Interesting, but market cap isn’t everything - FTA:
"While Tesla’s market capitalization has swelled in size, Ford still overshadows the Palo Alto, California-based company in most other financial metrics. Over the last five years, Ford has posted net income totaling $26 billion, while Tesla has lost $2.3 billion. Last year, Ford had annual revenue of $151.8 billion compared with Tesla’s $7 billion.
And when it comes to car sales, Tesla sold 40,697 vehicles in the U.S. last year, according to researcher IHS Markit. Ford sells that many F-Series trucks in the U.S. about every three weeks."
Dead on. The price of Ford is predominantly being determined by institutional investors with a strong understanding of the dividend discount model. Investors moving the market on Ford are buying/selling what they believe to be a stable, mature company and are pricing pretty much ZERO potential for innovation into Ford.
Tesla on the other hand is a darling of retail investors attracted to the marketing machine of "Silicon Valley disruption" and they have already priced in a belief that Tesla will win the global automotive market. DDM? What's a DDM?
Meanwhile Ford, GM, and all the other automotive incumbents are investing in the same technologies as Tesla. Is it more likely that Tesla never falters (even slightly)? Or is it more likely one of the 10+ incumbents surprises with a self-driving/electric success?
I know where I put my money. Interest rates will be climbing at the exact same time as Tesla will be attempting to expand their market to a larger audience who always purchase new cars with an accompanying loan. Oil prices are showing no indication of climbing again for years to come. Consumers have just replaced their aging vehicles in record numbers and won't be in the market for a new one for roughly 7-12 years. Good luck Tesla.
Right so for Tesla to make sense, it has to make the iPhone of cars with Ford analogously in the position of Nokia. It looks like that's the expected level of disruption priced in right now.
(Personally I have no idea whether this is likely or not).
> Ford: "We have no idea how to invest this money. I guess let's just put it in the bank."
> Tesla: "We have so many idea for investments, we're only constrained by cash. Let's go back to the capital markets!"
I think becoming as big as Ford already is, is one of Tesla's most positive possible futures if all of their many ideas play out. But they are already valued higher than that. How can this possibly work? There are so many car makers, there is no monopole they could get. Same for solar and batteries.
> There are so many car makers, there is no monopole they could get. Same for solar and batteries.
The automobile industry will contract as we move from individual ownership to mobility. But along with that transition some manufacturers will keep up and others will not. Tesla is hoping to be one of the winners, taking perhaps 25% of the mobility market as the car buying market dries up.
Tesla's valuation is also based on the idea that clean energy will replace fossil fuels. If that happens, the battery market will grow by orders of magnitude. Tesla will basically take the market from coal and petroleum.
They don't need a monopoly in either of these to justify their valuation. Simply get 10% of mobility and 10% of electricity storage and they'll have justified well above their current valuation.
Remember mobility services will subsume much of public transit and shipping too. The borders between industries are moving around. You can't just ask "how much of industry X will Tesla get?" because whole industries will ascent and others will wither as we transition to sustainable energy.
> The automobile industry will contract as we move from individual ownership to mobility.
What does this even mean? People like to leave stuff in their cars (e.g. mug, gym bag). They like them to be at their preferred level of cleanliness or disorder. Some even use them as a means of personal expression.
If "mobility" were so desirable, ZipCar would have taken off 10 years ago. The "mobility" market will be about the size of the taxi, bus, and train market.
> The "mobility" market will be about the size of the taxi, bus, and train market.
- A personal, individual vehicle which comes to pick you up where you are and take you to exactly where you want to go is a much MUCH higher value proposition than public transit.
- Add self-driving to the mix, and the cost of that service will plummet.
- When the car providing that service can drive itself, then there is little to no inconvenience to the vehicle owner to offer that service, and significant financial incentive.
- Because car owners will be able to make "rent" from their capital investment, owning a car will start to look more like property ownership than a depreciating investment-- especially as maintenance and operation costs fall for electric vehicles.
- There will be very strong financial incentive to use self-driving ride pools instead of putting up a large wad of cash to own a car. So total car ownership will go way down, and will be done much more by the wealthy and much less by the working/middle class.
- Cost of ownership is especially high in cities (parking), and the market for ride sharing is highest. So probably many fewer city dwellers will own cars.
- Families that own can shrink to one car instead of two, since the car can drop people off or pick them up.
I think there are a lot of pretty good reasons why the vehicle market is going to change significantly in the next 15 years.
This is a common pattern to electric and self-driving enthusiasts, but unfortunately it's the automotive equivalent of Wired articles about the internet circa 1996.
Problems include:
- Cost. All of the (limited) Tesla automation technologies cost more than my last car.
- Liability. Who is liable for mishaps? As Uber has demonstrated accidents and traffic violations happen with automated tech.
- Utility. The majority of users aren't high income people in SFO and NYC. We have parking, getting picked up is cool, but not high ROI.
- Pool vs own. As we've seen with transportation services as varied as stagecoaches, cabs, railways, and airlines, service based transportation models aren't cheap. Service price is always demand driven, it will cost more when you need it.
- Owning a car in the US is one of the greatest values available in any market. I can be at any point in the CONUS in <3 days for under $500 with most cars.
I think self driving cars may put the bullet in some cabs for good after Uber and Lyft implode, and may bring train-like scale to intercity transit. But the fantasy being sold today is just that.
> Cost: We're not there yet, but not paying registration/insurance/repayments/garage space will make this economical in time - at first at least for second car owners
> Liability: Insurance - I think automation will be safer i.e. less accidents
> Utility: I think door to door driving without looking for parking is a pretty good perk
> Pool vs. own: Both of these models will be competitive with each other, so in the end it won't matter
plus there will be additional benefits
Safety: Less drunk drivers on the road, less accidents from fatigue, etc.
Cost: at a minimum, it will bring cab prices down
Efficiency: Less traffic jams as autonomous systems won't slam on the brakes when they see a police car, etc. Smoother flowing traffic, higher legal road speeds if reaction time is shorter
And then there are other non-car transport which will benefit: logicistics, mail, deliveries etc. Minibuses that could pick you up door to door through automated route planning etc.
Interesting comments but they're hard to read because you use the word 'less' rather than 'fewer':
http://blog.dictionary.com/fewer-vs-less/ !
This seems to be a generational shift so please inform your peers! :)
Good point. Cars will still be valuable for road trips, but lots and lots of people will choose to skip car ownership and just settle for local, self-driving travel.
Maybe there will be a stratified market for rental self-driving cars; one for "just this trip" and another for "five days of exclusive use for a road trip."
I don't think the change will be quick, but I think you're overestimating the problems and underestimating the potential benefits here.
Cost is a short term problem. Costs will go down. Liabilities can be insured against.
Here is where I see it going:
Stage 1: Taxis start being replaced by self-driving vehicles at much lower cost. Car rentals too - liabilities potentially go down once they reach a certain level of safety as you don't face the risk of a poorer than average driver. Usage skyrockets as costs drop, and as services can cut pick-up times drastically by more optimally having a larger fleet parked around town and/or driving around town.
Stage 2: We start seeing pooling options from more and more rental providers to deal with high demand situations. E.g. Rental company crunches their numbers and see that my road => the local train station always maxes out capacity during rush hour and decides that rather than buying more vehicles, surge pricing coupled with offering a discount that brings the price back towards normal for each rider as long as it at most takes X minutes extra will be popular and more profitable.
Stage 3: They put in minibuses on some of the most congested streches and/or team up with the local bus companies to launch apps where you can tell them you're at the stop and get guaranteed pickup within Y minutes by either the regularly scheduled bus or a car. You pay a slight premium for the guarantee, which covers the car when the bus won't be there and a profit share with the bus company. (For me the only reason not to consistently use the bus is that if I need to be somewhere urgently, I can't always risk waiting for a bus that might be full; if I had a guarantee that if I press the button and walk to the bus stop, I will get picked up in 5 minutes, it'd make me use the bus more)
Stage 4: As self-drive increase in general, cities put the thumb on parking spots. E.g. in parts of London you already won't get planning consent for housing with more than 1.5 parking spaces per living unit as a means to cap car ownership. Expect to see that gradually driven down, with the expectation that people will buy parking space for their self-driven car elsewhere and/or forgo having one. Driving down the limits on parking will allow for denser developments, making ride share options etc. even more viable.
Stage 5: Youth grow up without depending on their parents to drive them anywhere from the moment they are trusted to go by themselves.
Basically, I see it as a process where the convenience of apps to get you somewhere will keep increasing to the point where people will find themselves increasingly opting to check these apps first and find themselves needing a car less and less. Some transport apps are already combining route-finding with then offering to order an Uber for you.
Expect to see more of that making it less attractive to get a car over time.
Especially as youth get used to a greater flexibility and level of freedom using these type of apps before they can buy a car. Car ownership many places represents freedom from parents driving you around, but more and more teenagers can expect to be in situations were parents opt to order them a car instead of driving themselves.
Before long, a whole generation will experience car ownership as irrelevant to the ability of liberating their transport options from parental control.
Sure, some people will still opt to own one, but many already forgo car ownership, and that number will certainly rise rapidly.
The funny thing, some of this already exists these days. It is called ZipCar, Car2Go, or DriveNow. All of them suffer from the very same problem: service.
It does not matter if a car is selfdriving or not. To be recognized as available by someone means a utilization of about 30% by the providing company. But a utilization of about 30% does not drive down costs. You still of costs for producing and servicing the vehicle, which is way higher than just the energy costs.
Tesla has no experience in free floating vehilce fleets. Uber has no experience in such thing. ZipCar has. Car2Go has. Car2Go as an subsidary of Daimler even has experience in car production.
ZipCar does not pick you up and drop you off at location. I can tell you as a Zip Car user, there are many issues that caused me to discontinue, none of which was service.
1 - the zip cars available to me are a few blocks away to walk which isn't convenient if I'm carrying something or lazy.
2 - high cost. Taking uber right now is so much cheaper. Imagine if cars were self-driving. Costs would plummet
3 - parking. This can be very hard depending on where I'm going
4 - I have to pay for the length of time I'm out, not for my ride. I also need to return the car when I'm done.
These are the biggest pain points in my opinion. Also, not needing to drive myself is a huge bonus. The leverage of solving these pain points are huge, imo.
zipcar and it's ilk have the same problems as bike-share programs: people don't use the service in such a way that the vehicles get to where the demand will be. And if you finish work at the end of the day and all the cars are gone, you aren't going to trust it again.
the bike shares solve this by driving trucks around, collecting bikes from areas where they aren't going to be needed and moving them to areas where demand is about to spike. it's hard to load up a truck full of cars to meet demand in the business district at 5pm, but it's very easy to send over all the spare capacity in your autonomous vehicle fleet.
That is it, and the ability to use the data to start offering sharing options with either discounts or priority pick up to make people ride share when capacity is full will be a massive change ("we're seeing high demand; you can wait 10 minutes for a vehicle to yourself, or a ride share can pick you up in 5 minutes"). There are plenty of times where I know it will take time to get a car because of demand, and would happily share if it meant I'd get picked up sooner.
Smoothing that out, so that you come to expect a car to be available very rapidly no matter what, with only minor inconveniences, may not end private car ownership but certainly will make a lot more people opt for alternatives - I know for myself (I don't own a car) the occasional lack of predictability in how soon I'll get picked up is the one aggravation that occasionally make me want one.
You missed the point like the GP. None of those services are anything like what's coming. Car2go still has to be parked, has to be close, you have to live in the home zone. Zip car is just... Not even close. It's a rental service and you need to take the car back.
Comparing either of those or public transit to self driving cars misses the point entirely.
The ridesharing systems (like uber pool and lyft line) are meant to alleviate that utilization problem. Zipcar has no experience with the complex logistics automation work for ridesharing that Uber and Lyft are doing, nor do they have a large enough userbase to make that ridesharing system viable and competitive.
As a zip car member, I wish it did all those things, but it is a far cry from the self-driving future GP is talking about.
I'm also worried about tesla's market share, but more because I don't know if they can corner all the markets they are about to compete in: automotive manufacturing, batteries and set driving systems are all hard enough problems for an entire company. It's a lot to get right.
ZipCar is very useful in it's own regard. It's problem is that you need to pick it up and drop it off at the same location, and availability during peak hours.
Self driving car networks basically can solve that.
> I think there are a lot of pretty good reasons why the vehicle market is going to change significantly in the next 15 years
But not necessarily shrinking the market. The cost of mobility goes down, consumption will go up. How high? I'm going to guess absurdly high. The reason US cities are sprawling messes is that they were built as the cost of mobility dropped off a cliff (cars and trucks replaced horses). Go read Clifford Simak's "City". People will live in self driving cars and commute in their sleep. It's going to be nuts.
> Cost of ownership is especially high in cities (parking), and the market for ride sharing is highest. So probably many fewer city dwellers will own cars.
If it's really self-driving it can go park wherever. Not very good for the environment, perhaps, but it completely solves that problem.
The farther the car goes to park, the longer the wait for it to pick you up on demand. Not to mention, traveling a few blocks rarely saves much on parking in densely populated areas.
It can travel way further than "a few blocks" and I'd guess most trips are not so unexpected that it's impossible to accept a delay of 30 minutes or maybe even longer.
If your parking spot isn't included as part of the building where you live, then you're going to have to either buy some more property (however small or far away) to keep your car, or pay someone to let you park your car on theirs.
Yes, agreed, but if you live in a major city that's already the case (or you drive around for an hour looking for a space, something the self-driving car could also do).
Right. And so my point is the expense and inconvenience of parking in cities is incentive for you to either (a) not buy a car, and instead use an on-demand (self-driving) rideshare service, or (b) buy a car, and recoup costs at little inconvenience by putting it into a self-driving rideshare pool.
The end result is fewer cars owned by fewer people, but utilized much more fully, so the cars that do exist in cities spend more of their time driving and in-service, rather than sitting parked and empty for 98% of their lifetimes.
A service will be able to keep cars near you, and will have sufficiently higher utilisation of their cars to be willing to pay more for parking spots. Your waiting time to get a taxi service will likely drop substantially at the same time as your waiting time to get picked up by a car you own is likely to go up.
As someone who doesn't own a car, the only potential appeal to me of owning a car is shorter waits and predictability (always there). If the predictabiity and waits drop for rental services, my reasons for considering buying a car would rapidly drop. If the waits to use a car I own go up, my reasons for considering buying one would drop further.
I find it shocking that something as simple as personal belongings would be a "lock in" to existing technology.
It's like saying "I prefer my horse, I can feed it grass off the side of the road, but you have to find some fancy petro-chemical station for your auto-mobile? Insane! My gas grows next to the road!"
I get it, but try to put yourself in the place of someone younger who doesn't make decisions like "I would never replace my car because I keep spare diapers there!"
>If "mobility" were so desirable, ZipCar would have taken off 10 years ago. The "mobility" market will be about the size of the taxi, bus, and train market.
This is very Bill Gates "no one would ever need more than ..." argument. Come on!!
ZipCar has literally nothing on the future of mobility.
You (and many people your age, conditioned from birth to place massive value on personal car ownership) may never move past that paradigm. You might go to your grave in 50 years a proud owner of a vehicle in an era where almost no one owns.
I think, instead of sagely predicting failure, maybe try creativity, use that entrepreneurial mindset to solve future challenges.
You want to keep spare diapers nearby? Why not have a secure storage module in the vehicle, lets say the trunk can be split into 2 or 4 secure storage modules.
You order an autonomous electric vehicle to your location, ETA 5 minutes. You hit the "bring my secure storage container to my location" option, restricting the available pool of cars to meet your need to those close to your container, at a small additional fee.
Boom, the "insolvable" problem of personal storage in a vehicle is solved by commoditizing the storage and use the AI vehicle to transport it where you need.
I'm sure you could come up with a better solution if you tried.
It's not "personal belongings," it's "personal space." Hot-sheeting happens where sleeping space is extremely limited, like oil drilling camps, but it hasn't taken off among the general population, despite the fact that you only use your bed for around 1/3 of the day. People are willing to pay for their own beds and, frequently, their own apartments or houses, despite the fact that most of that space goes unused most of the time for someone with normal work and sleep schedules. Do you AirBnB your bed (at hourly rates)? Do you AirPantsAndT your clothes? Most people don't.
I doubt I'll last another 50 years, but I'll probably live long enough to see the end of the current robot taxi fad.
Conflating a home and a car is a bad argument. Homes have been required for hundreds of thousands of years. Shelter has been a human need since before humanity.
Cars have not been. The earliest proto-human sought shelter from a storm. They did not seek personalized shelter during transportation.
I don't like the argument at all, and I think it's a cop out, a slippery slope argument.
>Do you AirBnB your bed (at hourly rates)? Do you AirPantsAndT your clothes? Most people don't.
This is just a very feeble slippery slope that ignores the very real differences.
Yes, clothing and shelter have been humans needs for far longer than civilization itself.
Can you say the same for micro-space in a personal transport?
Were humans owning personal space inside of pack animals 10,000 years ago?
It's a bad argument. There's no slippery slope here. Homes and clothes are fundamentally different than cars.
You cannot live a civilized life without a home and clothes. You can live a civilized modern life without a car. Obviously we approach higher order needs differently than lower order.
> Conflating a home and a car is a bad argument. Homes have been required for hundreds of thousands of years. Shelter has been a human need since before humanity.
> Cars have not been. The earliest proto-human sought shelter from a storm. They did not seek personalized shelter during transportation.
Are you familiar with New World Economics' discussion of "really narrow streets"? One thing the author points out (in "Let's Take a Trip to an American Village") is that even in the 19th century, the US was very interested in what he calls "My Personal Means of Transportation" -- the fashionable thing to do was to have a carriage house, no matter how little you actually needed a carriage. I think you see less of this pattern elsewhere in the world (or else you just see less wealth; consider how "pedestrian" seldom has positive connotations and "equestrian" never has negative ones), but there's definitely an enthusiasm for personal transport in the US.
> Conflating a home and a car is a bad argument. Homes have been required for hundreds of thousands of years. Shelter has been a human need since before humanity.
The need for transportation is just as ancient as the need for shelter. Before cars, it was a horse, or camel, or a chariot, or something else on wheels.
I think you underestimate the strength of car culture, and the value people place in personal space (at least in the US).
And as with so many things, why can't these unnecessarily-competing worlds coexist?
There are millions of overly confident entrepreneurs rationalizing millions of wacky, over-engineered money-grabs and only a few of those ideas have strength to be so culturally and socially transformative as the world you describe. Is the end of car ownership one of those lofty ideas? I am not so sure.
Edit: and on a more personal level, I see ideas like that -- the end of ownership, whether it be cars, software, or land -- as an attack on individual ownership, so that moneyed interests can instead own everything and lease it to the peasants at their leisure (and profit). The world needs the opposite: to make ownership easier and less costly, and to restore the the increasingly-stratospheric costs of everything* down to levels that put ownership within reach of the common man. Not owning cars is just another step towards feudalism.
* As for how, there could be much to gain simply by analyzing the cost structure of stuff and stripping out unnecessary middlemen, expenses, and materials. Adopting a more restrained form of capitalism, like what one sees in tight-knit economic communities or in idealized small-business environments, could perhaps foster a business culture centered around balancing customer, employee, and shareholder value. The current system of only maximizing shareholder value creates much of the turmoil, unnecessary innovation, and naked profiteering we see today.
The problem with this is that there are multiple competing needs and desires here. People may have a desire for that personal space, but many will sacrifice those when it helps them meet other needs.
Yes, it's great to have personal space. But you know what? People sacrifice personal space for spending less money all the time. And for convenience.
Consider e.g. London - a city awash with money, where a lot of even people who could afford to be driven around by a personal chaffeur will opt for public transport for convenience.
As another example for London: People will opt to smell someones armpit on the train in the regular train carriages rather than pay a few pounds extra for a seat in the First Class carriages all the time. The value of personal space when travelling, as it turns out, is deemed by large parts of the public to be very low.
People tend to opt for personal space mainly when the public transit options are unusably bad compared to driving.
