Published on March 24, 2019 |
by Paul Fosse
March 24, 2019 by Paul Fosse
As I reveal in my bio, I own some Tesla shares in one of my investment trusts. I own the stock because I believe the company is a promising tram with great risk and very potential reward. I am not trying to pump the stock price, but you can come to that conclusion based on my shareholdings and my positive comments on the company. Think of this investment advice.
You can see from the chart above that Tesla has had an incredible income increase over the past 10 years and is growing from about $ 15 million in annual sales in 2008 to over $ 21 billion in recent termination of 2018 calendar year. This 107% increased growth rate is not uncommon for small starts but rapid growth becomes much harder to maintain when the company grows. So far, Tesla has managed to maintain very high growth of 74% over the last 3 years, only slightly slower than 100%. So I thought about this article I would speculate on how Tesla could continue to grow at high prices for a few years until it reaches its mission to accelerate the transition to sustainable energy. This mission includes cars, trucks, storage and sun. I will not discuss half-cars, storage or sun, even if they are exciting areas. At a high level, in order for Tesla to grow, it needs to build more cars that people want at a price that enables the company to make a profit.
Builders People Want
There are two parts to building cars people want. Design the car and build it. Of course, the two parts are related, because the decisions you make in the design (cough, falcon doors, cough) can make the car's building extremely difficult. Elon mentioned at the model Y-reveal that the construction of the factory to build the car is 100 times more difficult than building the car.
The model Y message helped me realize that Tesla's strategy has now shifted. Instead of trying to prove to the world that it can make the best car in the world, profitable, which was more or less its target for model S, model X and model 3, the goal of model Y is more modest. Their goal is to show how they can deal with most of the world's automotive market (the small and medium crossover and SUV segments) with some tweaks to the revolutionary model 3 design. This hopefully means that Tesla can reuse most of the hard work on building a model 3 factory to build the model Y line.
It is also possible and even likely that model 3 and model Y can be built on the same production line. If Tesla can use existing batteries, motors, electronics and interiors to build its two closest vehicles, pickup and $ 25,000 model 2, Tesla can avoid the hell of production as it endured the model S, X and 3 ramp. a large market for $ 15,000 electric cars, but depending on how fast the transition to electric motors goes, we may not need to build many. If Teslas can take a million miles, there will be plenty of cars with 500,000 miles available to meet the demand for cheaper cars. Some prefer a new, lower quality car for $ 15,000, and I'm sure hundreds of Chinese and other emerging market makers will be able to meet that need.
Another problem Tesla (or the aftermarket industry) must solve is that they will build so many of some models that the parking lot at the local shopping center will have 100 copies of the same car . This is not a serious problem with finding your car, because your app will lead you to your car, but people do not want to drive a car that is so common. I will not address how this will be solved other than to say that it is a good problem to have. This is a problem the traditional manufacturers are very good at solving. They make many cars look different, which is not significantly different.
So Tesla has said it is easy to design a desirable car but to build it is difficult, but it has come up with a plan to avoid designing new factories by just reusing what the company learned to build model 3 production lines . You still need to pay for the new factories, and how do you do that?
Financing of new gigabytes
Tesla has managed to generate about $ 4 billion a year in cash flows from the existing business Tesla Cycle – why they will experience less seasonal variations in their sales than other companies).
Learning from previous factory building Tesla believes that it can reduce the cost of building future gigabytes from about $ 4 billion a year to about $ 2 billion a year (I think the note comes from the 4Q call, but it can be from groundbreaking at the factory or another item). That means they can split their cash flow to finance about a gigafactory per year and spend the other $ 2 billion to improve existing plants and design new vehicles and manufacturing systems. It does not allow them to pay off the debt, but companies that are growing fast are happy not to have to go to the capital markets to finance growth.
So which vehicles and volumes do I see the Tesla building?  Vehicle Production / Sales
As you can see from the tables above and below, Tesla plans to become a leading manufacturer of vehicles in the world, with only 4 high volume models.
