I can admit that perhaps I am somewhat naive in my predictions, forecasts and estimates.
They generally tend to follow the, if everything went as well as Elon said rhetoric.
And although there is clearly no competition coming for Tesla this decade in the space
of electric cars, there may be other certain threats to the company that perhaps we should
explore as well.
Because if the last few years have taught us anything, things don't always go as smoothly
as we may hope.
In fact, this probably how I look at my investing, this isn't a video about trading
options, I will be attempting to identify risks that would be relevant to my options
though.
We do all these forecasts, we do bear forecasts too.
As long as Tesla can manufacturer, and has the supplies, then there are going to be the
customers.
If they keep growing, then we are going to see the numbers.
Demand is usually the biggest limiting factor to growth, and right now, Tesla's demand is
just about unlimited.
So what else might impact the stock price getting to the numbers we hope?
I am going to try and go through some issues Tesla might face.
I am not trying to brainstorm every single possible permutation that might happen, of
course there may be natural disasters and other extreme black swan events.
I would want to focus on the more common, potentially likely concerns people bring up.
This could somewhat be re-titled as "potential reasons Tesla will not hit $3,000 before 2024".
Although I already said that Tesla has no
competition, I still hear it too much.
Einstein said "If you can't explain it to a six-year-old, you don't understand it yourself.".
I think I understand it well enough I could explain it to a 6 year old.
So here it is.
EVs need batteries, Tesla will have over half the worlds supply of battery cells.
COVID It would seem that Covid still seems to be
with us, and as we know, this has recently resulted in some lock downs, and is thus responsible
for half of the tragedy we call Q2.
The other half being the new money furnaces that we watched being constructed all last
year.
Most of the world has now moved on from Covid and accepted it is part of our life, and do
our best to prevent it, fortunately, it is nowhere as fatal as it once was either.
But China still seems insistent on lock downs.
Anyway, we now how damaging lock downs can be in a quarter.
And potentially run more risks with them in Shanghai.
Tesla operating in China certainly carries
risks, but the return on investment was more than worth it.
Those facilities paid for themselves quickly.
So it is still worth Tesla being in China.
And China very much needs Tesla in order for them to grow out their cell industry.
You see although Tesla was the first company to not officially have a joint venture with
another Chinese company, well they basically have one with CATL.
China needs Tesla though, as China wants to build out it's cell and battery industry.
You can only grow if you have customers.
Tesla is CATL's customer, and BYD now too.
They can expand their cell business, and Tesla will keep buying from them.
And as they are LFP cells, Tesla can always use them in energy.
People tell me that the CCP could end up nationalizing Tesla.
Whilst this is literally something we have seen them do in the past, stealing companies
and intellectual properties, I don't think this is a concern for Tesla.
For one, I would say that if Tesla chose to, no matter what the CCP did, they couldn't
make Teslas out of that factory.
If they wanted to close down Tesla in Shanghai due to a threat to their own domestic market,
then who would buy BYD and CATL's cells?
No one can make vehicles at a rate to consume the cells.
China need Tesla to consume all the cells that they make, so China can ramp up their
cell production and continue being the largest cell manufacturer in the world.
So Tesla has a solid foundation in China.
Although many are concerned that China will
overstep their boundaries again, quite literally and invade Taiwan.
In my opinion Taiwan is a nation that should be neutral, like Switzerland, not that that's
probably going to happen.
But the TSMC is just far too valuable, that is the root of all global technology, and
losing that would send us back in perhaps a decade of progress.
Invading Taiwan is going to get every other nation to sit up and take action.
I think this would be too far a stretch for China, particularly seeing how the entire
world recently reacted with Russia.
If such a scenario was to occur, it wouldn't just be bad for Tesla, but the entire world.
This is not really so much a Tesla specific incident.
However, the control China has over all the
processing and refining of so many important minerals is something the rest of the world
needs to wake up to.
This is too much control one nation can have over the world, as we are all discovering
lately, nations powers they have over the world, like the US with the global reserve
currency.
And how these nations use said powers in times of modern day warfare.
These are still minerals that hold a certain value, and thus have a cost.