Places like London are perhaps the areas where this transition is most likely to start: Places where those who even own cars often own cars as a "contingency" for those times when the bus doesn't arrive or you're going somewhere odd that just doesn't work well with public transport currently.
In those cases, for a lot of people, it'd be very attractive to e.g. pay a membership fee to guarantee a certain level of "contention" for cars to be able to just press a button and have one arrive "fast enough". Even more so with the ability to do that on either end of a train ride. For a lot of people this will make a car pointless.
And in environments like this "personal space" is moot, as almost everyone are already used to using public transport some or most of the time.
At the same time, it is somewhere where local authorities are clamouring for ways to reduce parking and make car ownership less desirable. Expect housing units to start coming without parking spaces or with very few parking spaces in high density areas as cost saving measures, or because they'll sell some of those parking spaces to ride share companies, or make residents who want them buy them separately.
Expect planning rules to start reducing the maximum allowable number of parking spaces.
Places with plenty of space, sprawl and a strong culture of cars as independence will certainly experience this change last.
But consider e.g. the impact of a generation of youth who will eventually grow up with a situation where they may be able to rent a self-driving car on demand from before they are able to (afford to) buy one, and where e.g. parents may opt to just order a journey rather than driving them somewhere once old enough, and who will grow up increasingly likely to get used to some car taking them somewhere without needing to take the step to car ownership to get that freedom from parents driving them around. The "liberation" may become to be able to sign up for your own account so your parents can't see your every journey.
I think that the whole culture where car ownership is seen as a rite of passage and signifier of liberation from your parents could change far faster than you think.
Human extinction is definitely the future, eventually. Beyond that, I find it hard to make absolute statements about the future with no evidence or argument.
Some people just like owning cars. I live in San Francisco and don't currently own a car, but I want one. Perfect example where Uber fails - I can't take my dog anywhere.
Different people have different values. Also I'm quite young, so I don't think age is a strict delineation.
Having personal transportation, rather a horse, a bike, or a car, is pretty vital for a lot, if not most of us, here in the US.
Self driving shuttle services will be a great new way to transport us, especially in metro areas, but this won't work very far from the center of those so if the valuation of that market is too optimistic in regards to Tesla the holders of their stock will pay for it.
If you look at the number of US car companies that have started from scratch in the past 70 years you don't see many still standing (pretty close to none). Tesla has a very different model though so we can't lump them in with most all of the others.
In my own humble opinion, I think Tesla's fate will be decided by how fast they can produce a low end, very affordable and dependable car for the masses. If they can deliver that within the next 3-4 years they've got a very good shot at moving up to competing with Ford and GM.
If they instead try to compete with higher end cars they'll find that's a hard road to travel. At some point soon the big players will produce a car that's a competitive option and dilute their market and they'll die.
It's worth remembering that both Honda and Toyota captured market here with affordable dependable cars, not luxury cars. Those came quite a few years later.
I fully expect Tesla will produce an affordable car though, and it would make perfect sense if they called it a "Model T".
Yes I did point out that most Americans and many people are conditioned from birth to value car ownership, even when it's a poor financial decision.
"Perfect example where Uber fails - I can't take my dog anywhere
As I told the other guy: Stop predicting failure based on problems, put on your creator and builder hat, and solve the problem.
Why not have pet friendly vehicles available at a small charge, guaranteed clean?
It bothers me that these problems are so easy to solve and yet people are so willing to write off a future possible technology without so much as thinking through any of the solutions.
You seem very defensive. I was just pointing out that I don't own a car and live in the epicenter of the ride-sharing revolution, and I'd much rather go back to owning a car.
Regarding the dog, I'm just pointing out something that currently doesn't work for me. Until they fix it I don't care - right now their solution does not help me and nobody has done anything to address it.
My point is simple. Right now owning a car is better than not owning a car for me. Until that changes I will want to own a car. If you don't want to own a car then good for you - different people have different desires.
It's not "car ownership" that we value. It's autonomy and independence.
A teenager doesn't just "want a car." He wants that freedom that car gives him... to go somewhere without bugging his parents or friends for a ride. If you're in a big city or someplace where this is not the norm, I could see you believing otherwise.
(And I laughed at "guaranteed clean." Right. All that means is you get a refund when you find the dog turd in the back seat.)
"A teenager doesn't just "want a car." He wants that freedom that car gives him."
Precisely, and this is why owning the car isn't that important. This teenager presumably still has to pay for the car and fuel, or bug his parents for it. Paying for the (cheaper) self driving ride is no different.
I think that most people are hardwired from start to value ownership of things.
You might have noticed that people are hoarding a lot of stuff, that are of little value to them. It's probably an intrinsic value to most people to own things. It might vary a little between cultures, but it seems to be a common trait.
If you don't - great for you.
However. It might happen that you one day walk by a car on display in a mall, and notices the nice paint, a practical laptop holder, the particularly nice storage boxes for diapers and what not, and thinks to yourself - "I want that car."
>"You seem very defensive. I was just pointing out that I don't own a car and live in the epicenter of the ride-sharing revolution, and I'd much rather go back to owning a car."
And I was just pointing out that your personal experiences with today's ride sharing aren't relevant to a hypothetical discussion of an unrelated future transport technology.
I'm defensive because you're continually derailing a thread about futuretech to list your personal experiences with todaytech. I don't get why you derail this conversation to make it emotional and personal, so I get defensive about the track of the conversation of solving tomorrow's problems. Stop taking it personally, think bigger! Solve a problem!
Do you have any evidence that either of those will make money? I have evidence that pet friendly cars lose money - Uber used to have a program that catered towards dogs and they cancelled it because it lost money.
You haven't solved anything until you've demonstrated a working solution. If it were so easy to fix problems in the real world, politicians would have our economy constantly booming, there would be more jobs than people, and the Middle East would be the most peaceful place on Earth.
Anyway, I don't think we're going to agree on anything. I'm exiting this thread.
This 'switch from ownership to mobility'-buzz is one of the most overvalued ideas recently. Much like the Kindle was supposed to kill the book.
Why must some people see new inventions always as colossal destroyers of products they don't like instead of the more humble 'enriching ones freedom to choose'?
The kindle may not have killed the book, but it has made a massive dent in the paper-book market, despite substantial problems with e-books. It will likely continue to eat away at it.
If self-driving cars has as massive an impact on car ownership as e-books have had on the paper book market, that will be a dramatically noticeable change in most cities.
Exactly. I like knowing that there are extra diapers and a change of clothing for each kid in my car should I need them. I carry enough in to cover my current needs, but as anyone with kids known sometimes that isn't enough.
I know many people who keep golf clubs in their car because sometimes a salesman is looking to round out a 4-some. I like going to walmart/lowes... over lunch and leaving my treasures in my car.
Car sharing won't actually work out anyway because everyone needs their car during rush hour. Everyone is driving then anyway, and then the cars sit idle.
The car sharing won't cover everyone's needs and some people will stick to keeping their own car. I'd imagine people living in urban areas are more likely to use a car sharing service since it's uneconomical to own a car in most cities. I'd imagine the suburbs will be a mix of sharing and ownership. I can imagine a family having a car they keep for weekends or whenever the parents and kids need to go somewhere but they still use a car sharing service during the weekdays when mom takes the family car to work and dad need to get to work too.
I think you're exactly right. Once cars can drive themselves to destinations, it becomes so much easier to get by with one dedicated family car, supplemented with car sharing services.
For example:
Mom takes service to work, possibly carpooling. Dad takes uses family car to drop off kids and goes to work. Car drives itself to mom's work for her to use to pick up kids and commute home. Dad takes service home. Or whatever. The point is kids can always be in the car with the extra diapers, with safety features parents want, etc.
The other part of this that people ignore is that a car sharing service could open up a lot of flexibility. For example, maybe our dedicated family car is just a sedan, but on this particular weekend with the grandparents in town, we can use the car sharing service to get a minivan and have everyone ride together. Or I want to pick up a piece of furniture and request a truck from the service. Or it's my anniversary, and I can request a luxury sedan to drive us to the restaurant for a touch of opulence. I'm sure there are many other examples people can think of.
Like you say, car sharing won't cover everyone's need, especially at first, but eventually, the big players in the space will have enough sophistication to cover many cases, especially for a second car.
I think car sharing even works in those cases. It's all a logistical problem.
Not that there won't be some people who own cars. There just aren't that many problems that are hard to solve with car shares to outweigh the huge benefits.
car sharing works less well for getting to work because everyone else is trying to get to work then. You may as well own your own car for getting to work because you pay for all the costs anyway. All car sharing buys you is fixed maintenance costs on your car.
Car sharing starts to make sense when you want the car outside of rush hour. Want to go to the store for an hour at 2:30, no problem there are plenty of cars free. Want to get to work every day - you are paying peak rates for a car that will probably be used exactly twice that day, once to get you to work and once to get you home.
"Rush hour" is actually a pretty long distribution of time compared to the average length of a person's commute. I imagine just considering commuting, you could likely get close to half the amount of cars required with car-sharing, since you may get in at 7:30 and I may get in at 9:00. And you could provide good price incentives to convince people to mix up their commute times a bit. I already know people who push their times significantly to avoid traffic just due to the stress aspect.
I think it comes down to cost. Its only effective in very dense areas. For example, right now I'm on an established commuter rail line going from downtown to a suburb. I'm paying $12 round trip to travel 60 miles total. It's just barely cheaper than driving (not including parking expenses).
At this point in time, I think it's wise to avoid laying costly new tracks with the dawn of driverless cars on the horizon.
I think there are physical reasons why driverless cars will never be as good as trains: they're rubber-on-asphalt instead of steel-on-steel, and you need a lot more engines, space, and transportation of dead weight per unit of people moved -- and they'll probably still need parking, too. As near as I can tell, driverless cars are horseless-carriage thinking... but trains have no element of novelty to them.
Driverless cars can take you between train stations and destinations. No magical form of train will come to your house or go to your office.
In fact, this is a perfect use case for driverless cars. The problem with trains everywhere is the wasted time not on the train and the million stops along the way.
Ultimately I think driverless technology can revolutionarise high density public transport too:
It gives us exactingly detailed information on what journeys people need. The dataset will be immensely valuable in allowing the companies that sit on them to first start doing quasi-bus services:
Order a bunch of minibuses. During peak hours, offer an option: Wait for the next dedicated car to be free, or ride share with quicker availability and a discount. Limit detours strictly - there'll be plenty of "Follow road X and pick up 6 people on the way to station Y" type stretches that will make people happy (little time lost; feels efficient if there's not lots of turning off).
Then you can see them partnering with bus providers to dynamically fill in during peak hours, or even bidding for bus franchises and proposing contract changes that would allow for more dynamic, demand-based scheduling.
Ultimately this can feed into planning train type services - companies offering these type of drive share will be able to e.g. let people order "end to end" journeys of the type "pick me up at address 1, get me to address 2" where they show journey options that include rail when it makes sense. The key beying that if they do so, they will know the entire desired journey, and would be able to offer insight into the most efficient interchange locations or other changes to train services would be most desirable.
I really want to be in the business of writing the software that plans these things. The possibilities are crazy. Predicting where to have cars based on overall traffic flows, having cars ready for individuals who always leave at the same time. Think, a car is 30 seconds away every time you follow your routine. That's faster than getting into and starting your own car! Especially if you have a parking garage.
If you're predictable enough, it might be worth it to simply arrive a minute or two ahead of schedule.
The raving reviews you'd get the first times people order a car and are told instantly "your car is already waiting right outside your door" would be rather interesting.
Get in, and your favorite radio station or music is playing.
And for colder climates: Your car is already pre-heated. I remember too many winter mornings during winter in Norway when even ensuring our car would actually start in the morning was an annoyance (even with a garage, space heaters in the garage or motor heaters is sometimes necessary).
> No magical form of train will come to your house or go to your office.
Yes they will; the magic trains you're thinking of are called streetcars. And, with the oddities in oil and the difficulties of maintaining suburbia, we'll be moving back to dense streetcar suburbs soon enough.
Even buses don't take you door to door. I can't imagine a future where a streetcar is anywhere near as good as self driving cars (possibly paired with mass transit).
Are you familiar with streetcar suburbs? They'd have a streetcar running along a commercial street, with residential streets branching off from it; typically one would have a walk of a few blocks from streetcar stop to house. I don't know if a return to that pattern is the future I expect, but it's certainly the one I'm hoping for.
That is only true if the costs of the return trip is free: it isn't. When the car for the guy who arrives downtown at 7am goes back to the suburbs to get the guy who wants to arrive at 8am it is burning nearly as much fuel as it did getting in, and putting just as much wear on the car. The effect is shared cars are more expensive than just a car per person. (Note, this does not account for cost of parking which is a significant factor)
Car sharing (if self-driven) does provide an additional perk--time and money saved trying to find a place to park and paying for that parking. In addition, people turning into parking lots/garages (or worse parallel parking) interrupt the flow of traffic, making congestion worse. There's also many other potential improvements that self-driving cars could use to reduce congestion (faster speeds, reaction times, communication between cars, etc) and greatly lessen the commute during peak times
"Diapers" is just a synecdoche for parenting equipment: diapers, wipes, books, snacks for older kids, extra changes of clothing, etc.
Car seats will be a bigger problem: they are unwieldy, legally mandated, and require careful installation to be effective. Unlike diapers, even the small boosters used for older children can't fit in a shoulder bag.
A young couple expecting to have children in the next few years might balk at these inconveniences, and that could depress adoption of the 'mobility' model. You have to keep prospective purchasers in mind, who are evaluating their needs over the use-life of a car.
I think you are generally right about a primary/family car, but less so for a second, commuter car. I think this mainly hinges around making the self-driving technology safe, reliable and cheap (that is, cheaper than owning a car currently). I think taxis would be used more if they were significantly cheaper. Buses and trains have extra delays for stops, and you may still have to walk/bike after you get off. Having a cheap transportation option once you get off the train would probably increase train ridership as well, and decrease congestion during peak hours (at least for the major freeways, it may increase it some on roads closer to the train station)
Trains should be faster than cars in dense urban environments (if you are close to the station), e.g. London Euston to Watford 19miles 15-20mins by train 32mins by car (outside rush hour).
Although you do have to enter the station ~5 mins before the train leaves (allowing time to get through the ticket barrier, walk to the platform, board the train), plus exiting at the other end. My train gets into London Bridge in the morning at :32 but I don't get to the street until :36 because of the sheer volume of people. It seems minor, but it does all add up. That said, in rush hour there's no contest - that same journey would take 1 hour+.
Poor people might take "the robocab from hell", but just as I don't order "the humancab from hell" now, but order from the slightly more upscale "clean, air-conditioned high end sedan with blacked out windows and wifi" for just a slightly higher fee, people who earn more will still have alternatives, yet will still benefit from the cost reductions.
The difference being that poor people will have the "robocab from hell" alternative rather than have nothing they can afford, and that more people will afford said high end sedan when it's self-driving, and will be able to justify it more often, and more people will afford to trade up to even more luxurious services.
There is already a marked class difference in commuting in London: Low paid people take the bus four two hours+ for commutes that'd take less than half that if they could afford the train from the outer fare zones (bus-rides cost the same within the entire London fares area), so transport is already today segregated by income. A lot of the longer bus lines makes no apparent sense until you realise that low paid people often can't afford the train, or a car.
>Simply get 10% of mobility and 10% of electricity storage and they'll have justified well above their current valuation.
Please show your math.
>Tesla will basically take the market from coal and petroleum.
And you base this off, what, exactly?
Sometimes I think that half of HackerNews didn't even know solar or battery backups were a thing before Tesla. These are competitive spaces where Tesla has essentially no market share (just like cars).
I think Tesla will be successful, but I doubt they end up market leader in any of these things.
> Sometimes I think that half of HackerNews didn't even know solar or battery backups were a thing before Tesla. These are competitive spaces where Tesla has essentially no market share (just like cars).
I'm genuinely curious if the numbers reported by SolarCity represent the full picture. [1] shows SolarCity with ~35% national marketshare while the closest competitor is at just over 10% (Vivint). This was in 2015, but it still appears to have a significant lead.
Battery backups were several times higher before Tesla. Just looking at the South Australia proposed battery, Tesla's offer of $250/kWh is about a third of other bids for storage, from what I can tell.
> CO2 capture is an area of active research and it's entirely possible that advances there will make Tesla and Solar City moot.
I don't know how likely that is. Even if carbon capture comes through, the low hanging fruit of fossil fuels are gone so now we have to get more invasive in harvesting the hard-to-get ones (strip mining, fracking, etc). It's likely that even with C02 emissions taken care of that we'll want electric vehicles and renewable power in general.
I mean capture of CO2 from the air and conversion into a fuel that can be used. Something along the lines of algal farms that soak up sunlight and CO2 from the air and excrete alcohol. Combining solar and the CO2 that has already been released into a liquid fuel suitable for a variety of uses. We could cease raw material extraction entirely.
Seems inefficient. Fossil Fuels work today because you just suck them out of the ground and ta-da! free energy when you burn it. If you have to pump enormous energy into harvesting the carbon so you can burn it and re-harvest it, why not just put that energy straight into the car and cut out the carbon entirely?
The battery is the thing that makes an electric car "expensive" today, but it's following a consistent downward price curve. In ~5-7 years, it will cost more to make an ICE car than an EV car, and then ICE dies. Simple as that.
> If you have to pump enormous energy into harvesting the carbon so you can burn it and re-harvest it, why not just put that energy straight into the car and cut out the carbon entirely?
Energy density. Jet fuel has about 25x the energy per kg as the best lithium batteries. Perhaps batteries will be able to match carbon fuels some day, but it's a long way off.
Or maybe there will be a breakthrough in battery tech and in five years we all drive Teslas.
CCS + Power2Gas + synthetic fuel is unlikely to be cost competitive. It's not like climate scientists don't consider that option. In fact the only half way plausible scenarios for reaching the two degree target involve going carbon negative after 2050. And synthetic fossil fuels are probably the only way to make airtravel carbon neutral.
Full de-carbonisation requires a multi-pronged approach, and cars are at a point where electric vehicles are already very close to conventional vehicles. Within a factor of two or three for range, so totally sufficient for most needs, and not much more expensive. It's one of the better options we have to de-carbonize a huge sector. Second only to the energy production sector itself.
Compare to food production which looks absolutely hopeless (the two degree pathways often assume we manage to implement massive dietary changes see e.g. here http://tool.globalcalculator.org )
Even if CO2 to petroleum were 100% efficient, you're still throwing away 70+% of the energy by burning it in an ICE rather than putting it in a battery as electricity.
Any likely method of CO2 to petroleum is likely to be below 50%, more like 15-30% efficient. Round-trip efficiency an entire order of magnitude worse than battery. That's why batteries are better for ground-based applications and will remain so.
I'm honestly not sure the assumptions underlying your comment. Solar cell to battery is pretty inefficient at the moment with the best solar cells converting 26% of the solar energy hitting the cell into electricity and the charge-discharge efficiency of li ion cells is 80-90%. The ultimate amount of energy delivered is less than 30%.
Regardless, if any of the biological/algal methods of CO2 to fuel techniques become successful, why would we care if 5%, 50%, 100% of the solar energy received makes its way to the end product. It's basically free energy at that point. The only thing that would matter is real estate to house the facilities.
Round-trip electricity efficiency is what I was referring to, assuming you'd use electricity in both cases. If you have to synthesize fuel using electricity and then burn it to produce either movement (shaft-power) or electricity, the efficiency is on the order of 10%. Whereas for batteries, the efficiency is on the order of 80-90%.
Effective CO2 capture might cause governments to not mandate a certain number of electric vehicles or provide tax credits for buyers or impose a carbon tax, but if electric vehicles are better and (eventually) cheaper to manufacture than gas vehicles, then people might still prefer electric to gas even without environmental motivation.
I think in a few years we will talk about how in 2017 people based their investment on the idea, that one company will win in not one, but in two already saturated markets, competing against companies with hundreds of thousands of employees.
I'm far from convinced that the people buying 40,000 Ford F150s every 3 weeks are doing it for mobility and they're just dying to take a "taxi" everywhere instead.
Will they though? Traditional car makers are not ignoring renewables by any means.