Related: Which Electric Vehicles can make 500,000 + sales a year ?
Depending on how much sales of other manufacturers fall when customers around the world realize electric cars are superior and then do not want to buy another gas or diesel car, Tesla could be the world's largest manufacturer about 2025. When this tipping s Oint happens, Although the other manufacturers have designed good cars that meet their customers' needs, they will not be able to secure enough batteries to quickly switch production to EV when the customer's tastes change.
How Tesla Match Supply Want To Ask?
One of Tesla's competitive advantages is the relative relief where it can sell its vehicles to different markets. Most cars must be reworked significantly to meet local safety and emission standards. Tesla vehicles have no emissions and are designed to be far safer than any regional standard, so they only need to update their charging port, as it varies by market.
So, how does Tesla use its international designs to match the supply to demand?
- Tesla announces a unique vehicle that has value far above anything available anywhere in the world. This creates a long waiting list for the product and causes people to keep their existing vehicles a little longer than normal and wait for Tesla.
- Tesla sends the new vehicle or model to the US and Canada, as it falls production and lowers its manufacturing costs.
- Tesla sends the new vehicle or model to the markets in the left side of Europe and China during the break in demand that occurs in the United States after it has worked through its waiting list.
- Tesla sends the new vehicle or model on the right-hand drive market during the break in demand that arises in Europe and China after it met the split demand.
Then it starts again at the top with a new model ($ 35,000 Model 3 at the moment) or a new vehicle (model Y, pickup or model 2). When demand softens in a market, they just start sending to the next market. Shorts shout, " Demand Problem ", but Tesla continues to increase production and sales to existing markets and expand into new markets. They only need a new vehicle design every year or so to start the cycle. Given how slow the race is, it is not difficult.
But what about competition?
Tesla will of course continue to handle various events that increase and decrease demand. Countries will add and release buying support and other EV incentives. They will put on gas and diesel car bans in some cities that will increase demand before their effective date. The competition will introduce cars competitively with Tesla. The 5 areas that it will be difficult for the competition to match are:
- Battery supply and cost. Tesla, as the largest manufacturer of battery modules (not cells) in the world, has significant economies of scale and has established a reliable supply chain.
- Efficient EV constructs that minimize the size of battery needed for acceptable ranges. As we can see, many companies can do a good EV, but making one as effective as a Tesla is very challenging. I have only been impressed by the Hyundia / Kia products from an efficiency point of view (other than Tesla).
- Overcharging, charging speed and reliability. Elon may not call it a moat, but everyone else thinks it is. If Tesla opens this to other manufacturers, it only provides more funding to expand the already large charging network.
- Full Self Driving. Every Tesla car built since October 2016 is equipped to be completely autonomous. Other companies will have good self-driving features in selected models and are offered in new cars, but only Tesla defined a standard sensor array and decided to equip all cars with that year ago.
- Security. Tesla is obsessed with safety far from the requirements of any state organization. It's no coincidence that the top 3 cars ever tested by the NSTSA are all Tesla vehicles.
I sound it easy, but it is not possible to increase production by 10 times over the next 6 years. Yes, Tesla has done it before 3 times, but this time it gets harder because the competition doesn't sleep anymore. Some of the companies have had their "Kodak Moment" where they realize they may or may not move to the new technology fast enough to survive. Other companies are "zombies" or the wandering dead. They do not realize that they have organizations that cannot build vehicles that customers want and do not have enough time or resources for the transition. Once they realize it, they will likely put aside half of their employees and sell the remaining scrap to the companies that have successful designs that customers want. But some big automakers also jump into the EV transition and strive to take advantage of it.
P.S. I have heard that Tesla sells all its demo cars at the end of the quarter. Sometimes they give big discounts on models with a few miles. Hurry if you want one of these deals. If you want to use my Tesla reference link to get 1,000 miles of free charge on a Tesla on a model S, model X or model 3, here is the code: https://ts.la/paul92237 (but as I have said before, if another owner helped you more, use your link instead of mine.