Like most of you, I have done projections, estimate, forecasts,
predictions on what Tesla will do over this decade in terms of revenue, profits,
and everything I can possibly try and evaluate. And whenever I do this,
its very easy for the numbers to run away, and get absolutely insane.
What we all seem to believe is there will still be a reasonable possibility that Tesla
will hit profits over $100 billion, or even $100 billions, over the next 5 to 10 years.
Tesla products are in so much demand though, Tesla will simply re-invest these profits
back in the company and build more factories and continue to expand the business.
Except, how do you re-invest over $100 billion or more, every year. And how would you even
do it cost effectively. Surely, its likely even Tesla would struggle with that, right?
Well lets discuss what Tesla might do if and when they achieve that level of success.
We can talk about investment opportunities and perhaps even when we might one day expect
dividends. Yes, dividends, right, thats a thing, I forget about those, and literally haven't really
factored any of that in. But yea, there might be enough income there one day alone to live on.
I actually can think of a several ways how Tesla actually could invest that much money
for a considerable time still. Until eventually the profits will just explode even further
and it will be, well beyond fathomable.
Firstly, we have Robotaxis. Now as hard as these are to believe, its highly possible they will
become a thing. And its Tesla's customers cars who will be contributing to the fleet of Robotaxis.
Tesla and the customer then share the revenue generated from the taxis.
This ends up being a reasonable return on investment for any Tesla owner,
who is willing to let their car out as a robotaxi.
But why would Tesla want to share this profit if they didn't have to,
given that it is such a good return. Well say if Tesla wanted one million cars in
their Robotaxi fleet, and it costs Tesla $20,000 per car, then that is $20 billion.
A lot of money for Tesla currently, when they have other investments they want to make.
And the Model 2 factory might make closer to 5 million cars a year, which is $100 billion a year.
Now that is a lot of money. Therefore it makes sense to get consumers to help at the start.
But like we are saying, in this scenario, Tesla has too much profit to invest in factories,
therefore they can start using some of it, to build their own Robotaxi fleet.
There will need to create their own infrastructure to do this too though. As the Tesla owners who are
letting their cars out in the fleet do provide value to the network, they offer the cars
somewhere to park when not being used, they make sure they are charged, maintained and kept clean.
Which is a bit of a logistic nightmare. Tesla will need to have centers for their
Robotaxi fleet, places to park all these cars, keep them maintained, and clean.
The cars can likely charge themselves from Robotaxi charging stations too.
But eventually there will come a time, when there are enough Robotaxis on the road
and thus no need for Tesla to invest in more. In addition to that these Robotaxis are dramatically
increasing Tesla's profits again, with perhaps 100% annual return on every single taxi deployed.
So if Tesla invest $10 billion into taxis, then they get $10 billion back again every year, aside
from all the other infrastructure investment. Therefore, although Tesla will be able
to re-invest a lot of their profits into Robotaxis, it wont take long before these
investments will start coming back in spades. So really only a temporary solution there.
Ahh, but Tesla is an energy company that happens to sell cars,
or something, right? Well lets look at the energy business then.
Tesla could start buying their own megapacks and then use them for energy arbitrage.
Now Tesla kindly show us their prices for Megapacks, and its $850 million for 3 GWh.
Which is $280 million per GWh. But Tesla will have huge margins,
especially by this stage. In fact they are likely at around $30 per KWh at the pack level,
but even if we increase that to $100, including all other associated costs, then we come to a
cost of $30 million per GWh. Ok lets go extra conservative and round it up to $50 million even.
Well what if Tesla invested $100 billion a year into that. Then that comes to 2 TWh of energy
storage a year. Now remember this is just $100 billion, what if Tesla have already bought all the
Robotaxis they need, and all this profit can enter into this? I mean Tesla could be on $300 billion
profit, implying 6 TWh of batteries a year. It wont take a few years until Tesla would control
20 TWh of battery storage themselves. Which probably isnt too far off what the world requires,
particularly when supplemented with power walls. That's even if Tesla can find enough people
to make enough to keep up with the capital they are investing.
Either way, after a couple of years, the income would be up again significantly,
making it an even hard struggle to invest. But why stop there,
what if Tesla also invested in solar power to supplement their battery business too.
If its about $1,000 per kW for solar, then its a billion per GW. At $100 billion invested a year,
that gives 100 extra GW of solar power a year. If that produced 10 TWh a day,
discounting non-sunny days, then we might see 300 TWh of energy a year. It's likely Tesla
would put them somewhere there is a lot of sun, perhaps the mojave desert near Giga Nevada. The
US consumes about 4,000 TWh a year. So it would be about $1 trillion for enough solar for the US.
Tesla may be able to produce the solar panels at a lower cost than this though.
But you get the idea. Even after 5 years, with all this other accumulation of profit by Tesla
buying their own products and using them for themselves to keep 100%
of the profit, eventually they will still run out of places to invest.
This is assuming the entire time there are the resources available to grow and
expand at this rate. But by the time that is completed then Tesla will have so much profit,
I think we are beyond being able to think how it might be spent.
And then we might finally start seeing dividends. I mean not that we would really
car that much by this stage, as Tesla's stock price has probably gone to $50,000 a share.
Which means that its possible we may not see any dividends until next decade. But Tesla are
not messing around. They are serious about transitioning the world, and this is what
needs to be done. All these batteries need to be built and deployed, Tesla are doing what they can
to move to renewable energy. This is their mission. Should we surprised that they will
eventually do it all themselves when they can afford to, and they have the their supply chain
and manufacturing in order. I mean vertical integration is at the heart of this business.
The only next step would be to stop selling the product, and just offer the service.
From extracting the raw ingredients from the Earth through mining, to eventually selling them as a
service for energy and transport. Tesla have their missions to complete, there was no inkling of any
dividends before they were complete. Investing in Tesla is not a passive income play. It is a
capital games play. As if even a tiny fraction of any of this eventuates, well all our shares are
worth probably 10 times as much anyway. How fast can this be achieved? Well why do you think Elon
cares so much about manufacturing, and works so hard on its processes. And then when people see
just how profitable it can be, then perhaps more great minds will also be involved.
There is also another way I can think of to spend the profits. Tesla could buy
out the Boring Company. The Boring Company could be as big as Tesla,
if it was capable of producing tunnels as fast and cheap as Elon says.
There would be a lot of tunnels to build, this would also cost an enormous amount of money
to build the infrastructure. Using the proceeds from Tesla might be what is required.
On the other hand Elon might be able to self-fund the whole thing himself, through Tesla dividends.
Of course Tesla could always venture into other products in the meantime too,
like personal robots. Tesla sure gives us hope at least, for a cleaner, better, safer future.
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