From article:
> Dozens of other companies around the world have battery-powered cars on the market, and more are in development. Investors “act as if Tesla has some sort of patented product that cannot be replicated,” said Dave Sullivan, an analyst at researcher AutoPacific Inc.
> “By the end of this decade, there’s going to be some significant choice for consumers looking for an electric vehicle,” he said, calling Tesla’s valuation outpacing Ford’s “mind boggling.”
I get that that is the vision, and 10% of mobility or electricity would justify their valuation. I'm just not buying that they are going to achieve either. In fact, I'm of the opinion that they won't even exist as an independent company in five years time.
except ford is spending an order of magnitude more than tesla. it's much easier to spend 100 dollars meaningfully than a 100 billion. I also hope you're willing to level the same charge at Google and Apple.
It is like comparing a spunky startup to an entrenched corporation. Ya, IBM once spent more than Facebook, but Facebook was worth more because it had potential while IBM didn't.
Ford doesn't have any good ideas for the future, they are too busy with the here and now and haven't shown an ability to do anything but incremental improvements with their R&D spending. Like we don't expect much more from IBM, we don't expect much more from Ford, but we do from Tesla.
> Ford doesn't have any good ideas for the future, they are too busy with the here and now
according to who? your average HN reader who basically hates cars? yeah, sure. the guy who hates cars is bearish on ford, shocking.
what about all the people buying raptors and gt350s and fgts and fists and fosts, hand over fist?
do you even know what i'm talking about? do these insanely popular cars even register on your radar?
it sounds like you're not-a-car-guy-but-a-tech-guy which makes up for a huge portion of tesla fans. and you're exposed when you make shit up like "ford doesn't innovate" or whatever your thesis is.
signed,
-not even a ford guy. porsche, there is no substitute.
For what it's worth I'm a (European) tech-guy who would love to buy a Ford Focus RS, the only issue is that I don't have the financial means to do that. And I also love their Ranger line, both the new one and the one from the late '90s - early 2000s, whose models are cheaper than the Hilux and whose engines are just as reliable (the only issue seems to be rust, which inevitably sets in after 250-300,000km).
I will also avoid buying a car connected to the Internet/which has a tablet-like dashboard for as long as I could, and I say that as a guy who has done web-programming for the last 10+ years.
The kind of people who buy raptors and gt350s are a tiny fraction of the market compared to the people who just want to get to work. Tesla isn't interested in car enthusiasts, they want to be the default answer to the question "How do I get from point A to point B for $1?"
OK, sure, the picture becomes a lot more complex if we want to talk about international markets. Anyway the car I see in the Tesla showroom does not say "car for practical people who just want to get from point A and point B." The article claims they're selling to the kind of people who would normally buy a Porsche.
Beijing has a lot of Tesla Model S's these days, up from virtually nil a few years ago. Chalk it up to Beijing separating the plate lottery for EVs, and the people that normally buy Audi aren't going to buy a Chinese EV.
I just bought an Acura ILX this year and I really like it (despite the reviews that it is just a luxury Civic), and I never even considered buying a Tesla.
People misunderstand post car like post PC: it doesn't mean the market is going away, but merely that it is no longer growing. Therefore, WYSIWIG on earnings, because they aren't going to change dramatically. Ya, Ford might have record earnings that are slightly more than last year, but no one sees them doubling before inflation makes that happen naturally.
> do you even know what i'm talking about? do these insanely popular cars even register on your radar?
I have to admit, I prefer Japanese cars and would never consider buying an American brand. I found them unreliable in the past, and got burned more often than not. But I still don't see the Japanese companies pulling a Tesla in the future, they are fairly stable companies with stable market share and profits. They don't change the game.
> -not even a ford guy. porsche, there is no substitute.
German cars break down too much. Ya, you can get one, but after the warranty is up, you are toast. Better to lease instead.
india and africa will be china in 20 years. this is the market that tesla is fighting for a fraction of, not the other way around. you're out of your mind.
people like cars. people will spend an irrational amount of money on their cars. they don't give a shit if it pollutes, or kills people, or doesn't because it drives itself sometimes. the trends show this, decade after decade. guess what? teslas pollute also. how many tons of CO2 was emitted extracting all of the rare earths and other super toxic shit that makes a tesla?
i'm sure tesla will be super successful. the rest of the brands aren't going anywhere either. and toyota was the first tesla. look at the prius figures. someone will do it again with electric cars. it won't just be tesla. you can't be serious if you think that.
Every year is potentially a record breaking year for profits. That's how inflation works!
India and Africa are going to buy Fords?
China has been really nice to Ford, it has kept them afloat while the American market tanked at home, BUT let's not delude ourselves about how Chinese JVs work. Also, China has some weird tax games going on, so its not clear where demand will eventually settle (disclaimer, I lived in Beijing for most of 2016). Other countries have and will follow similar home-grown biases.
You seem to have a bullish outlook on Ford, I don't know. I don't see them as a tech company, they make cars, they always have and always will, nothing will change for them. They aren't aiming for a shot at more greatness than they already have.
> Every year is potentially a record breaking year for profits. That's how inflation works!
do yourself a favor and never own or run a business. record breaking numbers do not happen by accident or because of inflation. you have a fundamental misunderstanding of what is actually going on here.
the analogy you are looking for is "right before the car showed up the record sales of horses looked unstoppable." but you're not putting the pieces together in a coherent manner.
also, ford will make whatever the car is. doesn't matter if it's electric or gas or diesel or bio.
What is this based on? Ford has had record profits over the past few years and has continually improved their vehicles and manufacturing processes, including remaking two assembly plants to make aluminum body F 150s. They also invested a billion dollars in Arvo AI and are making aggressive moves into self driving technology.
Ford's P/E ratio is 9.89.
IBM's P/E ratio is 14.02.
Facebook's P/E ratio is 40.79.
Tesla's P/E ratio is infinity since the E is negative.
I'm sure Ford has done many incremental innovations, I didn't say they didn't. IBM does the same thing, and has "record profits" every few years also. Its just the market isn't expecting the next big thing to come from Ford, while they are expecting that from Tesla.
If you think the market is wrong or too irrational, you can make a killing by shorting Tesla and buying cheap Ford stock.
I don't really like the analogy for several reasons, but what's wrong with IBM? Have you looked at their share price over the past 12 months? As of today, IBM is trading at around $164 billion market cap and paying out a dividend of over 3%. I'd say that's pretty good.
I don't short stocks because I don't believe in trying to time the market. I actually think Tesla could move well north of where it is currently trading. Not because I think they are going to grow to justify the valuation, but because I think lots of people will look at the $45 billion valuation and will incorrectly compare it to Amazon, Facebook (as you just did), Alphabet, and Apple and think $45 billion is low.
However I am long Ford. In fact it comprises the largest percentage of my personal portfolio. I continue to add more to it with every drop and just added more a few days ago. While the value has been dropping over the past couple of years, I've been collecting healthy dividends along the way ($F pays out now over a 5% yield), and am happy to sit and wait to see how long people will wait for Tesla to move beyond a niche auto maker and into the mainstream market.
Edit: One other point- this recent run-up is attributable to Tesla delivering more cars this quarter than expected, not because they just unveiled some new technology the market wasn't previously aware of. TSLA has been extremely volatile whether you've been long or short over the past 2-3 years. All it takes is one missed earnings report and it'll send this stock down at least 25%.
In general people who invest in stock are people who work at big financial institutions. Not 'regular' people trading on their own. For individuals, picking stock in stead of just buying accross the board is really risky. So it doesn't matter what 'lots of people' think, really.
The only thing happening now is that investors seem to be extremely worried of 'missing the boat' on automated driving. See the big investment in Uber, a taxi company with an app that essentially anyone can copy. But they raised billions on the promise of automated driving.
The only thing here is the idea that the organisation that perfects automated driving first will dominate every transport sector. That seems far fetched to me though.
But hey, I'm just a regular person too. So maybe I'm dead wrong.
Tesla is RISKY: it is a bigger gamble, higher volatility, higher upside if it works out, bigger chance of it going completely bust. Put Tesla in your portfolio if you want to add some risk to it. You want stability with a healthy dividend? Well, add some Ford to it.
Shorting is the way you capitalize on a stock that you think is overvalued. It is an advanced maneuver but can be done for the long term as well.
IBM...man, IBM is a tech company that got rid of most of its R&D to focus on consulting and accounting tricks. But ignoring that, IBM has a huge R&D division but has been unable to come up with any breakthroughs for quite some time now, it is the canonical mature tech company that isn't going to have rapid growth like a startup.
If you're looking for other stable tech-sector companies (mostly supplying corporate infrastructure), FICO and PEGA are good examples; so is Microsoft, for that matter. But why look for them? (They're S&P 500 components with solid dividends, so maybe that's answer enough.)
Sorry I guess. I couldn't find Tesla's P/E ratio on Google like I could for the other companies. It is my understanding that they don't report P/E ratios for companies with negative earnings.
And it makes sense: a high P/E ratio indicates high potential. The lower the earnings, the higher the P/E ratio. But if earnings went negative, then the P/E ratio would automatically go negative (since that is how math works, as you say). So if my stock price is $100, and I earn $1, my P/E ratio is 100...so much potential! If I accidentally lost a dollar instead, my P/E ratio automatically becomes -100 even though not much changed in my earnings.
The interesting thing is that as soon as you go negative, a larger negative P/E is better than a smaller negative P/E, and it's really wonky at earnings close to 0.
Don't try to short Tesla! Shorting depends on the short-term trajectory of the stock after you borrow it, and Tesla's being bought like mad by people who've put their faith in St. Elon, so this is a great way to lose your money.
The likely long-term outcome is for Tesla to be bought out for a pittance (maybe $20-$30 a share? $10 would be surprisingly low, $50 surprisingly high), by a mature automaker interested in the marque; in the meantime, the way to make money off Tesla is to realize that all the people who are zealously pumping their money into Tesla are leaving everything else under-valued.
An aluminum body is exactly the kind of iteration that was being talked about. It is neat, but its not and all new drive train on a totally different tech. Aluminium is a pretty well understood material, while self driving cars are virgin territory.
Tesla is making larger swings and potentially accepting larger risk. Ford is... iterating.
What innovation is Tesla making? Electric cars are not new. In fact the first production car to reach 60mph back in the day was electric. Aluminum in a production car is a lot more innovative that an electric car. (li batteries in a production car though is innovative)
The dunning kruger effect is super prominent in the tech community's discussions of Tesla.
Plenty of other manufactures are doing innovative things with automation, technology, etc. Not to mention most of them can build a higher quality interior/driver experience for far less than what Tesla wants for a Model S
It's 2017 and a $60,000 Audi still won't let you start it up remotely from your phone and run the heater/AC so it's comfortable by the time you leave your house.
Seems like the most basic, obvious, easy to implement feature but they still can't manage it. Apparently because it's "illegal in Germany" to have a car running without an operator behind the wheel. What a joke.
At work I'm parked down the street from the car so the key fob wouldn't reach. But that's beside the point; you can't even do it from the key fob today on a new Audi.
I can do it on a 15 year old chevy impala. I have a hunch that fernstart is verboten in europa because it is a waste of fuel (and emissions.) They have webasto heaters and parked ventilation instead. Aren't all these cars stop/start now?
Electric cars aren't new... if you really want to compare modern vehicles to those it pile batteries. When the roadster came out there was nothing like it.
Electric vehicles prior to the Telsas where research projects and low torque ultralight budget vehicles. Listing the differences between a Telsa and its closest successor, if you could pick one is not an easy task. Listing the difference between an F-150 and and F-150 with and aluminum was already done this sentence the hardest part was spelling aluminum.
You can pick an threshold for choosing what is evolution and revolution, I am just trying to choose a reasonable one.
IIRC, here in sand-land (AZ) you can drive solo in our OHV lanes with a vehicle that has less than four wheels (mainly motorcycles - but if you have the cash for one of those nice 3-wheeled "cars", you're still good).
I wonder if Tesla is contemplating building and selling a half-ton pickup truck to compete against Ford's F-150 (and others)?
That's what I'm kinda waiting for - I don't want a car; I like having a pickup. Ideally, it would be 4WD (and my next pickup will be - right now my off-road vehicle is an Isuzu VehiCROSS that I'm pouring money into). I would love it if my next pickup truck was a self-driving, off-road, 4WD electric beast.
But I don't see that happening any time soon - at least not before I get to the point of replacing my current truck.
Being innovative at small details of existing concepts isn't likely to produce huge gains in stock value, as opposed to being innovative at entire categories of new industry- and infrastructure-disrupting products. Ford does the former, Tesla does the latter, and the market is valuing them accordingly.
The market could be wrong, Tesla could fail to achieve their vision, Ford and other existing big companies could somehow turn themselves into organizations that aggressively pursue ambitious new visions.. but the market is betting not. You're welcome to make an opposing bet.
>Tesla does the latter, and the market is valuing them accordingly.
Suddenly we believe in a rational market when it comes to Tesla? Everytime I ask basic valuation questions in these threads, I get touchy-feely answers about "potential". And HackerNews is supposed to be a data/tech place. Imagine what average Joe thinks?
> The market could be wrong, Tesla could fail to achieve their vision, Ford and other existing big companies could somehow turn themselves into organizations that aggressively pursue ambitious new visions.. but the market is betting not. You're welcome to make an opposing bet.
I don't know about 'we', but I don't believe in an irrational market - the market may well be wrong, but it's not usually wrong for unreasonable reasons. And potential is all investors ever care about: they're looking to put their money where it has the most potential to turn into more money. Predicting the future is necessarily uncertain and involves ambiguous judgment; you can call that touchy-feely if you want to be dismissive, but there is no such thing as data on things that haven't happened yet.
We could quibble about the meaning of "irrational", but I do agree that markets can be mistaken for longer than most people can financially back their conviction that it's mistaken.
In the case of Tesla vs Ford, there is probably a sense in which the longer the market is 'irrationally' convinced of the value of Tesla, the less irrational it actually is - it's a bet on Tesla's viability and vision, and the longer it seems like a good bet to most people, the more likely it is that it is a rational bet to have made.
Maybe that's part of it. I'm sure another part of it is that Ford is already big enough, that there isn't a lot of growth potential there.
That said, it's not like they are exactly just making small refinements to gasoline engines, while SV companies are the only real innovators, chasing electric and self-serving vehicles. We just tend not to talk about it as much on HN (compared to Tesla, for example):
Ford doesn't have much room to grow because they are a mature company in a mature field. Tesla is creating new fields. Ford doesn't know how to create new fields, therefore they're stuck making small improvements to existing things, and, once someone like Tesla makes it very clear that a new field exists and is viable, Ford will reluctantly follow the market trend.
Ford does normal science [0], Tesla does revolutionary science [1].
Pretty much everyone who wants a Ford has one, or could buy one. There's not a lot of growth left for Ford. Their only hope is to steal a few customers from the other automakers, but those other automakers will steal a few back. It's unlikely that large numbers of people who don't currently own a Ford are going to buy one any time soon.
Tesla on the other hand, has millions of potential customers who would and will buy one once they become a little more affordable and the charging infrastructure becomes more built out. We already saw how fast the pre-sales for the Model 3 went. And that was just people who were willing to put down money on a car that wasn't even available yet.
It's not just about innovation or not. Tesla has a lot of room left to grow. Ford is about as big as it's ever going to get.
> Pretty much everyone who wants a Ford has one, or could buy one.
Yeah but it's not like people buy one car, and never buy one again. Ford sells over 800,000 units of just the F150 every single year.
Now it's true that they don't have as much potential for growth because they've reached a sort of stable place in the market. Maybe sales can grow a few percentage points year over year but Ford is unlikely to jump by 20% the way Tesla can.
But that's not really saying much as Ford is a mature company with a complete lineup and Tesla is only on its 4th model of car.
I don't understand this argument. Tesla is currently trading at a higher valuation than Ford. Ford has saturated the North American market. Tesla could eventually grow to saturate the North American market but is just a fledgling auto maker right now full of potential but not many sales.
But they are already trading at a higher valuation than Ford.
So unless you think that Tesla can command much higher margins than Ford does, then shouldn't Tesla only trade at a similar valuation when they are making similar amounts of cash?
Ford also signed a deal with Blackberry's automotive division and will be making their own software platform based on QNX.
Sounds like they may be trying to compete with Android, Apple, and Tesla on the software side. And QNX has a good microkernel architecture for an automotive OS.
Sorry but this is like Nokia saying they are spending all this money to make their phones and manufacturing processes awesome, all the while when a iPhone is getting designed somewhere.
Incremental changes is what most senior management folks at places like Ford can do because that is what they teach at MBA schools using linear growth graphs.
Self driving tech is really novelty thing now. And nobody expects it to work anytime soon.
The real deal now is mind-blowing battery tech. Batteries that are rugged, can charge quickly and a car that can give a big range on a charge.
Meanwhile talking of how efficiently somebody can build an ICE based car is really like someone talking about how quickly they can produce horse carriages. Doesn't really matter because that disruption is happening else where.
That all sounds good in theory, but where are the numbers to back it up?
Apple was making billions in profit on the iPhone at launch. Tesla has never made a profit and sold 70k vehicles last year. Companies like Ford and GM have huge numbers of loyal customers and move millions of vehicles a year and quite profitably. So while it sounds great to pretend that the automobile industry is dying and Tesla is capturing their market share by sheer innovation, the numbers tell a different story.
It's based on nothing other than the weird contempt you see for large, established corporations in the SV crowd. Big established corporation = big established rule book and management hierarchy = stifled innovation. Nevermind the fact that most of the major technological breakthroughs of the past 100 years were developed by the research wings of big corporations (Bell Labs, defense contractors).
I'm not the parent poster, but I'd offer one reason why some people feel this way - Ford is a car company, while Tesla is a software company. Big difference in expectations, capital expenditures, etc.
Based on committed capital, I think this is at least partially correct.
If Tesla is a 'software company', the last thing I'd ever want to do is buy a car from them.
As anyone who has every used software will attest to: Most of the time, we can count our lucky stars if our commercial software 'works' for a year and a half.
Cue all the: "If Microsoft/Apple/Google/Facebook/Snapchat made cars" jokes.
I'm kinda with @iamatworknow on this, too (thus right there with ya too).
I've contemplated the idea of my next pickup being a commercial vehicle, if I can get one (as a single unit and not a fleet sale) - which I probably won't be able to, but I can dream.
It seems like that's the only way (except for going used) that I'm going to be able to get what I want: A standard-cab, short-bed pickup, ideally 4WD.
I don't have kids, and won't have kids. I have no need for four doors and an extended cab. I don't need a long bed. I want a short wheelbase. So far, it's either buy a used pickup (back when they made and sold these kinds of trucks) or go with a commercial vehicle (where you can still sometimes find them - sometimes).
The other perk about a commercial version is that they are stripped down to the bone. Nothing fancy in the cab, just the bare basics for a radio, cloth interior, non-electric controls for windows and seats. Basically, eliminate all the fru-fru stuff to make that much more reliable for work-based usage.
In other words, I want a truck to be a truck - not some fancy "I only go to the mall to show off" substitute for a minivan. Add in some basic 4WD with manual hubs (again - nothing to break) - and there ya go. That's my dream truck (ok - if there were a Raptor version of it that'd be nice, too - but I can't afford that, so who really cares).
I actually had very similar thoughts on the pickup truck market when I was last looking for a new vehicle. I thought maybe a small pickup because I live in rough winter territory so the ruggedness, ground clearance, and 4WD would be good. Plus if I move homes soon like I plan to, it would be cheaper to just rent a trailer than a U-Haul for my one bedroom apartment worth of stuff.
But you're right -- there are no Chevy S10 or Ford Ranger type pickups anymore. The closest you'll find is probably the Toyota Tacoma, which has more than I would want or need.
So I just got another Corolla. It does have some fancy features I enjoy, but luckily they aren't reliant on the internet to function. And it's cheap.
Definitely agree with you there. We're already seeing some of the more unpleasant idiosyncrasies of the software world with Tesla.
