks is a strange game. If you're long IBM or AAPL right now, you're more or less betting that the future is going to look pretty much the same, just like with Ford. It's almost a misnomer to call them technology stocks.
There are only a handful of public companies you can bet on (Tesla and Amazon are probably the most obvious) that are really betting big on the future. The dividends of these will be unknown.
(This was part of a previous small discussion about the price of TSLA last night: https://news.ycombinator.com/item?id=14018954)
No. Being long Tesla is making a bet that the future will look like Tesla, that Tesla will be producing a very significant chunk of the vehicles on the road sometime in the reasonably near future. Tesla currently has plans to expand to produce 0.5 million vehicles per year in the 2018-2020 time frame; Ford currently produces 2.5 million vehicles in the US for ~15% of the market.
Disclaimer: I'm on my second F-150 and third Ford vehicle.
This is funny to me. I think Tesla is selling more of the same: various big cars to car drivers who can't imagine a society without cars.
It feels like "trickle-down environmentalism", and I don't have a very high opinion about the economic variant.
A real radical vision of the future would be betting on train and bus companies or something wild like that.
Tesla isn't playing Ford's game. The ultimate value of TSLA is in the vertically integrated electric Tesla Network with millions of level 5 self-driving vehicles.
Why would you want an ICE vehicle when you can own a Tesla that drives you & your family anywhere you want, charges itself and makes you money on the side. Closely following that...why own a car at that point? Just order one up off the Tesla Network.
People value stocks based on what they think the future holds.
As an aside, he strikes me as someone who's been told he has some short measure of time left to live and is trying to make the most of it. By all measures, he's swinging for the fences.
The current state of the art battery technology for vehicles is heavy and has less than desirable energy density.
The minute a new technology can deliver twice the energy density at the same or lower weight and lower cost most established car manufacturers will jump in.
Electric cars are very easy to build when compared to IC cars. The simplest fact being that you are eliminating thousands of mechanical components and replacing them with an electric motor and hundreds (or thousands?) of electronic components (for motor control). Electronics design and manufacturing is easier, cheaper and faster than mechanical manufacturing.
I believe Tesla is positioned to take a big hit when that inflection point happens. They are inexorably married to a battery technology. The Gigafactory, as awesome as it might be, is now a large ship with huge mass that is very difficult to turn around.
The next battery technology might very well turn the Gigafactory into a huge anchor for a few years, during which all other car manufacturers, lacking that commitment, are likely to leave Tesla in the dust.
It isn't just about cells but putting them together and designing a whole battery, with cooling and everything. Tesla knows very well how to do this. The competition doesn't.
Tesla is not in a position to replace Ford and others, and they won't be for several years. Even then, they won't be in a position to displace anyone in anything other than consumer vehicles. They have no truck and no announcement for a truck. They have no busses. They have no heavy equipment.
> Electric cars are very easy to build when compared to IC cars.
As I commented above, I recommend reading about the development of the Volt and Bolt at GM. They had a huge learning curve:
> Nearly everything changes when you opt for a fundamentally different power train, so GM’s greatest advantage—more than a century of experience building cars—was all but moot.
I can't find a number through Google but the number of Ford Hourly/Salaried employees has to be over 125,000. As a guess.
Tesla has 30,000 hourly/salary employees.
Despite being valued 'less' Ford has a huge economic impact for many peoples lives. This may decline, over time, but don't be surprised if Ford/GM/Chrysler combine forces for a huge battery factory of their own. Their ability to tap capital markets with lower interest rates than Tesla is a competitive advantage. They also move many more vehicles than Tesla and get better prices from suppliers, which is a competitive advantage.
Tesla's gambit with batteries is either going to work or will offer a fantastic opportunity to pickup a battery factory at a good price.
At the of the day, when all major automotive companies have EV vehicles, what's going to differentiate them? The accuracy of the self driving software? Entertainment options within the vehicle? Serious question.
They could do that, but they haven't really woken up to the huge threat to their markets that electric cars are posing. They still believe that ICE cars are what people really want. Ford has just announced now that it will begin designing hybrid vehicles. They're a few years behind.
