A lot of Tesla investors, well predominantly retail, which are higher in quantity that
institutional, seem to be of the mindset that Tesla will continue to grow 50%.
Despite that not being the case judging by Tesla's past history,
of 70% compounded annual growth rates. And despite nearly 100% growth in deliveries this year,
and what must be very likely around a further 100% growth in 2022 also.
Judging by what is happening in Shanghai, and with this 50% more potential we hear
about with Fremont, and even if the two new factories take a while to ramp up along with
the required accompanying battery production, then I think there is a high possibility
Tesla delivers 2 million vehicles by next year. Oh the end of next year,
how so much more will be revealed, not just with Tesla but the industry as a whole.
Now the math of 50% annual growth, actually is surprisingly easy. All you do is add half
of the deliveries from the previous year, on the next year, and voila,
you have just calculated 50% growth year over year. Right? Very simple.
Well when you calculate that it comes in
at 10 million deliveries a year by 2026. If we account for 2 million in 2022.
That would mean that Tesla would be biggest auto company by units sold too. Oh wait wait,
but Toyota is already there now, and perhaps in 5 years time Toyota could have ramped up a bit too,
right? No, all legacy autos are ramping down, because its somewhat of a zero sum
game, if Tesla sells a car, it means that consumer didn't buy a car elsewhere. i.e.
Tesla is eating up everyone else's market share. These sales are mainly coming from legacy autos.
Sure some of the Chinese micro EVs are perhaps establishing new niches of automotive,
that were not there before, but they are not taking away from legacy autos so much.
Alright, so what if each sale of a Tesla is worth $20,000 gross profit to Tesla, including
margins, FSD, and any other extras or upgrades. And bear in mind there is a high possibility
that most Teslas will have FSD, soon enough, when it comes into fruition. And let's assign
just a $10,000 value to each FSD customer, even if its subscription, despite the car generating
significantly more than that over its lifetime. I mean we could work out average selling price
and gross margins, but in the end it would only be to work out what the average gross
profit would be per vehicle. But to give you an idea, 40% of a $50,000 car is $20,000.
Remember we are even including FSD in there too. So this could be argued as low, but we
are also including the full product mix of all vehicles, including potentially the compact too.
This is meant to just be a quick and easy view of what 50% growth really means.
You might say that as time goes on then there will be less margin per vehicle,
on the other hand, Tesla are only likely to reduce their costs and efficiencies further.
Whilst also improving the value of the car by offering more features.
Thus increasing demand and what people will pay for a Tesla. Remember we might see all sorts
of things like Tesla's delivering themselves, saving an instant $1,000 or so just like that.
Now Tesla's OPEX is sitting about $6 billion a year, producing just
one million cars. And its possible that this will increase when Tesla grows more,
although there will be less in the way of depreciation and armotization as we go on,
due to the sheer capital expense on these latest factories. But either way, if OPEX did increase
it would not be at the same rate as production. This is due to economies of scale.
Do I say economies of scale in every video? Maybe, you know why? Tesla are truly going to
have incredible economies of scale. I am placing a 30% weighting factory relative to what Tesla have
in the way of OPEX now, to further growth relative production. To offer a rough guess as to what OPEX
would be for each year, relative to production. Like always, this is for indicative purposes only.
Well in 5 years time, when we break past the 10 million units a year point,
we have a gross profit of $200 billion, with a $33 billion OPEX, ok that OPEX does sound ridiculous,
but so be it. Leaving us close to an EBIT of approximately $180 billion.
This is just for the vehicle business. Now this is earnings before interest and tax,
but I mean look at these numbers, interest is going to be minimal,
and armortization too if you include that. I mean even if a new factory cost $10 billion,
well that's less than a month's pay at this stage. Maybe this comes to a net profit of $150 billion.
This doesn't factor in robotaxis either. If you want to to place a p/e ratio of 30
on that, then that's a stock price of $4,000s. Just for the autos sales business, with FSD.
And quote from Elon on battery day "I think we’ve got a good chance of achieving this
actually before 2030, but I’m highly confident that we could do it by 2030." He may be talking
about 2028 or 2029 to hit this stage. Which would be totally in line 50% growth,
starting at 2 million from 2022. But even if I put in 50% growth going from 2021, i.e. only a
dismal 1.35 million deliveries for 2022, then we still get to this 25 million figure before 2030.
But I think a lot has changed since then too. I don't think Tesla or
Elon had decided that they will inevitably double down on the in-house LFP batteries.