I, for one, kinda like driving a car that doesn't require an internet connection, doesn't have forced OTA updates, doesn't send analytics data back to base, and won't potentially be bricked if someday the manufacturer goes out of business. Other manufactuers are starting to do the same thing but I'm going to enjoy my "dumb car" for as long as it lasts. Hopefully when fully electric vehicles become more mainstream and affordable there will still be an option to get a "dumb" version.
> Ford is a car company, while Tesla is a software company.
How? Uber has passed as a software company by making its drivers pay for capital and depreciation. Tesla currently sells physical cars to individual people. They may be aiming for "self-driving," but if they ever get there, there's still the question of who pays to build and maintain the cars. Compared to that, the value of the controlling software seems fairly small.
"Ford doesn't have any good ideas for the future..."
I think you just don't read about it because you don't care about Ford, but you read about it for Tesla. And it's not entirely your fault; there is definitely publication bias as well.
Truth. I sat down with Ford exec group last week (Fontinalis is an investor in the company I work for) and they explained all their ideas. Most of them are excellent, very few of them are related directly to cars, and I don't expect they will start talking about them for quite some time. Long Ford. :)
On on side, Ford, and most other companies in the automobile industry, are big corporation. The bigger it gets, the more difficult it is to change. And all the sub-contracting done in the industry might lead to even more difficulties to move things around.
However changing from petrol to electricity doesn't seem to be a drastic change. An important part of car making is changed (engine and energy), but it's not a radical shift (the rest of the car is still the same).
Today, Tesla represents a very small fraction of the number of cars produced in the world. There are still quite expensive, even Model 3, and there are not as convenient as current gas cars (long recharge time and lower autonomy). EV are definitely interesting but they are still in their infancy.
It's still to early for big car markers to shift completely. But the shift will come in 5 to 10 years, then it will be an interesting moment, we will see which companies have prepared enough to jump in the good wagon, and which companies will die.
As a side note, cars, either gas or electric have always amazed me, and not in a good way, from an energy and ecology standpoint. A 1500Kg vehicle to move on average 1.5 persons or 120Kg seems a huge waste of energy.
I do see their usefulness in low density environments such as rural areas as it's a system that doesn't require a complex infrastructure. But in dense environments like cities, transports needs could be far more efficiently provided by public transport and coherent urban planning. I truly hope that cars will not be as common in the second half of the XXI century as there are today.
Also ford is investing in on-demand shuttles service, offered at low cost, and expanding to 8 cities this year. Executed well this could become very popular.
Ford bet $1 billion on Argo.ai to build self-driving cars, and they also acquired Chariot. They are planning on using these to roll out self-driving vans in 2021 to compete with Uber, Lyft, etc.
> it's much easier to spend 100 dollars meaningfully than a 100 billion
Is that true? $100 is such a small amount of money that you're completely at the mercy of the supply chain. When you have $100B to spend, you are the supply chain (or at least a major part of it). Big money always makes the rules. They're either making money off of you now or planning to in the future.
Now you might say, "but wait, plenty of products/companies have done poorly because I wouldn't give them that $100." But that's not true. In reality, product success is always in terms of big money -- it's just spread out over enough consumers who individually have the $100 buy/don't-buy option.
Another objection: "yeah, but I always hear about big money wasting $30M (for example) on something stupid." Maybe so, but remember the scale. $30M waste on $100B is the same as $0.03 on $100. Moreover, the stupid thing they're wasting money on may not be that stupid -- you just might not be privy to all the details.
All that may sound like it's bad, but I think it's pretty great system. I sell my products at a markup to get small money, then have the discretion to buy or not buy somebody else's stuff with the money I made. En masse, I form a part of the "big money" consumer group at Home Depot, Amazon, etc. that has power over the more centralized big money.
You're talking about power, oculusthrift is talking about capacity. Of course big money has the power. But spending that big money in a non-wasteful way is a very hard job. What would you do if you were the head of Ford and had $100B to spend? Build more plants to manufacture more cars? You won't have who to sell them to. Easiest way out is to buy other companies, which is what big money usually do.
Well if we're going to be making generic claims I'll just add my own anecdotal observation: I notice Teslas all the time in Portland now. They are easy to spot and it brings a smile to my face. On the other hand Fords tend to blend into the background, save for occasional jacked-up F-150 or maybe a spiffy Mustang.
It's not a generic claim at all, and not surprising a town like Portland has a number of Teslas.
Tesla ships nowhere near as many cars as Ford. Doesn't matter what you may see locally or what "blends in", but there is nothing generic about the number of cars Tesla produces (which is very small compared to Ford, and other major Auto companies). Tesla has nowhere near the level of business as the other major auto companies.
As mentioned elsewhere in the thread, there is nothing generic about:
"Tesla sold 40,697 vehicles in the U.S. last year, according to researcher IHS Markit. Ford sells that many F-Series trucks in the U.S. about every three weeks"
Ford sells that many trucks every three weeks. Every three weeks, versus an entire year for Tesla.
Maybe the Model 3 will change that, but I do not have high hopes with how thinly spread Elon is.
Ford's experienced how devastating an economic downturn can be for an auto manufacture. Tesla started their first serious mass market car (Model S) in 2012 and has had the benefit of being in a growing and healthy market.
Rainy day funds look like such a waste of money until the roof starts leaking.
1. Telsa has many investment ideas
2. Tesla spends massive amounts of CAPEX
3. Tesla incurs large amount of depreciation
4. Tesla's net income goes down
How do they spend in relation to the other car makers? Do you think that auto manufacturing capex simply turns off one day? It's a capital intensive industry.
That sounds simple. Maybe overly simple. As though if only Ford could spend money on growing it's business and building more cars per year they could be in a better position.
Ford share holders, presumably, received a return on their investment in the form of a dividend. While Telsa haven't and won't in the "foreseeable future".[1]
So your overly simplified analysis is complicated somewhat by the individual investor carrying out a risk assessment and deciding which companies should or shouldn't be in their share portfolio.
The market makes mistakes over value all of the time.
Look at the sad tale of post-bankruptcy Kmart, and how they used hype, valuation and newly available credit to gobble up Sears. Predicable trainwreck ensued.
Tesla is alike and different. They have an amazing management team, Apple-like religious fervor/hype machine, but a marginal product category. Their continued growth is only possible as long as they can convince people that they aren't a commodity like any of the 50 other car companies.
Calling Tesla just another car company is really missing the boat on their business. Tesla started as a car company. It's how most people are aware of them. So I don't really blame you for this mistake.
However, Tesla today is an integrated energy company. They make Solar Cells (the part of the business formerly called SolarCity), Stationary Battery Systems (generally referred to as Tesla Energy) that range in size from residential to grid sized and of course cars (which ultimately also use batteries).
Comparing them to car companies is like comparing Amazon with bookstores. Yes Tesla is a car company and yes Amazon is a bookstore. But both both of them are so much more than those simple comparison.
In fact I suspect the Amazon comparison here is rather apt because Amazon is now in the situation where Amazon Web Services is essentially able to prop up the retail business. I suspect Tesla Energy will be able to prop up the car business in the near future.
That's a great point. I guess the question to test your assertion is whether distributed electricity generation and storage is the cash cow AWS is. AWS took long lead time, high cost, high risk tasks and made them like ordering Chinese food.
End of the day, even with all they have achieved, the whole machine blows up once the hype train pulls to a halt.
Interesting comment. I'd say that the way they are convincing the public is with a very well engineered product line that is also a big fuck-you to big-oil. The only people that like big-oil are the people who work for and profit off big oil. Musks empire is growing in ways ford could only dream of.
People love the machines they make.
Ford can add body stylings all they want, but they can't match tesla or spacex or solar city.
I just don't think they have it in their DNA - I'm actually surprised we haven't heard of any of the big three going all out attempting to acquire tesla.
What would be a very interesting event would be when Tessa builds a long haul delivery truck/trucks in general. There is no way they haven't thought of a general platform chassis which can have modular tops put on them.
Wouldn't it be great if tesla sold a chassis to boutique shops like there were in the 20s...
>I'm actually surprised we haven't heard of any of the big three going all out attempting to acquire tesla.
I'm not. The big three don't have enough cash to pay the market cap multiple needed to gain control, especially now that Tesla is bigger than Ford.
No sane lender would loan the money to one of the big three to do it either - first, the money would be better spent just buying Tesla stock and second, there is no way that Tesla would be run better by pulling it into one of the big three car comnpanies, none of which have a strong non-incremental innovation culture.
> enterprise value, which is the correct measure of the value of a business
Not even Warren Buffet thinks this. In economics, the correct measure of a value of a business is the future discounted expected value of cash flow and external utility. There's almost no way to measure this directly so major simplifying assumptions are made when applying this definition in practice.
You can use either the cash flows to equity or the cash flows to the firm to calculate the value of equity (ex-non-operating-cash) or the enterprise value.
Enterprise value isn't the value of the business, its the cost to acquire a business and assume its debt. You've assumed that you have to take on a company's debt as an acquirer to take over a company.
The market cap is closest to its value representing what it takes to control/own/sell the company.
In financial theory, enterprise value corresponds to the sum of all discounted cash flows (after tax). Thus, it is the market's best estimate for the value of the business. The question of capital structure should not really matter according to the Miller-Modigliani theorem.
The value of a business is what someone would be willing to pay for control over it, or its market cap (value of all shares). This is typically disconnected from its DCF which is a modelled value based on expected future returns.
Enterprise value is also market cap + net debt, not its cumulative present value DCFs.
A change of control of Ford would likely trigger a default under Ford's debt, at which point it must be paid back. So if you are not financing with debt, an acquiror would really need the $150bn EV in order to afford to acquire the company. Of course, in reality, an acquiror would either replace such debt with new acquisition financing or work out a way to keep the existing debt in place.
DCF is indeed a method to estimate the fair value of a company's EV, not it's market cap. People will usually do a DCF, then subtract net debt in order to get an estimate of equity value from the DCF. Here's a citation: http://macabacus.com/valuation/dcf/overview
Strictly speaking market cap is what someone is willing to spend on a small portion of the company scaled up. The actual price someone is willing to pay for the whole thing is a different number, typically larger.
Well, ownership and value are different things. Ford has large creditors and they lay claim to a correspondingly large portion of the cash flows. Tesla (presumably, looking at the difference between EV and market cap,) does not.
The significant extra value of Ford is ignored when you focus the cost of getting control of a company rather than total value.
If they can properly pivot into the electric car market, a lot.
Ford has all the infrastructure that Tesla is attempting to build now (aside from the batteries, but that is something that Ford could easily partner with another manufacture to get). They know how to mass produce cars (granted right now, ICE cars). That's not an easy feat. They have a large manufacturing and maintenance base that, frankly, Tesla can't replicate. The bet is that Tesla will be the first successful company to market, or that they will hold some patents which will prove valuable in the future. The market is not betting that they'll beat Ford or GM.
I highly recommend Wired's article about GM's long-term bet in developing the Bolt. It talks about many ways that developing an electric car is not just a matter of adding batteries to your existing expertise in car manufacturing.
e.g.:
> Nearly everything changes when you opt for a fundamentally different power train, so GM’s greatest advantage—more than a century of experience building cars—was all but moot. Car structure was different, since they were building around a battery, not an engine. The brakes, steering, and air conditioner were powered differently. New systems, from electromagnetics for the motors to onboard and off-board charging, each came with its own learning curve. The engineers didn’t have established tests to follow. Just turning on the car required finding the perfect sequence of electrical signals from more than a dozen modules. “Oh my God, it took us forever to get the first Volt to start,” Fletcher says.
Though there is more to a card than just the power train. Maybe that explains some of the quality issues Tesla is having with non power train parts such as doors, leaky roofs, etc.
That's an interesting thing to notice. Most of their issue do seem to be more car related than drive terrain. Guess that goes to my point though, being a car manufacturer is much more than making the car.
<< Ford sells that many F-Series trucks in the U.S. about every three weeks. >>
This is why Ford is unlikely to succeed at pivoting into the electric car market. The power and pull inside their company doesn't want them to. It will take superhuman leadership to overcome that force.
An electric f150 is kind of the dream actually. Electric is great for fleet vehicles and it has all the low end torque your frame can handle. Plus trucks have plenty of space to put batteries, under the bed, between the bed and the cab, that can be nice and rectangular. Electric drive train means more effective ground clearance for a given ride height too because you don't need a drive shaft or exhaust. Regenerative brakes are probably better than engine braking too, at least from a wear and tear perspective.
Start with a hybrid Ranger billed as "torque+" marketing slogan "it'll tow a mountain"
Also the ability to run 240v + 120v right off the inverter for the pack would be a huge thing for contractors. I know many then end up hauling a genset out just because quite a few sites don't have dedicated power.
That makes no sense. Companies seek to be viable in the future. If Ford or GM feel that an electric car is on the horizon and that car will eat their (ICE) lunch, they will pivot.
By your logic Tesla would have been locked out of the VC/investment market due to Big Oil. Money flows like water.
> Companies seek to be viable in the future. If Ford or GM feel that an electric car is on the horizon and that car will eat their (ICE) lunch, they will pivot.
I guess you could say the same for Kodak, Blockbuster, and Borders?
“The reason is that good management itself was the root cause. Managers played the game the way it was supposed to be played. The very decision-making and resource-allocation processes that are key to the success of established companies are the very processes that reject disruptive technologies: listening carefully to customers; tracking competitors’ actions carefully; and investing resources to design and build higher-performance, higher-quality products that will yield greater profit. These are the reasons why great firms stumbled or failed when confronted with disruptive technological change.”[0]
I've read the book. None of those companies would even acknowledge their competition. Ford/GM/all other ICE companies acknowledge both Tesla, and the fact that there is a clear runway on oil.
IMO GM is doing a better job of it. While they do have a compliance car (Spark EV), they've also got the Volt and Bolt, and both will be 50 state cars.
Ford has primarily focused on hybrids and there EV offerings are either fleet-only or compliance cars.
> None of those companies would even acknowledge their competition. Ford/GM/all other ICE companies acknowledge both Tesla, and the fact that there is a clear runway on oil.
The bolt. Billions of dollars into self driving technology.
Oh wait sorry this is HN. Ya, those idiots at ford will die to the great Elon. hahahahaha any company older than 25 years is worthless old school idiocy and will die within 5 years of a startup coming in.
Individuals within a company seek to be viable in the future, which often leads them to reject innovation that might endanger their role.
History is littered with companies that refused to pivot into new technology until far later than they should have, because they were too heavily invested in the old way. American car companies suffered from this in the 70s, where they got thrashed by competition from small imports for quite a while before they could be convinced to stop concentrating on land yachts.
Companies seek to outperform themselves relative to the last quarter and year. Long term strategy like this takes a backseat, if it gets attention at all. It certainly doesn't get the luxury of a whole company pivot that could tank short term value.
Need proof? Look at all of the American companies that got caught with their pants down shipping nothing but bigger SUVs when the price of oil shot up back in 2008.
Ford has much more private interests (the Ford family) than other car companies so tends to think more long-term. Remember they weathered 2008 without needing a bailout.
They've also ditched the high-end SUV market right as that market exploded all over the world, thus missed out on massive profits because they no longer sold an Expedition. They openly admit to ceding the market to GM in their annual letters to shareholders specifically because they don't see gas-guzzling SUVs as long-term investments.
They also lead the market in fleet and industry-oriented products. They offer both technology and core-products designed to keep the incredibly lucrative fleet buyers happy.
In this regard, Ford is akin to Microsoft: their consumer products aren't mind blowing, but their corporate products are so well entrenched that they will be a practical ATM for the next decades. Ford sells six times as many F150s as Toyota sells Tundras and they own the entire small cargo van market.
If you were running one of those companies, would you sell SUVs that make you 10k in profit each or an equal number of small cars that make 2k in profit each?
There are a lot of examples of companies which, even when directed to do so by their CEO, were unable to pivot to technologies rising up from smaller markets. The term has been overloaded to hell, but that's disruption.
I would highly recommend the book "The Innovator's Dilemma." It provides case studies of disruptive innovations across many different industries -- from farm tech to disk drives.
The electric Focus is competitive with the Nissan Leaf, at least on paper.
I think the economics aren't really there yet for them to bother with an electric platform (vs retrofitting electric drive into an existing platform). If they thought it made sense, they would be able to be producing at large volumes in a few years.
Ford is unique because it's controlled largely by the Ford family still, all of whom having a vested interest in the long-term profitability of Ford. If someone demonstrates to them that pivoting to electric vehicles is the best long-term strategy for the company, even at the expense of short-term profitability, they will do it.
Also, don't discount the importance of the cashflow from pickups. The only reason Chrysler and Dodge still exist is because of their anchorage to Jeep and RAM. Ford could eliminate their entire car division and still retain like 80% of their profits.
Aside from batteries, supercharger network, and any true desire to actually build nice electric cars. I drove an electric Ford Focus for 2 years, and it was an absolute terrible afterthought of an electric car. It was downright dangerous on wet surfaces with front wheel drive and batteries in the rear, not to mention the horrendous user experience that is Ford Sync. I drive a Tesla now and couldn't be happier.
>not to mention the horrendous user experience that is Ford Sync.
Well that's what you get for buying a car that has Microsoft software running in the infotainment system. The MS-designed Sync system had all kinds of terrible reviews at the time, and it was so bad that it brought Ford way, way down in the "initial quality" surveys, from #1 down to near the bottom IIRC. Do you not do any research before spending a giant amount of money on a car? I spent several months researching my last purchase, a Mazda (I didn't actually spend several months continuously researching it, but I was doing research and test-drives for several months before committing).
To be fair to Ford, though, my understanding is that the latest generation dumped Microsoft and switched to QNX, and should be much improved. While they were using MS, there was no way in hell I'd buy one of their cars. After they switched, I did look into a Focus, but was deterred by all the reports of problems with their DSG transmission.
It was a 2 year lease, $239/mo - and California gave a $2500 rebate also, so cost and risk were low. I wanted to try electric and couldn't afford a Tesla at the time.
My point is I don't think Ford is even remotely taking electric vehicles seriously. With a little better engineering the Focus electric could have been a decent $35k electric car.
The article addressed Ford because of the market cap issue, but, out of the major american car manufacturers, I think GM is a much better match for tesla.
Ford (and all the other car companies) has also huge liabilities - a huge supply chain and R&D costs around combustion engines, and costly dealerships that revolve around servicing a hugely complicated contraption made up of hundreds of mechanical parts. Much of this will be of zero value in the near future.
>a huge supply chain and R&D costs around combustion engines
You mean largely trouble-free engines that run on ultra-cheap gas?
ICE has environmental issues, of course, but the idea that electric is universally superior is questionable. There's no range anxiety with gas and any backyard mechanic can fix most issues. Your locked down $100,000 IoT car is a completely different beast.
>Much of this will be of zero value in the near future.
Says who? If anything everyone is bearish on electric since gas prices have fallen and how range and recharge times will always be less convenient. Electric might replace gas but it won't be in the near future and nothing stops Ford from launching an electric line of its own. Electric cars are a solved problem if you can convince people to pay the premium and deal with the range anxiety and long recharge times. Ford has already announced an electric Mustang and F-150 on top of the $30,000, pre-rebate, 2017 Focus you can buy today. Tesla has no monopoly on electric tech. The barrier to entry is non-existant for other car companies.
edit: saying that the government will ban ICE isn't a market statement its a regulatory hope and for most nations a far off proposal. The idea that Tesla can only succeed with the government literally making their competitors illegal isn't actually a pro-Tesla argument. You guys are much less convincing than you think you are.
It is foreseeable that ICEs will become banned, at least in Europe. Right now there is still too much lobbying by the traditional car makers, but long term there is no other choice for reaching climate goals.
That would never work in the US. It would be both impractical and politically impossible. Most people don't have 35k to drop on an electric car, and even if they did the infrastructure doesn't exist.
Gas isn't "ultra-cheap" in most other parts of the world, especially Europe and Japan. Norwegians are buying Teslas at an absurd rate. Watch for Europe to switch to EVs sooner; their main roadblock is the charging infrastructure. Unlike here in America, where suburbanites all have garages that can be easily retrofitted with a charging port, Europeans don't have that luxury usually. They're a lot like the eco-conscious pro-EV city dwellers here in America who park on the street and have no garage.