If they decided now that they're going to fund their own gigafactory, it would only be ready in 4-5 years. Where do you think Tesla is going to be then? If things go as planned, in 4-5 years, Tesla could have sold 2+ million Model 3's, and be on its way to more new models.
> when all major automotive companies have EV vehicles, what's going to differentiate them? The accuracy of the self driving software? Entertainment options within the vehicle? Serious question.
- Better performance. The Model 3 isn't a model S, but you can be sure that it will kick the Leaf and Chevy Bolt in the balls.
- Slicker looks
- Brand appeal. Don't underestimate this. Think Apple.
- A supercharger network that's already in place. Other vendors all have major catching up to do.
Another thing to consider is, Tesla has a lot of expertise and an EV designed from the ground up to be electric. Other vendors can't just come up with that tomorrow. It takes time to design and refine a product. IMO, by the time Ford really wakes up, they will largely be fucked. Not just because of Tesla, but because all other vendors are already ahead.
Regardless, I don't think it's a tech issue, but rather an image issue. Trying to sell hybrid trucks to Americans is like trying to feed boiled spinach to kids.
ORLY? Odd that an energy company puts such a high emphasis on quarterly delivery numbers of... automobiles.
I actually think the residential solar roof market will remain niche, and the fancy integrated solar roof will be effectively a luxury product with a relatively small market value.
However, look at that huge Kauai solar/storage installation:
Tesla (with acquisition of Solar City) is able to turn these commodity solar cells from other companies (now at just 19 cents per Watt: http://pv.energytrend.com/pricequotes.html) into profitable utility-scale installations very quickly and at scale. They can install them all over the developing world where electricity demand is soaring and the existing sources are expensive (i.e. diesel). A key to this is the ability to install FAST. They can install these utility-scale battery storage units in just 3 months vs 3 years for a natural gas fired power plant (vs 4-5 years for coal, 6-20+ years for a nuclear power plant). And they can work with any kind of existing or future electricity source, smoothing out peaks in demand, including advanced combined cycle natural gas plants.
So that's a huge market especially if you can tack on a solar farm on top of it. And their exposure to risk on the very low-margin solar cell manufacturing side is limited, as Solar City primarily uses whatever cells the market produces, not their in-house stuff. It has even less competition than the "non-sucky production electric cars" market, and with the 3rd world needing terawatts of electricity, the market will only grow.
But they seem to be leading the way in battery production and self-driving automobiles. If they can hold on to market lead in those two areas then they should still be able to way outpace Ford or other car manufacturers. Big IF though in terms of self-driving technology with all the other big money players racing for that grail. Energy storage and battery production they seem to be in a class of their own without much competition.
Why push for high stock prices if it gives little benefits.
Seems like a nutty evaluation even if Tesla knocks over the established players in the future. I do in fact think that there will be an iPhone moment where established players who have not taken electric self driving cars seriousness will be eradicated like Black Berry and Nokia.
It is the price that Tesla can sell new stock for.
There might very well be another electric car maker upending the market, but really I think Tesla has quite a number of years head start now. Building and planning something like the Giga factory took many years. A competitor will not be able to reproduce that in a couple of years.
Tesla also sits with years of experience designing batteries now. They have a competency advantage over the established players who mainly know how to make a fossils fuel engine. Each year passing that becomes useless and dead knowledge. They also lack the software development skills of Tesla. They have mostly bought that from vendors. Tesla thus sits with expertise in the key areas for the future of automobile while the competition is very weak in these areas.
I predict a bloodbath. 10 years from now I think Tesla will be quite big and the established players struggling hard to hang on.
"Under which data?"
Data? Data? Never heard of it. This is all gut feelings here.
But today a stock's value can be influenced by a cool factor. Stocks that never pay any earnings can have high values (Amazon) and investor mania can out-live any attempted short.
There has to be a better way to set up the market.
What if stock had an expiration, after which you had to buy it again? And what if, when you short a stock, you get the full face value of the stock and then only have to pay the owner the earnings? Since the stock expires, you don't have to worry about covering both the earnings and the stock price, only the actual earnings.
