Alright, it seems like of Tesla investors are rethinking Tesla now, not rethinking their
decision so much, but more rethinking what it is they actually invested in. A lot of
these investors bought closer to the highs, hey I know some of you held from 400 to 100,
that's a tough hold, and many others are have dollar cost averaged around $300. One of my
best friends is a Bitcoin Maximalist, and he once had to hold when bitcoin dropped 90%
of its value, he held through it all and obviously it recovered and went as crazy as Tesla.
So what is Tesla the investment, or what is the company in reality? Have we invested in
EVs, tech, AI, energy, robots the mission to change the world? I said it once on Twitter
and it was not popular, but Tesla did bubble. We saw it go crazy, everything was pointing
in the right direction for Tesla at one time. Then it suddenly became incredibly profitable
with sky high margins. And then two new massive factories that were presumably going to probably
triple production further. It wasn't hard to do the numbers of insane profits times
3, and get to some crazy valuations.
But were those profits a fluke, just through some random circumstances at the time, or
will we see something similar return over time? Can Tesla still sport a half trillion
dollar price tag? Can Tesla still one day be more valuable than Aromco and Apple combined?
Can ARK invest be right about a $2,000 potential price tag by 2017?
These are big numbers, especially when at today's stock price. We are talking about
a potential 10 times return on investment. I'd happily take that over the next few years.
And you know what, this time I probably will take the profits, at least a large amount
of them. Enough is enough, as long as you can develop the mentality of appreciating
having enough, or else your forever chasing. In first principles I am in invested in Tesla
for the return on investment. I mean I love the company, product and mission, but me being
an investor, or you, has no effect on the mission, unless Tesla ever needed to sell
any more shares, with a rights issue. But I would hope they have sufficient cash for
whatever they need.
Which for the record doesn't include a share buy back. I know various people keep pushing
for a buy back, but forget that, it would be insane. We have no idea what kind of economic
enviroment we are headed for, dry powder is important right now, not trying to push the
stock price, with the potential risks that could result.
Might I also remind you that Tesla have a lot of CAPEX coming, with Mexico and Nevada,
that isn't going to be cheap. Not to mention the fact Tesla still got through $2.1 billion
in CAPEX just in Q1. Not sure where all that went, considering all the factories are built.
I am guessing its the Cybertruck tooling. A lot of 4680 Texas line went into cost of
goods sold that quarter too, so that would have reduced some of the CAPEX. But Cybertruck
is getting serious. They have a pilot line, and production line. I don't recall any major
Model 3 Pilot line. Tesla are going to a lot of effort over the Cybertruck. One might think
its the most pre-ordered vehicle in history or something, and might have a price point
close to $100k around its launch. It will ramp slow, and create another cash furnace,
and reduce margins further. But eventually given the price tag, there should be a huge
margin, and eventually it will turn around. Of course these vehicle also depends on the
4680 ramp.
Right 4680s, no one even cared about them any more hardly on the earnings call. Too
many whinning babies talkibg about margins. All looking short term, and not thinking about
the long term, hence why none of them asked questions that actually matter, and would
actually improve margins in the long run. I can't believe the entire word "Mexico" wasn't
even uttered in the whole call. Look to the future people. This is a growth company, it's
the future that matters. What i the biggest thing in Tesla's future, at least in the next
year or so, it's Mexico. Oh wait sorry, maybe FSD will be solved too. Which Elon slid in
on the earnings call, and update we hadn't heard since an interview a while back with
Silicon Valley Owners Club. Wow, that was almost a year ago now.
Not that Elon has any credibility remaining on FSD being solved, but at least he offers
us hope. He did in the past at least include some convincing axioms to convince us as to
why this year is different, but not this time. I mean a lot of his mind might have been on
the Starship launch the following day of course too. This guy has a lot on his plate.
Oh like what about that time Elon said FSD being solved is whether Tesla is worth a fortune
or zero. Was that a little concerning? Is that what we have ultimately invested in here,
the company that will pull off FSD in a scalable affordable way before anyone else? On the
earnings call it was starting to sound like that's how they will make money on the vehicles
they sell, if they start having to sell them at break even.
Look the economy is all over the place now, no one can make heads or tails of whats going
on. Some people say we are still in a boom, with the government pulling the brakes on
as much as possible to slow it down. Others think this is the recession, and many think
we haven't seen close to the real recession yet.
Personally I think governments are trying to inflate their GDP so their debt to GDP
ratio reduces, and in the meantime trying to stablize prices, which is the mandate of
most central banks in the world, one single mandate thats it. Except the FED also has
a second mandate of maximum employment. We have demographics too, baby boomers retiring
potentially opening up more employment for other generations. In fact if you think you
know more than about 3% more of what is happening in the world, then you are simply mistaken.
Its far too complex.
Alright, so did we invest in a profitable EV company. Yes, except now Tesla have increased
their supply by about 50% and had to reduce prices to increase the demand to match, except
Tesla didn't manage to reduce the costs like we hoped, with the new factories, that was
how it was going to work. In fact I bet a 4680 kwh is probably more expensive than a
2170 right now.
Is that what we invested in though? A cell that will eventually be the lowest cost way
of producing a kWh, with the highest energy density and multiple functioning as the structure
of the vehicle to further save weight. Aside from the fact that the 4680 vehicle actually
weighs as much as a 2170 vehicle, except it offers about 50 miles less range.