Combustion engines in vehicles like the F series trucks aren't going away any time soon. You need generational leaps in battery technology and safety to compete with those trucks. The whole "rugged, dependable" thing that they play on the television is not just for show. I've got a former co-worker who buys a new F-350 supercrew every couple of years before selling it and the depreciation is less than a lease for a midsize sedan.
Do you understand the difference between want and need?
He uses the thing as a commuter vehicle and to tow boats every now and then. The reason he gets a new one is that the dashboard computer systems on these things get updated from year to year and he prefers to stay up with the most current technology.
For most vehicles, 100K miles is nearing end-of-life. For an F series truck, 100K miles isn't even the halfway point.
To a much lesser degree. An electric engine is a lot simpler, mechanically, than an ICE. To the point that, I think, major malfunctions will result in replacement of the engine instead of fixing engine components. Given good refurbishment logistics, this is much more efficient.
Ehhhh. I work with batteries and have worked with electric engines in the past. When an ICE vehicle breaks down, or doesn't work, or goes fast, or goes slow, we know why. With batteries and electric engines, when stuff doesn't work... nobody really knows why.
Copied from another comment I made on HN:
Nobody really understands lithium-ion batteries. One production run might have substantially higher or lower capacity. Some batteries might explode. Some batteries are high discharge and some are low discharge. The "explanation" for all of these things is 'heat'.
Imagine that happening to any other industry (for example the auto industry.)
- "Why did my car just explode!?" "Heat"
- "Why does this car last a tenth the lifetime of this car?" "Heat"
- "Why does this car go a thousand times faster than any others?" "Heat"
- "Why is this entire production run of cars not working?" "Heat"
People say "heat" for two reasons: 1) because nobody understands li-ion batteries and 2) because yes, the real answer does have something to do with heat.
Batteries are one of the most important industries and critical to every company on HN. But the state of the art of batteries is putting together random metals with a bunch of random chemicals and watching which ones don't explode.
Imagine talking to the CEO of Boeing: "We just did our millionth test, engines made of cheese and wings made of coconut shells. It crashed during takeoff, of course. We haven't had any improvements in over a decade, but we're sure we'll get there eventually - we've spent billions on research so far. Wanna come watch test 1,000,001? We're trying engines made of cheese and potato-chip wings next!"
The reasons you mentioned are precisely the reason why an ICE based car selling company can't suddenly wake up one day and build electric cars.
Engineering takes time, Tesla has spent a lot of time building and testing battery tech that works. And they are using it across multiple applications.
If you get reliable electronics in, then without frequent oil changes, and tubeless tire. A electric quite literally is a zero maintenance car.
Hmm. The battery stuff is hard, yes, but only one company has to figure it out. Battery companies sell to everyone. All the battery breakthroughs so far have benefited every EV player. The actual meat-and-potatoes of Tesla's battery tech is actually from Panasonic, who has no problems selling cells to whoever wants to buy.
And EVs are absolutely not zero maintenance, that's just a fantasy. Even in dream-world where we have tires that never need to be replaced and no oil changes, batteries are always going to be a large part of the car's cost and only last a few hundred charge cycles.
The basic premise of an electric "engine" is simpler than that of an ICE, but when you actually make the car, it's nowhere near as simple on paper. Just look at the issue people have had with getting Tesla's repaired... the "mechanics" don't even know that you have to keep the battery charged.
Also, don't ignore the fact that we have 100+ years of experience with ICE.
>>the "mechanics" don't even know that you have to keep the battery charged.
I've been through the CRT -> Flat screen television phase in India.
Arguments were typically like these. How will TV repairmen fix these new TV's which have move like plug and play internals. Therefore new flat screen TV's won't sell?
In the end it didn't work out well for TV repairmen. If its easier to identify and swap the malfunctioning part, you need lesser and lesser skilled professional to service these goods. You can dumb down the process to a point anybody can do it.
There is such a thing as retooling your existing infrastructure. Nobody is saying that Ford's offering will be a homogenous Ford vehicle... hell, neither is Tesla.
Ford has all the infrastructure that Tesla is attempting to build now (aside from the batteries, but that is something that Ford could easily partner with another manufacture to get).
If that is done so "easily," why is Tesla building a Gigafactory?
The bet is that Tesla will be the first successful company to market, or that they will hold some patents which will prove valuable in the future.
Will that actually result in growth for Ford, however? Electric vehicle sales in Ford may displace sales of non-electric vehicles; in other words, the net effect might not be more than zero. This would not really represent growth for Ford, in that case.
You are right about some of their resources, however I think it is a mistake to glibly discount the importance of the battery supply and manufacturing (and by extension, the charging infrastructure) -- that is arguably the hardest and most important part of an electric vehicle, and with Tesla's Gigafactories, that could represent an important advantage of Tesla.
No, that isn't what I said -- you are moving the goal post now from "a lot" of growth, to "holding on to their marketshare".
As matter of fact, that was my whole point: Rather than growing "a lot" they may end up just holding on to their marketshare. Whether that is a mark against them or not is for you to decide, when researching investments.
> No, that isn't what I said -- you are moving the goal post now from "a lot" of growth, to "holding on to their marketshare".
Ok true, but Ford is way past "post-ipo". Growth is not the metric to measure them by (they will grow, but no where near as much as Tesla). That's pretty much agreed upon by market analysts.
I completely agree with you that this doesn't represent real growth for Ford. Auto sales have essentially reached peak already; people only need so many cars. Honestly, this is what I find so ridiculous about Tesla's valuation. A valuation that puts them as worth more than Ford then needs Tesla to be selling more vehicles than Ford to justify that valuation.
All of the existing manufacturers have better infrastructure than Tesla and are getting into the hybrid, electric, and autonomous car marketspace. Even if Tesla survives long enough to make a profit I see no way this company ever justifies it's current valuation. Long term I expect huge price drops in Tesla stock.
Strictly on the car front (which largely ignores Tesla's real growth potential) ...
Ford also maintains an extensive dealer network which can disincentivize some painful adjustments that otherwise might need to be made to be more aligned with future sales, etc. People talk about direct sales for Tesla usually in a negative connotation due to institutionalized friction (re: lawsuits / political favoritism), but I think it's a strong asset in a savvy marketplace, and can illustrate how established infrastructure isn't always for the best. One less mule for the cart to pull, IMO.
I also think there are some signs that existing manufacturing practices can be / need to be rewritten around an all elective drivetrain. For instance, Tesla plans to operate its lines at full-speed using some new "invasive" robotic procedures that the full-glass roof of the model 3 will afford. This has dramatic labor and capital consequences for an automaker with a diversified fleet. Might be costly to rebuild the machine that makes machines.
Dealership networks are fiefdoms in a benevolent kingdom. While they get a say, ultimately you go with the will of the manufacturer or you find another car to sell.
We're also making the assumption that charge-battery-drive-the-car is the future
Battery power is an evolution of car tech but it isn't a revolution. Tesla is building wired telephones when the majority of the market is using wired telegraphs. A substantial improvement to be sure, but to suggest a company such as Ford is not able to grow is very short sighted-- they aren't standing still either. Tesla could increase production and sales by an order of magnitude and still have a minuscule market share.
Of course Tesla will grow, but they don't have a monopoly. The future value of Tesla is certainly greater than today's value, but to discount everyone else because we are analyzing this through a specific lens of perception is a folly.
I have heard many times that the traditional car companies are heavily outsourced aside from the drivetrain. If I haven't been misinformed there (quite possible either way!) and this is true, then outsourcing that would leave Ford not adding much value themselves.
Even if it would work out for them, Tesla is pushing really hard to be a major battery supplier, so they could end up benefitting either way.
>I have heard many times that the traditional car companies are heavily outsourced aside from the drivetrain.
It's true, but I don't think it matters. Traditional automakers rely on suppliers for all kinds of parts on cars: headlights, wipers, tires, glass, airbags, and many electronic modules (auto-dimming mirrors, blind-spot radars, etc.). However they do tend to always keep the body/chassis and the drivetrain in-house (sometimes they'll outsource the transmission, like to ZF).
I don't see how this would affect them moving to EVs. Going from ICE to EV means two giant changes: the chassis (to make room for an entirely different layout, esp. because of the batteries), and the drivetrain. Well, the automaker controls both of those. All those other things, like glass, headlights, electronic safety add-ons, etc., are going to be the same either way. You don't need a different blind-spot monitoring system or windshield wipers or tires just because the drivetrain is electric.
Moving to EVs, they either outsource the drivetrain (as the comment I replied to was suggesting, and as GM is doing with the Bolt) or start doing EV drivetrains in house. Either way, they lose the advantage of their long experience with ICE drivetrains.
Sure, but they don't lose their advantages with chassis design (crashworthy design and testing is hard), manufacturing at scale, logistics, etc. It's not like there's a ton of serious EV competitors out there anyway; there's only Tesla (which can't manufacture at huge volumes), and a few other traditional automakers that have also dipped their toes into EV production.
Lots of design knowledge around vehicles, both from an aesthetic standpoint and in a number of other subsystems. But the bigger point is actually that GM, Ford, and the other major car manufacturers are really giant project management and logistic organizations. They are far from perfect corporations, but don't undersell what they do.
The piece of the puzzle that Ford doesn't currently have is charging stations.
Tesla building its supercharger network was a brilliant move because it means that Teslas are comparable to most petrol-fuel vehicles (as far as where you can go), and everybody else isn't.
If I buy a Ford, can I drive it to see my family in Northern Minnesota[1]? Because I know that I can take a tesla.
That's a really big deal.
I know there are 3rd parties in the US trying to compete with tesla's superchargers (a very close friend of mine was an engineer at probably the largest one until they went bankrupt), but as far as I can tell they're nowhere close to Tesla.
[1]Originally I said North Dakota, but it looks like even Tesla doesn't have chargers there yet. BOO! Well luckily I have plenty of family in Northern Minnesota too!
You may want to clarify the non-sequitur there. Yes, Ford doesn't have it's own network of "chargers" (300+ mile recharge in 5 minutes or less), but you know there's a solid network available; in the few places where chargers are lacking, you can easily take extra power units with you (disposably cheap at that).
That said, Tesla is pursuing the angle of enabling customers to install their own charging station requiring negligible maintenance, and no supply; charing networks are only needed for longer trips which most customers don't need. That is a game-changer for many industries.
There's a big gap in those parts for gasoline, too. Once a few years back I camped out near Fields Station waiting for the store to open 'cause I didn't have enough gas in my Jeep to make it to Burns.
Good point, I bring an extra gas can in the bed of the truck but I ended up getting a few gallons in Frenchglen from the store, probably could have made it with the extra I had but didn't want to chance it. It's a lot cheaper and easier to bring extra gas then a spare battery!
GM has for the most part done a good job so I am really surprised how much Ford ceded this segment to them. GM announces EV sales at end of the week and I am really curious how well the Bolt is doing at its still in limited number of states but will be in all by fall (September I think).
I really don't think there is any difficulty in making EVs now, its finding enough to support the market. While 200 is great for a base range I find it the absolute minimum for any pure EV and to be honest I won't go pure EV till I see 400+ (Drive a Volt now). Not all want/need two cars and even many families are constrained based on size/packaging of the car which led to my surprise when the 3 was a sedan which is not a growing market.
> Ford has all the infrastructure that Tesla is attempting to build now
* no battery production facilities
* no charging infrastructure
* no vertical integration (unlike Tesla, Ford has to sell through the dealershits - I see it as a big disadvantage)
> They know how to mass produce cars
Yes - but can they produce the car the public will want in three years from now, when affordable all-electric, high-performance, autonomous Model 3s will redefine what modern car means?
> They have a large manufacturing and maintenance base that, frankly, Tesla can't replicate
I admit that they have some hurdles ahead, but what would stop Tesla from being more efficient at manufacturing than Ford? It is one of their objectives - and their track record is pretty good, to say the least.
Sorry for not explaining the reasons, I thought they were obvious. First, dealers cut into margins; second, they are not interested in selling vehicles that require very little service; third, they won't be able to provide great customer experience - no one likes negotiating with dealers.
Tesla has already figured out how to mass produce cars. The move between 200k cars and 200,000,000 cars is hard, but not rocket-science hard, and they can always hire the right people to help. But can Ford figure out how to make cars that drive themselves at 80mph on highway? Having driven in Ford cars, I don't believe they can. They can barely figure out how to make a radio control panel that doesn't suck.
That's true, but underscores how treacherous comparisons between big companies based on market caps are. By every metric other than investor confidence in a single narrative (except maybe R&D spending?), Ford dwarfs Tesla and will continue to do so for the foreseeable future.
I don't think anyone has any trouble telling a story in which Tesla is ultimately a more valuable company than Ford. And I agree that's a big deal. But this comment thread suggests the market cap comparison is some kind of milestone. It's hard to articulate what that milestone would be.
The point is not really how much Ford is expected to grow, but how much Tesla is expected to grow. That is, it seems like the only way for Tesla to grow to reach Ford's metrics in terms of profitability would be perfect execution (plus Mars, Jupiter and Venus being aligned).
I'm a huge fan of Tesla and think that they will succeed, but saying that the stock is "priced for perfection" is putting it mildly.
Realistically they more often invest on their perception of others perception of the promise of future value. How those perceptions get linked together is interesting but it is not nearly as objective as you imply.
> And when it comes to car sales, Tesla sold 40,697 vehicles in the U.S. last year, according to researcher IHS Markit. Ford sells that many F-Series trucks in the U.S. about every three weeks."
How much stationary energy storage did Ford sell last year?
"Tesla CTO: our energy storage is growing as fast as we can humanly scale it [Gallery of new Powerpack station]"
Actual laughter was produced at a generator product page.
Fuel has a marginal cost. Stationary battery storage soaks up power when power is cheap, releases it when the cost is higher and energy demand is higher and has a 10 year minimum life.
> Actual laughter was produced at a generator product page.
You must be a blast at cocktail parties then.
>Stationary battery storage soaks up power when power is cheap, releases it when the cost is higher and energy demand is higher and has a 10 year minimum life
I think you're making a few unsubstantiated assumptions here. Primarily that the cost differential in electricity (or the availability of renewables) is broad enough for the Tesla tech to be significantly profitable.
I ran the numbers: a Tesla PW2 gives you ~20.3MWh throughout it's useful life for $5500 limited by power availability and recharge rate. A slightly more powerful Ford generator at $1500 with $4000 worth of diesel fuel would yield ~8.9MWh of anytime power with the ability to run on waste oils and a comparatively perpetual lifespan.
So, 44% the power cost with a power wall but a substantially higher upfront cost, a considerably lower salvage value, and a number of restrictions on it's usage (hope you don't need power during sustained outages in the Northeast).
"SolarCity developed a microgrid with 1.4 megawatts of solar generation capacity — enough to power nearly 100% of the island, according to a SolarCity blog posted on Tuesday. The microgrid is enabled by 60 Tesla Powerpacks, the company's large commercial battery, which can store solar energy at night."
"The Kauai project consists of a 52 megawatt-hour battery installation plus a 13 megawatt SolarCity solar farm. Tesla and the Kauai Island Utility Cooperative, the power company that ordered the project, believe the project will reduce fossil fuel usage by 1.6 million gallons per year."
"On Thursday, Tesla announced that it had been chosen “through a competitive process” to supply utility company Southern California Edison with 20 MW (or 80 MWh) of battery storage. In May, regulators ordered Southern California Edison to invest in utility-scale battery networks after natural gas provider SoCal Gas leaked 1.6 million pounds of methane into the atmosphere when a well ruptured at its Aliso Canyon Natural Gas Storage Facility."
"California will shortly bring more Tesla energy storage systems online in Southern California Edison’s (SCE’s) service area.
The 50 MW projects (utilizing Tesla’s Powerpack 2) are conducted by Macquarie Capital, the corporate advisory, capital markets and principal investing arm of Macquarie Group (a global finance corporation)."
"With the confidence of a well-oiled pizza shop, Elon Musk “seriously” said that Tesla could deliver a more than 100 MWh Powerpack project to Australia in 100 days – or it will be free."
...
"Considering a large part of the 100 days will be for shipping the Powerpacks and other equipment from Nevada to Australia and then installing those packs, I wouldn’t be surprised if it means that Tesla and Panasonic already have a capacity of over 100 MWh per month at the Gigafactory. That’s a significant 1.2 GWh annualized rate."
It might very well be overprices (I sold because I think it is) but they got $7B in revenue in 2016 which is hardly no earnings. They make money on every car they sell so it would be pretty straightforward for them to decide to become profitable at the expense of growth and R&D. Now, their stock price assumes they're going to conquer the world rather than settle down to become a profitable small car manufacturer and solar/battery provider so lots of investors would lose their shirts if that happened. But it's an option for the company which makes them very different from the pets.coms of the world.
Revenue is nice, but earnings are all that matters when you have debts to pay. Just look over to the recently IPOed Snap, Inc. for a company with less revenue and more eyeballs!
Tesla is potentially a trillion dollar company and it's biggest current hurdle is getting it's production up to meet an enormous demand. The reason it's trading at a higher market cap is because Ford doesn't have any growth potential and Tesla is still trading at a fraction of what it could be. Of course there is still a ton of risk factors for them, but expected value for investing should be based on the chance of success * potential future value over a variety of possible outcomes.
Ha! I just wrote about it this morning. Tesla's potential is not in the car business as we used to know it, but in the way it's going to play out in the next decade. Based on everything happening right now, it's not an IF but WHEN kind of question. Here, some detailed thoughts : http://kirillzubovsky.com/what-is-tesla-really/
While the biggest 5 are spending in R&D to meet tesla in product, tesla will be enjoying (presumably) apple level profit margins on their established product.
A trillion dollars? For a niche/luxury car company? What fantasy is that based on?
> it's biggest current hurdle is getting it's production up to meet an enormous demand
While enormous to Tesla, actual demand is pretty small compared to other car companies.
It doesn't help that even the most "affordable" Tesla is far more expensive than the average competitor's EV or hybrid vehicle[1][2], let alone it's base price (not final sale price) starts off above the average new car purchase price (final sale, after upgrades, etc) for the entire industry[3].
There's a lot of hype around Tesla, but that doesn't mean they're going to take over the auto industry, let alone become larger than the largest auto makers around who produce "Everyday Joe" cars for the rest of the population.
Also, it ignores the fact that every car manufacturer already has a plethora of fully electric, or hybrid models available (and they are, on average, far cheaper than the cheapest base model Tesla can offer), and the markets still don't buy them.
This also ignores the fact that many companies make great batteries, and Tesla is only recently sitting down to that table. Why wouldn't Panasonic be that "trillion dollar" company? Or Sony? Or Fujitsu?
So, when will Tesla be manufacturing 2,500,000 cars per year?
Edit: No, really. Ford sold over a million vans, pickups and heavy trucks last year, a market that Tesla has no apparent interest in entering.[1] The Toyota Camry alone sold 428,000 in 2014, the Honda Accord 328,000, the Corolla 340,000, the Ford Fusion 306,000, the Nissan Altima 336,000, and the Honda Civic 326,000.[2] The Tesla Model 3 will presumably be in that latter market (although those are roughly $10,000 cheaper), and if Musk is right about scaling his factory to 500,000/year, it will take a big chunk of it (but still, it's $10,000 more). (If it's in the BMW 3-series/Merc. C-class/Lexus range, 500,000/year would eat all of that market.)
Tesla seems to be nimble and quick. They are making the future of cars like making software. Quick and iterative. If they can make batteries cheaper than anyone else. If they can make electric cars cheaper than equivalent gas cars for long term then they are clear winner.
It didn't take Apple much to take Nokia out of the game. Nokia had smartphones on the agenda for a long time. The problem was that wasn't their only focus. Apple went all hands into the iPhone.
I think that line of thought assumes that they pivot from electric cars to batteries, and from batteries to energy in general. Imagine huge, modular atmospheric/solar/geothermal/battery/molten salt combination generator/energy storage plants dotting the globe.