I think the result would be pricings that more accurately represented a company's earnings potential.
Who supposes that? I don't and I'm ready to pay a different price that you'd do. If there isn't a good reason for that, you might be able to take advantage from my position.
Now, there are many reasons why I wouldn't price a stock as the sum of its (future) earnings. For instance, a company can be acquired by another and makes a very different business in the combined configuration. Moreover, the acquirer could use the merger to prevent a competitor to enter a very profitable market. Why would you care about the performance of the acquired company if it remained independent? There's no way to estimate the future earnings of a company without knowing all the possible strategic configurations.
Growth stocks are bought for potential capital gains, not dividends. (Market) power is much more important than earnings you can forecast.
I'm a Tesla shareholder (the stock makes over 90% of my financial assets) and I don't expect a buck of dividend from this company. I intend to keep the stock for ~20 years, which I bought at $25 avg.
Well, you may want voting rights. But voting rights don't mean much unless you hold a lot of stock, and a lot of stock is non-voting anyway.
That leaves dividends and exits. An exit depends on someone having a value for the company, and can almost be looked at as a 'final dividend'. So I would essentially boil the value of most stock down to purely dividends.
If you buy it for any other reason, you are hoping that some other person will be willing to buy it from you later. Which means that other person needs a reason (voting power, dividends, or some other business move with external benefits).
But my appraisal is that many stocks exist today that have value simply because people think that other people will want the stock. It's inefficient, and at the moment of exit (death also counts as exit here) someone is left holding a bunch of stock that's worth less than what they bought it for.
Greater fool theory has some problems. For one, it's not economically rational.
Also, the "winner" of his comparison was a RAV4 EV (by about $20K) The Tesla finish mid-pack (behind the Ody)
Fair, it's not a slam-dunk that the Tesla S was a great purchase if your goal was saving money. I'm pretty sure it' wasn't the best option in that case.
The Model 3 sticker price is less than half the S85, though. Short-term, yeah, most people still won't be driving a Tesla, but when I see volume increasing and unit price decreasing, I extrapolate to "Tesla could easily become a major player", not to"this is irrelevant to 99% of us".
EDIT: It's a very serious problem if we lose free market competition, and instead success depends - or even appears to depend - on politics and corruption. Even the appearance will encourage others to take that course, and normalize it. Corruption always exists to a degree, the market is never perfect, but that doesn't mean it's not serious. What happens to startups if success depends on access to politicians?
The surge in Tesla's market capitalization corresponds with Musk's public support for Trump, though the stock market in general has recently. Here's the data on Tesla; I recommend just looking at the graphic, which will tell you more:
* It's now at it's all-time high (give or take a buck or two), $294
* Generally, around Election Day it was stable around $190, on Dec 2 it hit bottom at ~181, then it vectored mostly steadily upward to Feb 21 (277), then there was a dip and it stabilized for awhile; now it vectored up again starting ~ March 23. today.
When the above comment was posted, it immediately was below 7 other threads and hundreds of comments, and it dropped quickly since then, despite no downvotes. That is odd behavior; usually new comments start at the top, or near it, unless the user is brand new or has some other problem (I'm in neither category AFAIK; most of my other comments seem to behave within the range of normality). I've seen other recent comments exhibit this different behavior. I see nothing that would algorithmically trigger anything; it's not short, it contains no inflammatory words, no all caps, etc.
My guess, based on eyeballing the anecdotal evidence is that mentioning "Trump" is the problem. If you object to it, please just say so. I think it's a bad idea to single him out - his presidency will have a very serious impact on the IT industry, startups, and many broader things that HN readers hold dear. But that's a different issue. Please give us the courtesy of letting us know, whatever it is, Trump or not.
EDIT: You objected previously to something I wrote that mentioned Trump, but I wasn't clear what the objection was - mentioning Trump? something else? I responded and asked, but I think too late to be noticed, so I still don't know. I really have no idea what's going on. The thread with my question is here:
The claims about his motives and thinking are speculative; it would be hard to find evidence of them. Even the things he says about himself often turn out to be unreliable. Certainly we can speculate on many other motives and interests, but I don't think that's useful.