Hey, I’m Steven and this is Solving The Money Problem.
If you’re new to the channel, welcome.
For everyone else, I’m glad you’re back.
I’ve been reading all your comments and I’ve noticed a lot of you guys are saying
that you’re waiting for the next dip in Tesla’s stock price before buying.
Well, I don’t have a crystal ball, but I do have a brain. And so do you.
So let’s fire up our neurons together and attempt to deduce the most probable near-term
direction of Tesla’s stock price.
Spoiler alert: it’s not down.
Now, I can’t see into the future. This video isn’t a claim about what *WILL* happen to
Tesla’s stock price. Anything COULD happen. I’m just looking at the facts and doing
my best to understand the most likely outcome.
Tesla has a slew of good news on the horizon. Unless something unforeseen and unexpected
occurs, like Elon dropping Acid with Joe Rogan or somebody turning off the simulation, it
seems improbable that Tesla stock will trend any direction but up. The tailwinds are simply
too strong.
Let’s look at why.
Q4 Is Going To Break Almost Every Record Ever
Tesla will almost certainly report record production, record deliveries, record revenue
and a record order backlog in Q4 2019. This would be good news.
And depending on the timing of the first made-in-China Model 3 deliveries from Gigafactory 3, Tesla
is likely to also report record cash and record profits for the quarter. This would be good
news.
Model Y Ramp
The Model Y was revealed in May of 2019 to little fanfare despite its potential to outsell
the Model S, 3 and X combined.
Thanks to sharing around ¾ of its parts with the Model 3, and to how quickly Tesla learn
and adapt, the Model Y ramp is aeons ahead of schedule.
We were originally told to expect Model Y production in late 2020.
Since then, Tesla reported in their Q3 2019 results that the Model Y ramp was ahead of
schedule and production was expected to begin *BY* mid 2020.
Following that, a rumour leaked that Model Y production would start as early as Q1 2020.
Soon after that, a Taiwanese website reported that Tesla suppliers has been told to expedite
Model Y parts 6 months earlier than expected which puts the timing of Model Y production
at Q4 2019 or Q1 2020.
This would be good news.
Gigafactory 3 Production
Gigafactory 3 was built in record time, from mud pit to commencing trial production in
10 months flat.
It’s absolutely mind-boggling to see how quick Tesla got s**t done in China. And thanks
to the drone-flying Tesla fanboys (p.s. I love you guys!) who’ve been documing the
entire construction process, we know Tesla’s parking lot starting filling up with Model
Ys weeks ago and production is ramping steadily.
The guys over at the EV stock channel estimate Tesla is already producing Model 3s at a rate
of over one thousand per month. Tesla took about 6 months to ramp to the same level
of Model 3 production in the US. In China, it’s taken 1 month.
The made-in-China Model 3s have been seen being loaded onto trucks. This indicates that
deliveries will commence soon. This will be good news.
With higher pricing than the equivalent US vehicles PLUS much lower labor
costs in China, it seems likely that the made-in-China Model 3s will have very healthy margins once
volume production is underway.
And don’t think that Tesla isn’t preparing to ramp Model Y production in Shanghai too.
Tesla and China Are Sleeping Together
Let’s not beat around the bush. Tesla China are in the midst of a beautiful romance. The
scientifically-literate Chinese government really wants EVs to succeed, and FAST.
They’ve opened doors, expedited processes, made exemptions and basically done everything
within their means to help Tesla.
First, Tesla gained approval to solely own and operate their factory in Shanghai while
typically foreign companies MUST partner with a local Chinese company.
Then, Tesla was offered finance to build Gigafactory 3 at below-market interest rates by a group
of local lenders.
Then, Tesla received an exemption on sales takes on their imported vehicles. for its made-in-US vehicles.
And finally, the made-in-China Model 3 was added to a list of EVs recommended for the new energy
vehicle subsidies.
Premium Subscriptions
Tesla just announced it will begin charging for premium connectivity (which
includes music streaming, live traffic, car-aoke, internet browser and more). For every 100,000
owners who subscribe, that’s another $12 million in annual revenue. This is good news.
The Tesla Semi
Tesla has confirmed that that limited production of the Semi will commence in 2020. I suspect
most of these initial trucks will be used by Tesla itself, thus lowering transport costs
within their business which adds more to the bottom line.
Because of the commercial nature of the Semi, it’s getting almost ZERO air time despite
having an enormous market and a huge average sale price. The Semi is a total sleeper product.
Think about it. 68% of all goods in the United States are transported by Semis with high
fuel and maintenance costs. The business case for the cost savings of an efficient electric
Semi is compelling. Commercial customers are frothing at the mouth to get their hands on
these things.
Tesla already has orders from Walmart, Pepsi, Fedex, UPS, DHL are loads more.
Gigafactory 4
The recently announced Berlin Gigafactory will be moving ahead as fast as Tesla can
make it happen. Once complete, the made-in-Europe Teslas will bring costs down and margins up.
This will be good news.
Battery and Powertrain Investor Day
In early 2020 Tesla is hosting a Battery and Powertrain Investor Day. Let me save you the
time.
Tesla will detail how embarrassingly far ahead their CURRENT battery and powertrains are.
I mean, we already know this. Then they’ll talk about the next generation of each, and
our jaws will be left on the floor. The recent acquisition of Maxwell Technologies and Hibar
Systems strongly suggest a battery technology breakthrough that Tesla plans to produce at
scale.