But I mean, couldn't GE do that too? Or Samsung/Murata/Vishay/Maxwell/Panasonic/etc.? It kind of seems like the stocks are trading largely on the strength of Musk's vision. I am kind of okay with letting mad scientists-cum-Bond villains like Musk and Bezos run amok with billions of dollars, though. I mean why not, it's a bit of a wildcard and it makes about as much sense as anything else that's happening right now.
> But I mean, couldn't GE do that too? Or Samsung/Murata/Vishay/Maxwell/Panasonic/etc.?
Sure. So could Martha Stewart, or Jeff Bezos.
That hard part is actually doing it and doing it well. Is GE better positioned to do it than Tesla? Not really. It's a complex problem involving advanced software, engineering, branding, customer service, talent retention, supply chain, and myriad other challenges. Tesla is better at some of these things, worse at others. But they're going for it. GE, GM, et al don't appear to be moving aggressively towards these goals at all.
If Apple can be a multi-billion dollar company making laptops, phones, and an app store, I don't really see the Tesla "could be a trillion dollar company" as too far-fetched.
I mean this is the era when SnapChat is "worth 25 billion".
>I don't really see the Tesla "could be a trillion dollar company" as too far-fetched.
Anything could be anything. The challenge for Tesla is that they validated the electric car market and managed to carve out some market share, but now they are in the sights of every car manufacturer in the world. It's a different ball game for them. Car companies know how to make cars at scale, Tesla doesn't. It's a big challenge.
the parent has provided no citation on his claim of no growth potential. my source at least provides qualitative reasons why Ford has seen growth in the 2016 fiscal year, reasons which are clearly overlooked by parent. Not many people are aware of Ford's big sell on Mobility Services - it certainly is not as exciting as Electric cars that have a "Ludicrous Speed" button. Full disclosure, I'm a fan of both companies.
I'll put the math behind the numbers aside just for a moment to consider this is still a pretty impressive feat. I wouldn't have believed it 24 months ago. Also wouldn't have predicted for Ford and other nameplates to remain so static in this category. A high performance luxury EV just seems a great asset for any brand at the moment, even selling in lower numbers. We're at one of those shifts in technology where the cards get shuffled. I think Porsche gets it. Jaguar. Maybe Chevy.
Tesla is reminding me a lot of early Apple—equally rapid supporters and detractors. If anything, that means people find your work interesting. (Wonder if Elon will send out a staff note mirroring the note Jobs sent when Apple first passed Dell in market cap.)
It's not about the number of cars that Tesla can sell today, and it's not even about the cars it will sell in the next decade, it's about the market domination a decade from now, and I see Tesla as a clear-cut winner. A few concrete thoughts here - http://kirillzubovsky.com/what-is-tesla-really/
There's no such thing as "independent research." Any article like that is always paid for by the company that ends up "leading" in it; that's how these research companies make their money.
I worked for this lovely company once where we paid hundreds of thousands of dollars to a consulting company to "research" how we were the dopest, only to have pretty much written the entire document for them. Go figure...
ps. From that TC article: "Ford has already responded to their position in the study, with a Medium post from CTO Raj Nair expressing their satisfaction at being ranked number one. " -- if this doesn't read like a pre-plan PR, I don't know what does.
There wasn't a doubt in my mind that this would be the top comment. But it is still a milestone, and a trend. Does anybody think that what happened to Apple and Google's market caps wasn't globally significant?
it is what you concentrate on when your other numbers don't look so good.
The 3 is going to be a real test here. Not that they can make the car but that those expecting to get one at 35k actually get one and on a timely basis. Then throw in, is there any profit at that price point when factoring in all related costs?
I doubt there will be much profit at $35,000, at least not for a while. But does there need to be? As long as it's profitable on average, the base model can just break even. I bet a lot of buyers will pay for the Autopilot option, for example, and that's pure profit.
Are you arguing that people would be better off investing in Ford? Because if not, I don't really see the point of always trotting out the fact that 100 year old auto-makers have a larger manufacturing base than new ones. Seems obvious. "People in their 30s, on average, are taller than people in elementary school!" Whoa, really??!!!
and... this is how bubbles happen. Investors and fans say "but, but my stock isn't overvalued! Mine is the exception, its everyone else who is in the bubble!"
There's no sane scenario where a car company that sells cars in the tens of thousands over-values a car company that sells cars in the millions.
Google had a search monopoly. It trounced all competition trivially. I remember Google absolutely dominating the market and everyone shifting away from hotbot, yahoo, etc within a year or so. Anyone can, and does, make an electric car now and ones that don't cost $90,000. These aren't remotely comparable scenarios.
Former finance professional here: Ford is actually worth 3 times as much as Tesla, once you factor in debt. The total value of the Ford capital structure ("enterprise value") is about 150 billion.
When two companies have wildly different capital structures, you have to compare them on enterprise value, not the market cap of their equity. So while I give kudos to Tesla for building a valuable business, it still has a long way to go to catch up to Ford.
> When two companies have wildly different capital structures, you have to compare them on enterprise value, not the market cap of their equity. So while I give kudos to Tesla for building a valuable business, it still has a long way to go to catch up to Ford.
That is not necessarily true.
Market cap and enterprise value are two equally valid ways of measuring value or worth. There are even more ways to measure value, such as DCF or value of assets. All of these have their pros and cons.
In this case, my personal opinion is that market cap is a very meaningful way to measure Tesla/Ford and that it's noteworthy that Tesla has passed Ford.
I think it is very meaningful because it (loosely) implies that the present value of Tesla's profits (i.e. net profit after tax) is higher than Ford's. Even on a risk-weighted basis. Or, at least, that's roughly-kinda-sorta what the market believes.
I would argue that enterprise value would be more meaningful that market cap if we were talking about which company was 'bigger'. However, the interesting thing here is that Tesla has become more 'valuable' than Ford, for this definition of value.
1: Debt + Equity = Enterprise Value. The value of the equity is determined by the stock markets - and that value can vary a lot.
2: Equity Value therefore represents the market's perspective of the Net Present Value of the future cash flows less the value of the debt. Those flows, calculated using a discounted cash flow spreadsheet, could be from profits, or could be from sale of assets.
3: The analysts will forecast the Enterprise delivering a certain IRR - annualised percentage return, which is split between the debt and equity. This total return is called the weighted average cost of capital - WACC.
4: Debt is cheaper than equity, and it also has a lovely tax shield effect from the interest expense.* Debt holders get the company when the value falls underneath the total value of the debt though, so you don't want to issue too much.
5: Equity (shareholders) demand much higher returns than banks, but accept the greater risk for it. e.g. VCs have much higher expectations than banks about their returns.
6: The more debt you have the higher the returns - and risk - for the equity. Think about the leverage you can get on a house - an asset with low % returns can deliver high value (or high loss) by using a lot of bank debt.
7: There is a body of work around finding the optimum level of equity and debt for a company - basically you want to balance the risk from having too high debt (and the company value falling underneath that value and using all the equity) and the benefits of higher returns to equity=holders from having higher debt.
Going back the the original post - EV is the real value of the company, not market cap. Ford could sell down their debt by issuing more equity, Tesla could issue debt and reduce the share of equity. It all comes back to EV.
*This makes the weighted average cost of capital vary slightly as the amount of debt changes.
> Going back the the original post - EV is the real value of the company
EV is one way of valuing a company. As is market cap.
> Ford could sell down their debt by issuing more equity
Absolutely. It's logical to say that a company with less debt is worth more than a company with debt. And the same applies in reverse.
Other ways that EV can be distorted, and market cap can be preferred, is whether the company choose to purchase capital assets financed via debt or lease them. For example, a company with big capital assets financed via debt could note that the company would be more profitable if they sold them and leased them back. The company is now more profitable, and its reasonable to say its 'better', but its EV has gone down.
Current amateur here. I feel like there's only one important thing to consider when comparing Tesla and Ford as investment opportunities: is their value likely to increase?
With Tesla, there's an obvious path for potential massive growth. It's not guaranteed, but the potential is obvious.
With Ford, it's like any other auto manufacturer. What surprises are we expecting? What new products or innovations? Does Ford have any path, even hypothetical, to massive market share growth relative to its current position the way Tesla does? It seems clear to me that the answer is no. Even if their Bolt is a success, they're not about to dominate the market, double their sales, and double their stock. They don't have any Model 3 type event on the horizon.
So all these comparisons of financial metrics on current value, to me, seem pointless. This is the only thing that should matter (along with whatever analysis you want to use to gauge whether Tesla is likely to be able to execute on its plans, which is a more complex question-- but performance so far makes it clear that they are experiencing steady and dependable growth of production and sales with clear, well-defined plans for further future growth.)
The problem with this analysis is that it ignores current valuation. What if somebody offered to sell you 1,000 shares of ford right now for $1 each? Would you buy? Of course you would because you know that the value of one share is much higher than $1. So despite whether you think Ford has room to grow, it's very possible that the market is simply undervaluing it as a company, all things considered- assets, brand value, liabilities, etc.
The question isn't necessarily "can this company grow?", it's "what is the value of this enterprise as a cash-generating vehicle?"
But I would only buy the $1 shares because I know the market value is $11. I can see that incontrovertibly. If they offered it at $11 and we were hypothesizing the real value is yet higher still, I would have no way of knowing that the market will soon come to realize the "true value" and increase the price. It would be a gamble of me betting the market comes to realize they've undervalued the company.
Of course. But your original point was that the only thing to consider is future growth potential and because only Tesla has room to grow that it is a better investment than Ford. My point was that regardless of growth prospects, a company can be undervalued and be a great investment if growth stagnates or even goes down.
That is the basic idea behind value investing and what made Warren Buffett the 2nd wealthiest person in the world.
> However, the interesting thing here is that Tesla has become more 'valuable' than Ford, for this definition of value.
I think it's a very tortured definition of "value", though... I don't have a Bloomberg terminal in front of me anymore to check, but I'm guessing Ford's bonds are generally trading closer to par than zero. In which case the bondholders are telling you they think there is about $100 billion worth of additional value to Ford's business beyond the value of the equity. That's a really big piece of context to this story.
I agree with you in principle that market cap is a perfectly valid metric, but when you're comparing a majority-equity company to a majority-debt company (assuming the bonds are valued as non-distressed assets) it ignores something very, very significant.
> I think it is very meaningful because it (loosely) implies that the present value of Tesla's profits (i.e. net profit after tax) is higher than Ford's. Even on a risk-weighted basis. Or, at least, that's roughly-kinda-sorta what the market believes
The "market" (albeit a more limited one) also believes that Uber is worth $70B - almost 1.5X the market cap of Tesla.
Sure! Think about two companies that just started up in the widget business, each raising $1 million of capital. Company A issued $1 million worth of equity. Company B issued $500,000 worth of equity and borrowed $500,000. Which company is more valuable?
Obviously both are worth the same amount: each company has an "enterprise value" (the value that all investors in all securities place on the underlying enterprise) of $1,000,000. The only difference is that company A has only one class of investor, while company B has investors that own a riskier asset (the equity) and a less risky asset (the debt). But assuming the two companies are otherwise identical, an investor in company B can easily financially engineer themselves into a financial position that is identical to an investor in company A: for every dollar of company B equity they buy, they simply buy one dollar of company B debt. Owning $1 of company B equity and $1 of company B debt is identical to owning $2 of company A equity.
Since the choice of equity or debt financing is (theoretically) arbitrary, when comparing two companies that have very different capital structures, like Ford (mostly debt-financed) and Tesla (mostly equity-financed) you have to control for those differences. The simplest way is the add the value of each company's net debt to the market value of their equity, which gives you the total market value of each underlying enterprise.
A simple example we're all familiar with is home prices. Two neighbors might own nearly identical houses on the same block in the same town. One might have a mortgage and one might own it outright. But no matter the financial situation of the individual owners, the value of the two houses should be about the same: the value of the asset is separate from the financing of the asset.
> Obviously both are worth the same amount: each company has an "enterprise value" (the value that all investors in all securities place on the underlying enterprise) of $1,000,000. The only difference is that company A has only one class of investor, while company B has investors that own a riskier asset (the equity) and a less risky asset (the debt).
There's an important issue that you aren't taking into consideration. The value of the equity is ultimately based on the profit that remains after interest/debt has been paid.
In your example, it is perfectly valid (if not MORE valid) to say that Company A is worth more than Company B.
The investors in Company B figured that at the end of the day they will only be eligible for half the cash that investors in Company A will be eligible for. So they paid a lower price.
You're insisting that debt is another form of investment, and depending on what you're looking at that makes sense, but when talking about 'value' it doesn't always hold true.
> You're insisting that debt is another form of investment, and depending on what you're looking at that makes sense, but when talking about 'value' it doesn't always hold true.
This sort of intuition is seductive, because we're generally told "debt bad, equity good!" But it's not correct, for the very simple reason that debt and equity are, in many ways, fungible: each type of financing can be utilized to replace the other.
To go back to the company A & B example: Company A could decide tomorrow to borrow $500,000 and buy back $500,000 worth of stock. Company B could issue $500,000 worth of stock and pay down its debt. Then, just by shuffling some papers around, the capital structures of the two companies will have been reversed! Yet nothing in the underlying business will have changed for either of them.
But don't just take my word for it! Franco Modigliani won a Nobel Prize for his part in the Modigliani-Miller theorem, sometimes called the "capital structure irrelevance principle" (seriously): https://en.wikipedia.org/wiki/Modigliani–Miller_theorem
It's certainly a complicated subject, but debt is very much a real part of a company's capital structure and can't be ignored when comparing two different companies.
> This sort of intuition is seductive, because we're generally told "debt bad, equity good!" But it's not correct, for the very simple reason that debt and equity are, in many ways, fungible: each type of financing can be utilized to replace the other.
Debt can be viewed in many ways. I'm not saying that it's wrong to view debt as another form of financing - like you I studied Modigliani-Miller, just that there are other ways to view it.
My point is only that it's not right to disregard market cap entirely in preference to EV. EV is generally a "more comprehensive" measure of company value, but it doesn't supersede market cap.
EV, for example, is susceptible to distortion between leasing and buying capital assets. For example, a company with big capital assets financed via debt could note that the company would be more profitable if they sold them and leased them back. The company is now more profitable, and its reasonable to say its 'better', but its EV has gone down.
> EV, for example, is susceptible to distortion between leasing and buying capital assets.
Yes, this is an excellent point. The next-level thing to do when modeling companies that make extensive use of operating leases for capital assets is to capitalize those operating leases, for exactly this reason.
It seems strange to ignore the terms agreed to when raising money. A company that raises money via loans typically has more obligations than one that raises money via equity. Doesn't the option value for repayment count for anything?
> It seems strange to ignore the terms agreed to when raising money.
I'm not sure what you mean by this - can you clarify?
> A company that raises money via loans typically has more obligations than one that raises money via equity. Doesn't the option value for repayment count for anything?
Certainly the equity of a highly indebted company will behave differently than the equity of a debt-free company. But "different" isn't necessarily "better". To go back to my company A & B example, if both companies double in enterprise value, the equity holders of company A will get a return of 100% ($1,000,000 profit on capital of $1,000,000), but the equity holders of company B will get a return of 200% ($1,000,000 profit on capital of $500,000). Conversely in a scenario where each company loses half of its value, the equity holders of company A will still be left with half of their money, while the equity holders of company B will be wiped out (to first order - reality is more complicated than this usually).
So in some scenarios the company A equity looks better and in some scenarios the company B equity looks better. Which you prefer overall depends on your individual risk preferences - some people want a higher potential return at the cost of higher risk, some people want less risk at the cost of a lower potential return. There's no objectively "best" structure.
Even for companies with no debt at all you'll see investors who artificially create financial leverage by buying options on the company's equity. Different strokes for different folks, or as my dad likes to say, there's an a$$ for every seat. :)
Interesting. Yes, tolerance for risk varies with each investor, but isn't there supposed to be a consensus way that the market prices risk, on average? I'm just throwing out terminology here, but what about "risk-adjusted return"? Other things being equal (which they never are), prices should be lower for higher-risk investments, to compensate for the risk taken.
So I'm wondering how enterprise value prices risk compared to market value.
> isn't there supposed to be a consensus way that the market prices risk, on average?
Consensus on the price of risk, yes. Consensus on risk preferences, no. :) I.e. two people can agree that a one year US Treasury Bill paying 0.50% interest is worth exactly par, and yet come to completely different conclusions about whether they want to own it at that price.
I.e. you're absolutely right about achieving a consensus on how to value an asset, but people's differing risk preferences are a major reason we have markets in the first place - it's not just zero-sum wagering on what will go up and what will go down.
> So I'm wondering how enterprise value prices risk compared to market value.
To the extent a company has debt, the risk (and expected return) of its equity will always be higher than the risk (and expected return) of an identical company without debt: the equity holders have levered up by borrowing and magnified their risk and potential return. I don't know if that answers your question or not, though.
Market cap tells you the value of everything: both the business and its money (cash & debt).
Enterprise value is the value of the business (the thing actually generating value) separate from the cash & debt it's holding.
For example, if I have a banana stand worth $250K, but inside the banana stand is a briefcase with $245K, then the $250K is not really the value of the banana stand - it's mostly the value of the cash inside. The Enterprise value of the banana stand is only $5K.
With the debt, the idea is the same but the sign is opposite. So if Ford is worth $50B while holding onto $100B of debt, that implies that the enterprise value is $150B.
Comparing the valuations of Ford and Tesla without subtracting out cash and debt is like running a race without mentioning that the losing racer started a half mile behind. Though they 'lost' by one metric, they're still the faster runner.
Legacy costs for Ford and GM are only decreasing as they stopped giving out pensions in the 90s. As their retirees keep dying off, those expenses won't be replaced.
Also, I know from experience Ford uses their ability to generate cash and borrow cheaply to give "buyouts" to large chunks of retirees at a time (ie. They offer a lump sum of $1 million dollars today instead of a pension. This almost always works out in the company's favor).
I think these comparison's to other car companies really miss the mark. Those who are long on TSLA (myself included) aren't looking at them as a car company. Tesla is cracking open new markets in the following areas:
- Electric Cars (most visible. Also don't undervalue their unique direct sales channel, which is a huge competitive advantage)
- Batteries/Energy Storage (not just cars - utility scale energy storage, with capacity coming online that will double global output of lithium batteries)
- Solar panels and solar roofs (both residential and commercial, a market with a hockey stick growth curve coming)
- Self-driving AI (head to head with Google on one of the most fundamental changes to transportation our society has seen in a century, and they have the hardware driving around us all the time already, rapidly learning and improving)
Ford, GM, et al are irrelevant and poor comparisons. This is SpaceX for Terran energy and transportation.
The price has been rapidly decreasing in the last 10 years, to the point that it no longer makes sense to not have solar everywhere. It's cheaper than coal, and will soon be cheaper than all the other fossil fuels as well, and will continue to go down, never up.
China now employs over 1 million workers making solar panels. And they're ramping that up as fast as they can, and shelving coal power plants. We've reached that critical tipping point for PV solar to go vertical, and Tesla/SolarCity just built their own factory in Buffalo to take advantage.
I think solar is the future, but these claims are stupid.
> "to the point that it no longer makes sense to not have solar everywhere. It's cheaper than coal, and will soon be cheaper than all the other fossil fuels as well, and will continue to go down, never up."
Then the market should automatically have shifted to 100% solar by now.
Solar is getting cheaper yes, but it is dependent on hours of sunlight available, which like wind energy, is unreliable and doesn't work at periods (like night). Further, the capacity of a solar power plant isn't its produced electricity, because the capacity is mainly peak capacity, which is only reached a few hours a day.
> China now employs over 1 million workers making solar panels
Don't know where that figure is from, but I guess china must be covered in solar panels by now. 1 million is large number of people. Unless your figures are deceiving. For example, walmart sells solar panels. So, you will count every walmart employee as a solar panel retail employee.
>Then the market should automatically have shifted to 100% solar by now.
65% of new capacity in the US last year was wind or solar.[1] The world doesn't change overnight, but expect that trend to continue.
Renewable energy growth is only being slowed by lack of storage. As battery production and other storage techniques come online, it allows higher and higher % of energy to come from renewable sources.