Well it's still a free market, but even if China did absorb all these minerals, and left
little for everyone else, well they couldn't consume it all themselves, and they couldn't
make a profit from it.
So what would be the point?
I think Tesla control more of the refining and processing of the ore as they increase
their vertical integration.
Remember though Tesla does have good relations with China, both parties seem happy with the
partnership.
4680 It would obvious be remiss not to touch on
the 4680 cell.
Given that the entire future growth of the company rests pretty much on the success of
the production of these cells, and some could even argue the fate of consciousness as we
know it, relies on these cells hitting high volume production.
And to date, we haven't even seen them in volume production.
We all know how important these cells are, and everything else we talk about, is almost
just a distraction to keep us entertained whilst in the background Tesla are sorting
out their 4680 production.
It is frustrating we have not seen the progress we hoped, it requires more patience than we
were initially told.
It looks like we are at a stage of when though, rather than if, which is the main thing.
And the wait may not even be that long, we could still see 4680s in volume production
this year.
Tesla are showing all signs of the future of this company reaching high volume production
for 4680 cells.
Tesla is still investing on this being the future of the company.
Ok sure, we are having to revert to 2170 cells in the meantime.
But Tesla don't have enough 2170 cells for Berlin and Texas to hit full capacity, that's
why they are building these 4680 factories.
The Cybertruck has to have 4680 cells, and high energy density too, especially if the
quad is coming out.
Elon is talking about the Cybertruck coming sooner than later now too, which is a good
sign.
Berlin has made better progress than Texas,
but it's not great.
It's still losing a lot of money.
Also I would be surprised if Tesla even has enough 2170 cells to get to volume production
in Berlin, especially if they are using 2170 cells in Texas.
Perhaps it can just about break even, due to Tesla only selling the higher profit margin
Model Ys.
Essentially the success of the ramp at Germany is also dependent on the 4680 cell and structural
battery production, the same as Texas.
Like I said, the future depends on these 4680 cells.
There is nothing else coming in the meantime for these factories.
Panasonic's 4680s will be a couple of years away still.
They could use LFP and do standard Model Ys, although it will inevitably be at an opportunity
cost of the cells being deployed somewhere else.
Berlin might have energy issues though, especially as we go into winter.
I dont know how self sufficient Giga Berlin is when it comes to powering the factory yet.
But this could be a risk to European output, although if its, hopefully only temporarily,
and would be rectified in a couple of years.
Perhaps the main concern is the actual economy.
How bad a recession might we face?
This is out of our control, but can still have a heavy effect on Tesla's stock price.
A recession should in no way impact Tesla sales, even if it reduces demand, Tesla has
a big buffer, which is their waiting list.
On top of that they have an even larger buffer with absolutely insane margins.
Tesla has the highest chance out any auto OEM of making it through the recession.
By a long long way.
So if Tesla don't make it through the recession, then it's likely a pretty scary world, and
your losses in Tesla will be the last of your problems.
Having said that, the economy could contract more, interest rates could rise, liquidity
could dry up, resulting in lower p/e ratios, and thus lower valuations on stocks, and especially
lower p/e's for growth stocks.
But we have 12 to 18 months to get potentially get through, and the economy can hopefully
be on the path to recovering from there.
If this video is about Tesla hitting $3,000 in 2 years, then I would hope we are out of
any recession then, so it won't be an issue.
It might have meant that Tesla was able to dominate even more, and buy up the industry
whilst its blood is in streets.
The economy could hit Tesla some more, but Tesla might have also grown some more.
Either way, historically speaking, the chances are we get through this recession, within
2 years, and back to usual market conditions.
At least the one thing we can leave from this
list, is competition.
Competition would be an issue if there were competitive EVs in the market, that would
force Tesla to reduce their prices and thus lose margin.
But said competition can barely even compete with a 10 year old Model S, and that's just
in EV technology.
Which isn't even the important part, it's cell manufacturing.
Which no one is coming close to the order of cells Tesla is.
Besides, the competition is ICE for a long time, and it'll be sometime until EV OEMs
even have to fight over market share.
These are some of the main concerns that I
hear from you, but if you see any other threats that I have missed, that could have a large
impact, then by all means comment below.