And while this is pure speculation, I won’t be surprised if Tesla announces that it will
be partnering with other automakers and licensing its battery and powertrain technology to them.
After all, it aligns with their mission of accelerating the world’s transition to sustainable
energy, AND it’s not the first time they’ve done this. In 2012 Tesla was supplying Toyota
with its battery and powertrain technology for their electric RAV4.
Full Self-driving
The progress toward full self-driving is deceptively rapid. Telas is attacking the problem from
both ends - at highway speeds with Navigate on Autopilot, and now at low speeds in urban
environments with Smart Summon. Data is how full self-driving will be won. This is how
deep neural nets work. And Tesla’s data lead appears unassailable. They’re approaching
1 million vehicles on roads, each of them collecting data and training the self-driving
AI.
As more data is used to solve edge cases, new features will be progressively rolled
out making Tesla’s even safer and before we know it, they’ll be driving themselves.
And each time a new feature rolls out, more full self-driving revenue is recognised. This will be good news.
The Plaid Model S
Tesla are working on an even more ridiculous Model S. The Plaid version promises even greater
performance and handling -- on a model that CURRENTLY can do 0-60 in 2.4 seconds.
The Plaid Model S is a gigantic “f**k you” to gasoline powered vehicles. It’s another
nail in the coffin. It’s also a warning shot to anyone wanting to compete at the high
end of the EV market.
The big deal here is that there will be other automakers, the likes of Porche with their
Taycan, and many more who want a slice of that high-margin, top end. But Tesla’s technology
lead is SO big that they can outperform AND massively undercut everyone on price. Good
luck anyone trying to rain on Tesla’s parade. We saw what happened at Nurburgring when Porche
tried to one-up Tesla.
Analysts Waking Up
Though not inevitable, there is a trend over time for bearish analysts to abruptly reverse
their outlook on Tesla stock. I guess it takes some longer than others to see the writing
on the wall. If you really want to get a handle on this, do some googling and look at what
was being said about Apple or Amazon in the 2000s by these same folks.
Each time the stock is upgraded, or someone from a big investment bank improves their
outlook, it bodes well for Tesla’s stock price. With some of their track records, it’s
questionable whether anyone should be paying attention to them, but that’s besides the
point.
And don’t be surprised if we see a few prominent short selling admitting defeat over the next
year or two.
Big Automakers Transitioning to EVs
Transition to electric vehicles or die. That’s the choice facing existing automakers. Turning
a huge ship around is a slow and painful process. Those with any sense now realise they must
go all-in on EVs or they’re f**ked. Problem is, shareholders want their dividends, executives
want their bonuses and few have the courage and vision to do what they know needs to happen.
Watch as existing automakers perish or sheepishly announce huge layoffs, reduced dividends,
slash sales forecasts, warn of tens of billions of new capital expenditure and big losses.
Each time this happens, it validates Tesla.
The ‘Tesla stretch’
Because Tesla’s vehicles are such great value -- truly in a league of their own, a
curious thing is happening.
Buyers who previously had only ever purchased vehicles on the budget end of the market are
stretching themselves $10, even $20k further to get into a Tesla.
This is deceptively important. Tesla are vacuuming up customers who were thought to be in the
sub-$30k market. This is greatly expanding their potential customer base.
Those who think Tesla is a luxury brand, only for rich people are in for a shock as smart
consumers look at the overall cost of ownership and realise that a Model 3 is actually cheaper
than a lot of lower-priced gasoline vehicles.
The Social Change
People are increasingly becoming more environmentally conscious as the catastrophic impact of climate
change becomes more visible in our daily lives. This social change is spreading. It’s not
an overnight thing but eventually, just about everyone will look down upon and shame those
who don’t care about our planet.
As I said at the start of the video, I don’t have a crystal ball. Tesla is a very volatile
stock. It could do anything. I don't KNOW what the stock will do today, a week from
now, or in 10 years. But I am confident that the probability of the stock dropping meaningfully
below its current level of around $330 is far, FAR less than the probability of a bumpy ascent
to new highs.
Tesla has dozens of strong tailwinds working in their favour and a sea of good news around
the corner with very little in the way of major obstacles.
If I’m right. And you’re sitting on the sidelines, waiting for the stock to drop as
it passes $350, $400, $500. What then? Are you going to hold off even longer and keep
hoping it drops? Will you bite the bullet and buy it for 20, 30 or 50% more than it
is today? Or will you simply remain on the sidelines wishing you had a time machine?
I’m Steven Mark Ryan, this is Solving The Money Problem and I love you all.
Thanks for watching. Let me know your thoughts in the comments. Do you agree or disagree?
Any holes in my thinking? What other factors do you see impacting Tesla’s stock price
in the near term? Do you own any Tesla stock? And if you have ideas for future videos, I’d
love to know. I read ALL your comments and I REALLY appreciate them.
p.s. Guys. Seriously, after my last video a LOT of you said bought Tesla stock. I’m
not giving advice here, I’m trying to teach you how to think for yourselves by sharing
my reasoning process. Keep using that brain of yours.
[So when maybe you or somebody else creates an AGI system, and you get to ask her one question] - Lex Fridman
[What would that question be?] - Lex Fridman
[*thinking*] - Elon Musk
[What's outside the simulation?] - Elon Musk