>Don't know where that figure is from, but I guess china must be covered in solar panels by now.
Pretty good summary of the situation here: [2]
"In 2015, China installed half of the world’s wind power and a third of its solar photovoltaic capacity. Last year, solar capacity jumped 81.6 per cent and wind capacity grew 13.2 per cent. Greenpeace has said that China’s renewable energy growth rate is equivalent to installing one wind turbine and covering one soccer field with solar panels every hour. Five of the world’s top six solar manufacturing companies and five of the 10 biggest wind turbine companies are in China. By 2020, half of the country’s new electric generation will come from solar, wind, hydro and nuclear power."
Government subsidies probably. My provincial government (Alberta) just introduced $40 million in solar subsidies. I don't think Solar City operates in AB, but I'm sure other states will come up with similar subsidies to replace the federal one that I believe is expiring.
And when the price undercuts other forms of power generation, you won't even need subsidies anymore. I'm guessing it'll be a while before this is true in latitudes like Alberta, though.
I agree. I don't think we'll see large scale solar power generation in Alberta. The gov subsidies are mostly for residential use. They introduced a revenue neutral carbon tax Jan 1, 2017 and need to return the tax to green projects. This is just one of them.
Alberta does have quite a bit of wind generation though. They blow pretty consistently off the mountains and we have a pretty low density population in the south end of the province. Hopefully under the NDP (left wing) government, we can see some expansion of this. Prior to this, oil sands was the only game in town.
Making acquisitions and executing on a cutting edge market opportunity are two different things. When GM adds something unique to the AI transportation market, then they'll be relevant. As of now they're just an outsider trying to get in.
Yeah I think car companies should focus less on making cars...
- Your first point is cars - there are a ton of evs for sale from many large companies and direct sale doesn't seem to sell more cars than indirect.
- Tesla is partnering with battery companies just as GM does on the bolt and volt. Nothing special here as their battery business is pretty minuscule.
- Again a niche market that compares to GMs after market crate motor program in revenue and size.
- Self driving tech doesn't belong to Tesla and Google, most luxury car companies had automated cruise systems when Tesla was making the roadster. Gm has a large fleet roaming around Detroit, Chrysler is partnering with Google with their Pacificas, and Ford has a fleet of fusions as well after billions in investment.
The larger point is that elon and his 16 companies seem to do no wrong and avoid comparisons to the existing car companies, he should focus on getting market share in the extremely competitive automotive market instead of making a space/AI/brainlink/tunnel/solar/ev company.
1. Tesla's EVs are outselling everyone else combined, even with an average sale price that's double everyone else.
2. Tesla is partnered with Panasonic, but they're practically married with communal property. They haven't outsourced this, they've put billions into building a gigafactory. What part of "doubling global output of lithium batteries" is minuscule to you?
3. In 20 years, probably half the world's electricity will come from Solar PV. Was coal a niche market? Because this will be bigger.
4. Most other car makers are licensing systems from others, not building their own, and they don't have the self-driving hardware in any cars yet. Tesla has 10's of thousands of cars on the road right now (25k just in Q1) with their second generation system, while GM and Chrysler are still fiddling with prototypes.
If you don't see how all these things connect, then I understand your view. But when you recognize how they're all interconnected it makes complete sense to me to be building all of them at once, otherwise a failure in one dooms them all.
1. Nope. Are you just pulling numbers from a hat? Nissan sold 14,000 leafs last year, add that to the 24,000 volts and the 8,000 i3s and you get more than the model S.
2. Im saying the current business is minuscule, if we looked at elons promises as gospel (which you apparently do) we would have had a model x three years ago. LGchem and Samsung SDI are more than capable to meet the demand of the current lithium battery market without panasonic.
3. Speculation
4. Tesla has a SAE level 1 system which is the same as my VW golfs adaptive cruise with lane assist. They sell the car with the "hardware" and you think they are done? -> " All we have to do is build the controls and software now!!" By this logic throwing a couple cameras on the car means it has "self-driving hardware".
1. "Tesla delivered over 76,000 vehicles in 2016" [1]. My math may be rusty, but I'm pretty sure I'm right that they're outselling everyone combined with $100k cars. They're tracking to over 100,000 for 2017.
2. Several billion dollars worth of capital investments disagree with you. And what's important isn't the current market, but the future market - these things are growing and production bottlenecks kill growth.
3. Again, look at the trend lines not just what it is today.
4. A golf you buy today will keep lanes, and will never do anything better. A Tesla has all the hardware needed for Level 5 autonomy (which they've demo'd, but requires regulatory approval), and it's a software update away. And their whole fleet is sensors-on all the time, whether you're using it or not to enable that, which is not true for any other vehicle manufacturer. Google is the only other company that's close.
I'm no disciple, but I can see where the puck is going to be.
> A Tesla has all the hardware needed for Level 5 autonomy (which they've demo'd, but requires regulatory approval), and it's a software update away.
Audi, BMW, Google etc. demoe'd similar capacity as the tesla did 2-3 years ago. Do you even understand how difficult problem it is? It's not a problem you engineer away. Do you think Tesla made machine learning breakthroughs that Google or CMU (Uber) researchers couldn't? Tesla beating Google at Machine learning?
> And their whole fleet is sensors-on all the time, whether you're using it or not to enable that, which is not true for any other vehicle manufacturer.
Does it matter what kind of sensor? Almost everybody else agrees LIDAR is necessary. And what use is random data from useless sensors? It's like saying that you'd put cameras in a pedestrian crossing, and soon you'll process it to make a human level intelligence.
Ahh, a controlled demo on a test track with impeccably clear road lines and signs. Something they could have tested a hundred times with, potentially overfitting a route. Even then the Tesla was over-cautius, stopping metres before in front of a stop sign.
And that is still level3 or level4. Level5 is inarguably far far away.
1. You are comparing all of tesla models to individual models from other brands
2. You want to speculate on the future market, go ahead, I dont think Tesla has any special position on lithium batteries.
3. Solar is not a hockey stick, not sure what trend lines you are talking about.
4. Talk to anyone working on self driving cars and they will tell you level 5 is at least 10 years away. Can a tesla drive on icey road in northern canada in blizzard conditions with a couple failed sensors? Nope, then it is not level 5.
Commoditization is never instantaneous. You start of highly competitive because the products are all immature. During this period people who can differentiate become market leaders. Companies without R&D staffs can't compete yet because by the time they copy last year's product, next years product is out.
After a while, usually decades, commodity producers take over the lions share of the market. The high end is captured by one or two of the market leaders. Being first to market helps you get there, but you still have to fight for that position.
Look at iPhone. It was the best and the cheapest smartphone for probably a decade. Now Apple only has what, 20% of the market? But they have all the profits. The other 80% goes to commodity manufacturers but they don't make any money.
Tesla hopes to be that for mobility and home energy. Even if they fail, they'll still make a huge amount of money in the ramp up, before the commodity manufacturers eat their lunch. They're the market leader right now, so the prize is theirs to lose.
There's a big difference between being the premium product when the range for them is $0-$1200, your margin is massive, and everyone on the planet needs one.
It's another when the range is $12,000-$100,000, margins are much more competitive with way more competent adversaries, all the while car ownership is changing drastically to rental/ride sharing for a great many people.
At that point, you don't necessarily care the car you hired that day is a Tesla or Ford, because you experience it for 20 minutes and are done. The buyer in this case is the fleet owner not an individual, which does not necessarily favor Tesla.
I don't think that you can compare Tesla's product to Apple's (not to mention Apple's software ecosystem permeates so many more aspects of one's life if you are a part of it, Tesla not so much)
Wasn't overvaluing the potential of newer companies over established institutions with significant holdings one of the hallmarks of .com bubble ridiculousness? I'm not particularly knowledgeable about finance and economics– if someone that is knowledgeable has some insight, I'd love to hear it.
On the other hand, there were some major successes as well. Amazon got its start in the bubble and is now gigantic. eBay is doing great. So is PayPal (which is relevant here, since without PayPal we wouldn't have Tesla).
Sometimes these ridiculous valuations are completely unjustified, but sometimes they do come true. Figuring out which is which ahead of time is, well, hard.
>VA Linux - .... They set the record for largest first-day IPO price gain; after the price was set at $30/share, it ended the first day of trading at $239.25/share, a 698% gain (9 December 1999)
I don't think we are quite in the situation where valuations are based on updated websites. Nowadays it seems like monthly active users drives valuations which when your revenue is ad based, is a smart metric. In Tesla's case, they are actually shipping cars.
Agreed. During the dot-com bubble it seems like a lot of stock was driven by abject cluelessness and investors' perceived need to get in on any stock with .com in it.
These days, it's more like excessive optimism. People actually understand this stuff, at least vaguely, and if they're getting it wrong it's just because they don't see the downsides.
>Sometimes these ridiculous valuations are completely unjustified,
'Sometimes' is being generous. If we can only cherry-pick the world's biggest tech successes all of whom can be counted on one hand compared to the thousands, if not tens of thousands, of other over-valued companies, then you're really not saying much here. This is like saying, "How are there poor americans, look how rich Bill Gates is!"
A few exceptions don't invalidate we're in a bubble or justify the practices that get us in a bubble - traders trying to outfox other traders by reading the tea leaves of hype and ignoring the actually profitability and practicality of the business.
There will always be overvaluations and undervaluations of companies relative to how they'll perform in the future. It's notoriously difficult to predict. In my opinion, however, while there may be some overvaluations now, we're not even in the same universe as we were in 1999/2000.
Back then you could take an MBA with a powerpoint, put the word "Internet" on it, and they could conceivably IPO for hundreds of millions with nothing more than that. All of these companies valued at $100m, $1b, $10b with no more than a promise of "one day we'll sell x online and make a lot of money." A couple companies full of genius technologists (Amazon, Paypal) made it through the rubble, but for the most part it was all smoke, mirrors and charades.
Contrast that to today. Certainly there are overvalued companies; there always are, but there are also companies that are proving to be worth the hype, and severely undervalued. The Internet is 20x as large, there's real revenue coming in, real profits, and the scale that companies can hit when they land on something solid is incredible.
People were crying Bubble when Facebook was valued at $30B because it wasn't making much money. Now it's bringing in billions easily and still growing http://www.marketwatch.com/story/facebook-profit-tops-1-bill..., now valued at $400B+. So some companies were undervalued, even when everyone was crying "bubble."
As an asset class today tech is tiny. The valuations of every tech "unicorn" combined today would be less than Microsoft. Would you rather own every single tech startup that raised venture capital in the past couple years or Microsoft? You could have that discussion, but you wouldn't be crazy to take all of the VC-raising startups. And today the total amount of venture capital raised is a rounding error relative to the rest of the economy. (There's also a discussion around how all asset classes are highly valued today and even bonds are returning negative yields, but we'll save that for another day).
Tesla is certainly expensive relative to where it's at today, yet I still put in my entire net worth at $180 http://www.marketwatch.com/story/elon-musk-to-the-guy-who-in... (this is not a move that would be recommended by your financial advisor; my net worth is something I could replace quickly enough that it's not a big deal). Tesla is, in my opinion, building a fortress. It's combining the technology needed to incredible electric cars at large scale with the biggest battery factories in the world, solar-powered roofing, a nationwide charging network, and just some incredible innovations. We've seen Tesla do the impossible an innumerable amount of times in recent years.
So the price of Tesla right now is very frothy, but I still think in 10 years I'd rather own 100% of Tesla than 100% of Ford. If you disagree, then Tesla is overvalued, but no one truly knows who will be right. Such is life as a growth stock.
I did a ton of analysis, and basically at the end of the day it came out to "will they hit their targets in Q3/Q4 2016 and Q1/Q2 2017?"
There's so much unknown that Tesla continuing to de-risk the business step by step gets them in line with the current valuations, and forward-looking it should go up.
So I figured that at $180 (a very low price for Tesla historically) that if they did what they were predicting (which no one thought they could) that they would crush the current stock price. They have since hit (or come very close to) all of their targets.
Now the entire question short-term is around how the M3 performs. Long-term Tesla is playing a game no one else even sees, so we'd be OK with a couple stumbles.
>I did a ton of analysis, and basically at the end of the day it came out to "will they hit their targets in Q3/Q4 2016 and Q1/Q2 2017?"
The analysis upon which you went "all-in" on Tesla rests on a non-GAAP "delivery" figure (rather than a sales number), covering a few quarters, 1 year before the first model 3 is even built? I'd be interested in seeing that work. What did you think when they missed 2016 delivery estimates by 5%?
I'm aware it's not GAAP. They're showing they can deliver with models x and s. They didn't even have to get to model 3 for me to be up 60% (in four months).
I was a little concerned that they missed 2016, but the stock actually went up that day; most thought they would miss by more.
Bill Ford gave a talk at SXSW, and I asked him the question "Why hasn't Ford built the gigafactory". He gave IMHO a really weak answer about how they weren't sure the economics of it worked out.
Big car OEMs have so much invested in terms of R&D, brand and emotionally in the combustion engine that I think most are just not going to be able to make the jump to EVs. Nissan and BMW are trying, but they are still making really baby steps.
Nissan "built the gigafactory" a decade ago and it didn't work out for them at all.
In 2007, Nissan and NEC entered into a joint venture just like Tesla/Panasonic's: they created AESC, Automotive Energy Supply Corporation, and built a $1.1 billion lithium ion battery factory near one of Nissan's manufacturing plants. Nissan committed to buying the plant's output for some years. These became the batteries and battery packs for the Nissan Leaf, of which they've sold more than 200,000 to date.
However, AESC eventually lagged at least a generation behind Panasonic (and now several others) in chemistry, process and price, which significantly worsened Nissan's position in the market. It took them some years to get out of that arrangement (relatively recently) so that they can buy batteries for the next-generation Leaf and other Nissan-Renault vehicles at less than 1/2 the price from other suppliers.
There's no guarantee that 10 years from now, we'll look back and say the Gigafactory was a wise investment for Tesla. They feared insufficient supply or being locked out of adequate supply for batteries, but now that everyone's seen the writing on the wall that EVs could become a big chunk of the new car market in the 2020s, it seems far less likely that battery supply will be a short-term issue.
Boston Power, BYD, Foxconn, SK Innovation, Samsung SDI, LG Chem, etc have built, broken ground or committed funds for over 150 GWh of annual vehicle battery production over the next 3-5 years. Tesla will not be the only major player in that market, and Panasonic is free to supply batteries to other car makers than Tesla from their other factories.
He's right, the economics don't work out for a Ford. They only work out for a smaller, separately owned disruptor. Inevitable truth and pattern seen across all mature industries
The dealerships won't sell it. Any marketing they do for it will hurt their other brands. Any marketing they do for their other brands will hurt it.
It's like McDonalds selling an organic, grass fed burger. If they talk about the quality of the beef, they're basically saying the Big Mac is low quality beef.
McDonald's just a couple days ago announced a change from frozen to fresh beef patties in their Quarter Pounder, clearly to compete with Wendy's who joked about it on their Twitter (https://twitter.com/Wendys/status/847478772311834626).
I'm not sure what that says about your analogy. Perhaps Ford should have gotten started on this a long time ago and taken the hit then. Perhaps once Ford gets serious about electrics, their response will be equally as weak as McDonald's.
The sub-brand still messes with their marketing. Why do you think there is so much anti-Tesla astroturfing? There's no point in starting a sub-brand if you're just going to have to astroturf it.
For instance: The government of Sweden just announced suggested legislation for june 2018 that will severely punish any new registrations of non-electric vehicles (the tax penalty is linear to the co2-emissions/driven km above a certain treshold.) I think it goes sort of halfway towards Norway's current policy. (Which is rather extreme, and something they as a nation can afford, being a major oil exporter.)
Ford sells 6.5 million cars a year, and only 12,000 of them in Sweden. Ford already makes an electric car, and 12K cars is 3-4 weeks of production from one production line in one of their factories.
Can anyone long the stock who is bullish about the future growth of production, cars, batteries etc write down some quick napkin math on future expectations that would justify your investment at this valuation? I have yet to hear a bull case with any actual math behind it, but am willing to hear you out.
Something like:
cars sold by yr, Margins.
battery wall, solar sold by year. Margins.
multiples assumed on revenue and earnings by yr, and at mature phase.
dilution of equity assumed to scale production.
Can someone address those things without hand waiving them away for me? Again, I'm not long or short the stock, but havent heard a coherent argument with math for going long.
In the late 90' during the tech bubble, companies that had negative cash flow operation were bid to the stratosphere. Tesla and Amazon however have positive cashflow for operations and huge growth.
People said the same thing about Facebook in 2012-2013 and Google in 2004-2005: how will they (Google and Facebook) justify their valuations? Well, they did. Wall St. sometimes get it terribly wrong (Infospace in 2000) and other time very right.
Sometimes it doesn't make sense...but there is a method to the market's madness.
lol @ "but there is a method to the market's madness." It is just supply and demand. More buyers than sellers => price goes up. More sellers than buyers => price goes down. Not all buyers need to be smart and informed. I think Elon Musk will do great things with Tesla but I would never buy that stock... it is purely a gamble.
If everything in investment is about Math (and Math only) we'll have a perfect market. I'm long on Tesla and I totally believe the current valuation is out of proportion. However, I know Tesla can do a lot more and better than they do currently. I do think they have a lot of potential and can overtake other car makers. I won't buy more shares but I'll hold on to them for the foreseeable future.
Thinking about product category sales is the wrong way to do it, because Tesla is trying to restructure existing product categories. Not car purchasing, but mobility services. Not solar panels but sustainable electricity generation and storage.
U.S. residential electricity use is 1.4 trillion kilowatt hours (kWh) per year. [1] At $0.10 each that $140 billion dollars.
Americans travelled about 3 trillion car miles in cars per year. [2] At $0.50 per mile (what the IRS lets you claim for mobility) that's $1.5 trillion dollars.
That's just the U.S. These markets are enormous. There are all kinds of ways for them to carve out $7 billion a year in net income to justify their market cap.
The assumption is that Tesla is going to knock the market out of its steady state. You aren't going to predict any of those numbers because the space of possibilities is wildly broad for a roiling market. You may as well try to predict the weather a year from now. People instinctively know not to waste time on that.
Put differently, the long argument is a qualitative one, not a quantitative one. This doesn't make it any less intelligent, just harder for people to put into words. See an earlier comment I made[1] about the kind of thing that's meaningful but which is difficult to attach a number to.
And conversely, if you can predict something with numbers, that's a sign that it's stable and less risky, but then the price/ROI will reflect that safety.
It appears that no one has even presented napkin math to justify the price. Total addressable market is interesting, but doesn't even qualify as napkin math without even a rough idea of margins, capital needed, rough growth rates.
I am basically seeing an argument that Tesla is smart and will figure out ways to make money to justify a 50B mcap. That may be true, but I was hoping for more.
I will likely buy puts on this once the squeeze subsides.
All arguments so far I would basically describe as hand-waving which gives me more confidence that the market is too optimistic.
All that said, if you have been long this, congratulations.
I would agree with the market that Tesla has the potential to be far far larger than Ford should things go well. If they manage to get to 500000 cars and full automation within the next year, they'll be worth even more than their current market cap.
Remember that Tesla have by far the best dataset for building self driving cars and this is going to give them a huge time to market and/or safety advantage over their competition. If they launch an Uber clone as well (which they have implied they might) I think they could be able to replace a lot of car journeys with their service instead of paying drivers, something Uber's lofty valuation is entirely based upon.
This! Tesla's proposition is very risky but from their track record of what they've done with reusable rockets, I guess you can say execution is their strong point. Yes Elon will have crazy deadlines, but if you put a good buffer then eventually he'll deliver it.
One possible future is that Tesla execute perfectly but their stock still underperforms the market.
In 20 years Tesla may produce more cars than Toyota. They may have self-driving AI that is safer than any other. They may provide more taxi rides than Uber. But the total market for new cars may be half what it is today because no-one will own cars in future.
I don't think so, but by 2027 poor people won't be able to afford to drive anything other than a Tesla. The per mile costs for ICE will dwarf electric. The per mile costs of car ownership will dwarf autonomous mobility services. And Tesla will own the biggest battery supply chain in the world, with the best economy of scale.