But look at this trajectory. We know 20 million vehicles is a huge milestone,
and somewhat parallel with the 3 TWh milestone or 3000 GWh a year. Which is meant to be split
about half with cars and half with energy. Well 1500 GWh for cars, if average pack is 60 kWh,
which I think it might be smaller by that stage, as batteries are only going to get smaller and
fewer in vehicles as efficiencies improve, charging speed increases,
and superchargers are in more places. But even 1500 GWh with an average of 60 kWh battery packs,
comes in at 25 million vehicles a year. But I have a feeling Tesla can get away with 40
to 50 kWh battery packs in the compact variants, and that could be half of their sales. And sure,
there might be variants of the compact like a compact cross over, 2 door, and 4 door.
But think of the competition as we go through this growth. At a guess half of Teslas production will
be for the North American market. What's going to happen in 5 years time, when Tesla have about
30%, or more, of the market share of the US auto market? Well who is going to be hit the
hardest? This is a very large number of cars for a competitor to suddenly come into your market,
and eat up a huge amount of your share. Has the Cybertruck hurt F-150 sales dramatically, so much
so that it's had to close down it's production lines in Detroit, or Dearborn I should say?
That's basically Ford's only profitable car they make, if they lose their economies of
scale on that, then they are in big trouble. I think legacy will lose some profit in China too,
which the Chinese are likely gunning for. But Ford would have been feeling this pinch for a coupe of
years time, and had possibly already downsized as a result. Then what about GM, what have the
got left to clamber on to? The White House? I would say BMW, Audi and Mercedes were being
affected too, Tesla is still a luxury auto, and beats the Germans on performance and value.
And if Tesla bringing out the compact, then Toyota will feel that the most.
Now bear in mind, this 70% growth we have been seeing from Tesla, well this was limited by the
rate at which Panasonic and LG could make 2170 batteries, and 18650 too. And recently
we have seen the growth continue with CATL's LFP batteries. But the point is, this growth was at
the rate at which others could manufacturer their batteries. And as we know Tesla came up with the
4680 battery since. I am not even sure how long that took, or how long they were working on it,
but surely years of R & D before battery day, or project roadrunner. Now Tesla will be able
to make their 4680 batteries at a rate of 100 times as many per square foot
as Giga Nevada alone. And likely that pace will continue to increase too. And then my thoughts
are that the Tesla's LFP batteries will be even faster again. As Elon even says about 3/4 of cars
will use them, implying that Tesla need 3 times as many LFP batteries than they do 4680 batteries,
just for cars of course. They need at least as many batteries for energy storage as they do for
cars, which would thus imply 7 times more LFP batteries than 4680 nickel batteries.
You see we are given numbers from Tesla and Elon, that we can use to further
elaborate inferences and draw conclusions and assumptions. But if we are thinking 500 GWh
of 4680 batteries from Berlin and Texas, by perhaps the end of around 2023, and we need
7 times as many LFP batteries. Well that's going to be a lot of batteries then isn't it?
So what I am getting at, is that if Tesla achieved 70% growth rate with 3rd party
suppliers, then could it be plausible to think that perhaps there is a chance that
Tesla might be able to grow at an even faster rate when they start making their own batteries
at this much faster a pace? Remember CATL are still using prismatic form factor,
which is a lot slower than cylindrical. Yet CATL have high ambitions for battery production too.
Elon has hinted that 70% growth may be possible to continue, at the shareholders meeting too.
That may not be so sustainable, but just out of interest starting at 2 million for 2022,
we hit 10 million by 2025, and 40 million sometime in 2028. FYI, I think 40 million is possibly
the limit for Tesla, especially if we include Robotaxis. I could be wrong, I mean we have a 2
billion global fleet to replace and people might decide to buy an electric car because they want
an electric car, rather than because they need to replace their car. But we'll see. Like I say,
this company has barely begun, we haven't even produced over a million cars in one year yet.
But look at this, by 2025 perhaps Fremont and Shanghai are surely producing a combined 2
million, perhaps with further expansion. Berlin 2 million, and Texas 4 million. Well that's 8
million right there. With no new factories over 4 years time. 10 million by 2025 is not impossible.
The main thing is the batteries, and look how fast Tesla will be able to make batteries over the rest
of the world. But I can't see the rest of the EV industry contributing overly to the transition.
Tesla will likely have 2/3 of the market share, if we remove micro EVs.
Either way, even 50% growth looks good, from a shareholder point of view.