But its early, and cells can often take years to get right and ramp, especially something
as complex as a dry battery electrode. And look we saw Tesla achieved the dry battery
electrode anode, thats got to count for something. We just need them to perfect the cathode at
mass scale. But things dont go as well as you hope on a mass production line compared
to a lab or pilot line. I wish I could ask just 2 questions about those cells, and get
to the bottom of this, but we have to listen to people's questions who dont get this company.
No its the economy stupid. Although we dont know what kind of economy it is, thats the
issue, the uncertainty, consumer confidence is down. I wouldnt buy a new car right now,
thats for sure, and I was thinking about trading my model 3 performance in for a Highland last
year. Its not just the economy, although related, its that cars have become more expensive too.
As in the interest rates, in the US they are about 3% higher now. On a $50,000 car over
5 years, that comes to something like $5,000 more interest. But the US just got $7500 off
their cars with the tax credit, except you get that back with your tax return, you still
have to buy the car in the first place, and likely finance it. Although next year, its
going to be off the actual sticker price, and instant rebate, which could make a difference
to demand.
If history is anything to go by, then recesions dont last for ever, perhasp 18 to 24 months,
and then the economy starts recovering. Except usually in the recession we have lower rates
to stimulate the economy into the recovery. Yet we have higher rates, and likely causing
some form of stagflation. We just need to see more disinflation first until they come
down, which is what everyone is hoping for. Or something break in the economy and then
they'll come down for that too.
But Tesla are still selling a lot of just two models, particularly one. I invested in
Tesla way before any Model Y was heard of. But that car killed. It was so popular, so
much more popular than the 3, and with a higher price tag even. Tesla made a highly coveted
electric vehicle, and it took the company to the next level. There wasnt even much effort
put into it, just a cross over version of the model 3 with about 70% the same parts.
Well what about since then? And since Tesla hit an insane market cap too? We've had nothing
new. Yet so much invested in R & D, and labs, testing a new vehicle, with new production
techniques.
Well what if this new vehicle is even more popular than the Model Y, except this time
it is half the price and is afforable to the masses? Will it be a compact? Will that many
people in the US actually want a compact though. And yes the Mexico factory is definitely going
to serve the US market. Its too tempting to resist those subsidies and tax credits, its
an insane amount. Yet the vehicle also cant cannibalize the Y or the 3 either. So we will
have to see what Tesla end up delivering. Although they gave us the name of the new
vehicle, its the Robotaxi. However, we are also told the 3 and Y are Robotaxis too. But
what if we get the reveal and it is the actual Robotaxi. More convicvion and belief from
the team that Robotaxis and FSD are coming and coming soon enough.
If Tesla achieve FSD then the stock becomes priceless, there is no judging how high that
could reach. But theres still a big journey from there, like regulation, although GM managed
to get past that, and Waymo. But will people really want to use, will they trust it, will
there be enough to replace peoples vehicles, especially when demand peaks at rush hour.
Still uncertainties there. But still FSD gets solved, and shows a trajectory of march of
9s, then that justifies everything, it will be a very valuable company. And look at the
videos, its mind blowing, imagine watching one of those videos just 10 years ago, you
wouldnt believe it. And the fact that Tesla may be able to make them for under $20,000
is more mind blowing.
And we have energy too, which will be growing. If they can make a profit of $100 a kWh, then
over time Tesla should have 200 GWh of energy perhaps in a couple of years or so. Which
comes in at $20 billion a year. But supposedly will deploy much more than that, even more
than vehicles, 20 million vehicles, so we are talking about over a TWh a year, which
could be a $100 billion profit. People say there are small barriers to entry for energy
storage, but 1 tWh a yaer of cells sounds like a big barrier to me. Energy is all about
return on investment the demand is infinite if its saving money on energy.
Anwyay it was tough going through what looked like a bubble, and skewing expectations. But
perhaps Tesla was never meant to be that profitable that soon. Just look at other growth companies
like Amazon, and how long it made no profits. And that sure bubbled too in the classic .com
bubble, yet it went back up again didn't it. About 40 times more than it peaked in the
.com bubble. It found new areas to invest, like AWS, and its likely Tesla will too. Some
are saying DOJO could be Tesla's AWS. Tesla is heavily invested in application AI for
navigation, which can also be used in robots too, which may even be easier than cars, as
the consquences of something going wrong, have a less probability of resulting in death.
And the robots can potentially replace labor on the production line, which will reduce
costs.
It's still relatively early days for Tesla either way, the team are working out what
they have, and what they can do. We even have new products in new industries coming like
heat pumps. The market can react to strange things, especially with this company. The
stock price movements have blown everyone away at times, bulls and bears. But there
may not be much to expect it to do for sometime. Rates will eventually come down, and one day
there will be another boom, and Teslas may get to crazy prices and margins again, we
never now.
I look at the climate change movement, and the more governments back that, then Tesla
is likely going to get more support. We hear about a potential equivalent of an inflation
reduction act to come out of Europe too. Tesla just need to get their costs down slightly
more, and we can see those 20% plus margins return when the economy is in better shape.
In the meantime, being a Tesla investor might not be as fun as it has been in the past.
But seeing Mexico break ground will reinstore some confidence.
Right now overall sentiment is low. All the major stock pumps were used earlier this year,
and even though the Q4 earnings call actually wasnt great news, investors didnt care, everything
they heard was amazing news, they heard what they wanted, they were ready for the stock
price to return, and run it sure did. And that will happen again, investors will change
their sentiment and start believing harder again, and thinking FSD will be solved, profits
will return, costs will come down, and Tesla will be massively profitable. Honestly, the
market is that fickle, it literally is bipolar.