Rich people will still buy classic cars and Germans will still buy ICE BMWs. The vast majority of daily commute hours will be split between Teslas and whichever other manufacturers who get off their butts before it's too late.
I've never seen the acronym ICE used before. Internal combustion engine. I probably just don't know the correct lingo more commonly used in this context and comparison.
Ford is sitting on almost $16 billion cash. Tesla, like Amazon, burns through cash as fast as they can turn it into scalable future stuff. Whether you consider this good or bad depends on your future outlook:
Being long Ford is making a bet that the future will look pretty much the same.
Being long Tesla is making a bet that the future will look different. (Plus the risks of believing that they can do what they say they can, and that their vision is more correct than not)
If you are a Ford investor and want Ford to be investing in the future, you should be ashamed of them for being either too scared or too stupid to know what to do with their piles of money. Then again, the largest carmakers in the US (incl. Ford) were making a loss just a few years ago, and unlike Tesla, they were making that loss while doing ZERO to invest for the future.
So maybe Ford should be scared.
Or maybe they should be pivoting faster so they don't return to not-making-a-profit, because unlike Tesla, they still aren't spending very much on the future, are they?
We can argue about whether or not Tesla has a good plan or a bad plan, but Ford has shown before that they more or less have "No plan." Their reliance of SUV profits almost killed them in the mid 2000's (and did mortally wound GM, only to be resurrected). Will Ford's reliance on the F-150 (or on ICE expertise while outsourcing most other things) do the same thing in the future?
~~~
I've been holding Tesla for a long time. Currently I'm more optimistic about the company than when I bought it, which seemed fairly risky.
I think the room for growth and market expansion (Important Electric Things and energy future) is very large. I think trying to compute how the math will get there is a mistake, short of making sure that they are not going to run out of money.
Being long technology stocks is a strange game. If you're long IBM or AAPL right now, you're more or less betting that the future is going to look pretty much the same, just like with Ford. It's almost a misnomer to call them technology stocks.
There are only a handful of public companies you can bet on (Tesla and Amazon are probably the most obvious) that are really betting big on the future. The dividends of these will be unknown.
"Being long Tesla is making a bet that the future will look different."
No. Being long Tesla is making a bet that the future will look like Tesla, that Tesla will be producing a very significant chunk of the vehicles on the road sometime in the reasonably near future. Tesla currently has plans to expand to produce 0.5 million vehicles per year in the 2018-2020 time frame; Ford currently produces 2.5 million vehicles in the US for ~15% of the market.
Disclaimer: I'm on my second F-150 and third Ford vehicle.
I don't own either Ford or Tesla stock directly and I'm not sure how accurate this assessment is, but Ford is probably investing the same amount or more as Waymo or Tesla in self driving car technology. It appears all of the large auto manufacturers are technically a little behind Waymo but are starting to catch up and are ahead in other areas of the total problem of getting self driving cars in production - it looks like none of the big US/euro brands is going to be satisfied with integrating something from Waymo.
I've been expecting this ever since I test drove a Tesla last year and got the same feeling I got back in 2008 when I saw an iPhone 3G. The market isn't betting on just another car company but on. car + energy (electricity instead of gas) + TaaS (Transportation as a Service). Tesla has a tremendous headstart on this and in 5-10 years I expect a bloodbath like the smart phone wars, with a only 2-3 main players left e.g. Tesla:Apple::Waymo:Android.
Ford has dozens of production facilities across every continent on earth producing millions of vehicles a year. How can Tesla possibly be more valuable?
Blockbuster had thousands of stores. How could Netflix possibly compete?
Tesla isn't playing Ford's game. The ultimate value of TSLA is in the vertically integrated electric Tesla Network with millions of level 5 self-driving vehicles.
Why would you want an ICE vehicle when you can own a Tesla that drives you & your family anywhere you want, charges itself and makes you money on the side. Closely following that...why own a car at that point? Just order one up off the Tesla Network.
It is all about who owns the future. E.g. how much would you value the stock of SpaceX competitors now that SpaceX can fly reused rockets? Doesn't matter how many factories these guys have. They will be destroyed because they will never be able to compete on price, with somebody who can just refuel their rocket while you have to build a whole new one each time.
People value stocks based on what they think the future holds.
Because people buying and selling shares think that ford will probably shrink and tesla will continue to grow at pace for years, eating market share from Ford (and every other hydrocarbon heavy manufacturer).
I think people are betting more on Elon then they are on TSLA.
As an aside, he strikes me as someone who's been told he has some short measure of time left to live and is trying to make the most of it. By all measures, he's swinging for the fences.
My prediction has always been that all traditional car manufacturers will jump into the market with gusto at the next inflection point in battery technology.
The current state of the art battery technology for vehicles is heavy and has less than desirable energy density.
The minute a new technology can deliver twice the energy density at the same or lower weight and lower cost most established car manufacturers will jump in.
Electric cars are very easy to build when compared to IC cars. The simplest fact being that you are eliminating thousands of mechanical components and replacing them with an electric motor and hundreds (or thousands?) of electronic components (for motor control). Electronics design and manufacturing is easier, cheaper and faster than mechanical manufacturing.
I believe Tesla is positioned to take a big hit when that inflection point happens. They are inexorably married to a battery technology. The Gigafactory, as awesome as it might be, is now a large ship with huge mass that is very difficult to turn around.
The next battery technology might very well turn the Gigafactory into a huge anchor for a few years, during which all other car manufacturers, lacking that commitment, are likely to leave Tesla in the dust.
When that change comes the other players will have the problem that they too will need to build some sort of Gigafactory. There is no way they can do a rushed attack against Tesla on this. These guys are slow movers not willing to take big risks. When this battery technology switch happens I am pretty sure Tesla will actually be the first to move. They will have more experience with large scale battery production than the competition.
It isn't just about cells but putting them together and designing a whole battery, with cooling and everything. Tesla knows very well how to do this. The competition doesn't.
They could also buy from the gigafactory, just like Apple buys components from Samsung (their competitor within, particularly, the mobile market). Google licensed their search engine to Yahoo and others.
Tesla is not in a position to replace Ford and others, and they won't be for several years. Even then, they won't be in a position to displace anyone in anything other than consumer vehicles. They have no truck and no announcement for a truck. They have no busses. They have no heavy equipment.
New battery tech takes a long time to being to market. Once an innovation is shown to be viable in a lab, there's a long gauntlet of stress tests to run--different operating loads under different environmental conditions. There's no market surprise to be had that's going to catch your competitors off-guard.
> Electric cars are very easy to build when compared to IC cars.
As I commented above, I recommend reading about the development of the Volt and Bolt at GM. They had a huge learning curve:
> Nearly everything changes when you opt for a fundamentally different power train, so GM’s greatest advantage—more than a century of experience building cars—was all but moot.
I don't really know about the gigafactory, but it seems logic that a % of it is dedicated to R&D and growth. Plus, this battery tech doesn't create itself, if I remember reading correctly Tesla is making some advancements in here as well.
I think the error in this thinking is in assuming that the market leader will be the source of the next step change in innovation. This is covered very well in the book "The Innovator's Dilemma". Bottom line, this is seldom the case. If the inflection point in battery technology comes from an outfit Tesla does not control they could be in trouble. All other car manufacturers will simply go off and buy these new better batteries while Tesla will have to figure out what to do with a factory that can't produce them and, perhaps, never will because they won't have command of the tech.
On the other hand, I'd guess there's a "small" window of a couple of years for a real breakthrough+production outside of Tesla to affect them. Seeing the history of batteries and incremental improvements for the last 20? years, it'd be pretty rare for it to happen now.
Some other car manufacturers could do this intantly. Nissan has the best selling electric car (Leaf) on the market and Toyota has some kick ass hybrid engines (that's an electric engine AND a combustion engine) available for most of their cars. If they decided that battery only cars is the way to go they could switch from one day to the other. But they don't.
I can't find a number through Google but the number of Ford Hourly/Salaried employees has to be over 125,000. As a guess.
Tesla has 30,000 hourly/salary employees.
Despite being valued 'less' Ford has a huge economic impact for many peoples lives. This may decline, over time, but don't be surprised if Ford/GM/Chrysler combine forces for a huge battery factory of their own. Their ability to tap capital markets with lower interest rates than Tesla is a competitive advantage. They also move many more vehicles than Tesla and get better prices from suppliers, which is a competitive advantage.
Tesla's gambit with batteries is either going to work or will offer a fantastic opportunity to pickup a battery factory at a good price.
At the of the day, when all major automotive companies have EV vehicles, what's going to differentiate them? The accuracy of the self driving software? Entertainment options within the vehicle? Serious question.
> don't be surprised if Ford/GM/Chrysler combine forces for a huge battery factory of their own.
They could do that, but they haven't really woken up to the huge threat to their markets that electric cars are posing. They still believe that ICE cars are what people really want. Ford has just announced now that it will begin designing hybrid vehicles. They're a few years behind.
If they decided now that they're going to fund their own gigafactory, it would only be ready in 4-5 years. Where do you think Tesla is going to be then? If things go as planned, in 4-5 years, Tesla could have sold 2+ million Model 3's, and be on its way to more new models.
> when all major automotive companies have EV vehicles, what's going to differentiate them? The accuracy of the self driving software? Entertainment options within the vehicle? Serious question.
- Better performance. The Model 3 isn't a model S, but you can be sure that it will kick the Leaf and Chevy Bolt in the balls.
- A supercharger network that's already in place. Other vendors all have major catching up to do.
Another thing to consider is, Tesla has a lot of expertise and an EV designed from the ground up to be electric. Other vendors can't just come up with that tomorrow. It takes time to design and refine a product. IMO, by the time Ford really wakes up, they will largely be fucked. Not just because of Tesla, but because all other vendors are already ahead.
As far as suppliers go, Tesla is tightly vertically integrated and is willing to build anything in house if it increases their quality or delivery date. This is their buisness strategy for beating companies like Ford, and with baby-hands Trump in the office killing international trade left and right, it looks like it might be a winning bet (free trade is required for cheap supply chains).
Rather than build own factories. It would be smarter, and someone will do it, to buy batteries and self driving tech from someone else. Concentrate on their strengths of car design, brand, dealer networks. Rather than enter new and risky tech someone else has 10 year lead on you. Someone else like Tesla.
Of the major automakers, Toyota probably has the furthest behind ICE platforms. The 5.7L V8 and the 4.6L v6 are 10 years old, and very fuel inefficient compared to the the engines from ford or GM. I think that Toyota really has the most to fear in this case, since they haven't had any success bringing out more efficient ICE/Drivetrains to match the competition, and haven't really managed to scale the hybrid efficiency past the sedan market.
In the truck/SUV/CUV segment, the engines are dated- sure. But that segment barely exists in other markets, at least compared to small cars. Particularly in Europe and Asia.
Regardless, I don't think it's a tech issue, but rather an image issue. Trying to sell hybrid trucks to Americans is like trying to feed boiled spinach to kids.
Ford has been successful with the Ecoboost, though. And Ram has the ecodiesel. Both viable options. Though the segment is small outside the US, the Article states that Ford alone sells 40K trucks every 3 weeks.
Comparing Tesla with Ford is like comparing Ford with (GM + Shell + Hertz). Tesla is an energy company not an automobile company. It plans to sell you new ways to capture (solar panels), store (power wall), and consume (cars) energy. It also plans to make cars fully autonomous and ownership free. Ford will obviously compete with Tesla in some segments is not a primary competition for Tesla.
Agreed. Tesla is a young auto company, who eventually wants to be an energy company. It might happen faster than we all think or expect, but it's not there yet.
Correct. The energy side (powerpacks) are absolutely huge, even with cheap oil. When combined with solar, this provides a cheaper source of dispatchable power than diesel, which is its primary competitor, anywhere along the equator.
I actually think the residential solar roof market will remain niche, and the fancy integrated solar roof will be effectively a luxury product with a relatively small market value.
Tesla (with acquisition of Solar City) is able to turn these commodity solar cells from other companies (now at just 19 cents per Watt: http://pv.energytrend.com/pricequotes.html) into profitable utility-scale installations very quickly and at scale. They can install them all over the developing world where electricity demand is soaring and the existing sources are expensive (i.e. diesel). A key to this is the ability to install FAST. They can install these utility-scale battery storage units in just 3 months vs 3 years for a natural gas fired power plant (vs 4-5 years for coal, 6-20+ years for a nuclear power plant). And they can work with any kind of existing or future electricity source, smoothing out peaks in demand, including advanced combined cycle natural gas plants.
So that's a huge market especially if you can tack on a solar farm on top of it. And their exposure to risk on the very low-margin solar cell manufacturing side is limited, as Solar City primarily uses whatever cells the market produces, not their in-house stuff. It has even less competition than the "non-sucky production electric cars" market, and with the 3rd world needing terawatts of electricity, the market will only grow.
What you said is correct but immediately raises the question "what's the value of that integration?" Obviously GM and Shell have been successful and profitable without being integrated, and it's not clear that merging would yield them advantages. Why do these advantages exist in the electric energy arena?
This is just my opinion, but I think long term Tesla will lose out on solar panels to cheaper more focused competition.
But they seem to be leading the way in battery production and self-driving automobiles. If they can hold on to market lead in those two areas then they should still be able to way outpace Ford or other car manufacturers. Big IF though in terms of self-driving technology with all the other big money players racing for that grail. Energy storage and battery production they seem to be in a class of their own without much competition.
Can't predict numbers but some obvious integration points are... a) on the hardware side a solar panel customer could also buy the power wall (natural extension) and car, which can yield very high LTV per consumer; b) on the services side a fully autonomous ride sharing means low operating cost; c) if Solar City continues to lease out the panels then Tesla could become the biggest solar powered grid network on the planet.
I just don't see a) as happening much. If there are cheaper solar panel or electric cars available I don't see the point in a consumer not going with the competition. Unless Tesla intentionally makes it hard to integrate competitors solar panels into their power walls/cars, which would likely land them in some anti-competitive/monopoly troubles in a number of jurisdictions.
Possible.. interesting thing to note is that home owners are more inclined to lease panels than buy them (so retail cost doesn't matter much it appears). SolarCity really took off after it started offering the 0 down lease. If that trend continues, Tesla could potentially offer a blanket $x/month for energy production and $y/month for consumption (cars) and lock people in. We know panel cost and batter cost will go down over time, so the game is likely in selling experiences not entities..
I think this is mostly undervaluation of Ford. 45B$ marketcap is quite low for that kind of revenue, profits and assets. I mean 12B$ in free cash flow! How do analyst even evaluate car companies?
Why doesn't this have a huge benefit to Tesla. They always seem to be short on cash, but if you are worth that much shouldn't cash be super simple to raise for Tesla?
Why push for high stock prices if it gives little benefits.
Seems like a nutty evaluation even if Tesla knocks over the established players in the future. I do in fact think that there will be an iPhone moment where established players who have not taken electric self driving cars seriousness will be eradicated like Black Berry and Nokia.
They just raised about $1 billion a couple of weeks ago, which they said they didn't strictly need for the Model 3 but would be nice to have. They're not shy about taking advantage of their valuation.
That's an interesting comparison — we could very well end up in a market where existing manufacturers catch up and vastly outsell Tesla in the long-run (Android), and Tesla ends up as a very successful luxury model (iOS).
Android was not an established player either though. So we had a situation where new entrants like Apple and Google both destroyed the established players like Nokia, Black Berry, Windows Phone, Siemens, Sony-Ericcson etc.
There might very well be another electric car maker upending the market, but really I think Tesla has quite a number of years head start now. Building and planning something like the Giga factory took many years. A competitor will not be able to reproduce that in a couple of years.
Tesla also sits with years of experience designing batteries now. They have a competency advantage over the established players who mainly know how to make a fossils fuel engine. Each year passing that becomes useless and dead knowledge. They also lack the software development skills of Tesla. They have mostly bought that from vendors. Tesla thus sits with expertise in the key areas for the future of automobile while the competition is very weak in these areas.
I predict a bloodbath. 10 years from now I think Tesla will be quite big and the established players struggling hard to hang on.
Can someone more knowledgeable explain how is that even possible?
Doesn't this mean that the market predicts that Tesla's future earning after discount and after taking risks into account is higher than Ford's? Under which data? Or am I missing something?
You will not find any data to support this. The stock price level is based on emotion and guts feeling and on the cleverness of people who know how to play the emotions and gut feelings of others.
This is exciting, but Ford continues to be a major player. They just invested $1 billion in R&D in Ontario, Canada. Seems like they are on the right path, but perhaps don't have the flexibility and velocity of a (relatively) smaller company like Tesla.
What this says to me is that the stock asset class is broken. The value of a stock is supposed to be the amount of earnings you are expected to receive from it over its lifetime (adjusted according to the risk free rate or whatever).
But today a stock's value can be influenced by a cool factor. Stocks that never pay any earnings can have high values (Amazon) and investor mania can out-live any attempted short.
There has to be a better way to set up the market.
What if stock had an expiration, after which you had to buy it again? And what if, when you short a stock, you get the full face value of the stock and then only have to pay the owner the earnings? Since the stock expires, you don't have to worry about covering both the earnings and the stock price, only the actual earnings.
I think the result would be pricings that more accurately represented a company's earnings potential.
Markets are irrational and always have been, and the cool factor has been around since at least the 1920s. You sound like you could be an extremely capable investor; disillusionment is a really good starting point. The next step, if you're interested, is reading The Money Game by 'Adam Smith', which was written in the 1960s but reads like a description of the 2000s... I also recommend 1929: The Year of the Great Crash, although I forget the author at the moment.
> the value of a stock is supposed to be the amount of earnings you are expected to receive from it over its lifetime
Who supposes that? I don't and I'm ready to pay a different price that you'd do. If there isn't a good reason for that, you might be able to take advantage from my position.
Now, there are many reasons why I wouldn't price a stock as the sum of its (future) earnings. For instance, a company can be acquired by another and makes a very different business in the combined configuration. Moreover, the acquirer could use the merger to prevent a competitor to enter a very profitable market. Why would you care about the performance of the acquired company if it remained independent? There's no way to estimate the future earnings of a company without knowing all the possible strategic configurations.
Growth stocks are bought for potential capital gains, not dividends. (Market) power is much more important than earnings you can forecast.
I'm a Tesla shareholder (the stock makes over 90% of my financial assets) and I don't expect a buck of dividend from this company. I intend to keep the stock for ~20 years, which I bought at $25 avg.
All companies eventually die. Sometimes this can take hundreds of years, but all companies do eventually die. At that point, the stock is worth zero. So if all stock is eventually worth zero, why pay for any of it today?
Well, you may want voting rights. But voting rights don't mean much unless you hold a lot of stock, and a lot of stock is non-voting anyway.
That leaves dividends and exits. An exit depends on someone having a value for the company, and can almost be looked at as a 'final dividend'. So I would essentially boil the value of most stock down to purely dividends.
If you buy it for any other reason, you are hoping that some other person will be willing to buy it from you later. Which means that other person needs a reason (voting power, dividends, or some other business move with external benefits).
But my appraisal is that many stocks exist today that have value simply because people think that other people will want the stock. It's inefficient, and at the moment of exit (death also counts as exit here) someone is left holding a bunch of stock that's worth less than what they bought it for.
The alternative to valuing a stock as the current value of its net future dividends (not future revenue; as a stockholder, you have no claim on revenue) is the greater fool theory.
Greater fool theory has some problems. For one, it's not economically rational.
Part of this huge surge in tesla stock has to do with enthusiasm over their battery technology. tesla is a battery company that also makes cars, too. I think the share price goes as high as $500 soon.
even years ago, a model s was as expensive to own, all costs accounted for over the span of seven to ten years, as a honda odyssey minivan. they are about to release a car that costs 35000 dollars.
So three years ago, the high-end, not-meant-to-be-cheap $92,800 car was 5% more expensive than the Odyssey according to a decent-looking model (but cheaper according to some reports), and significantly more expensive than the since-discontinued Rav4 EV.
Fair, it's not a slam-dunk that the Tesla S was a great purchase if your goal was saving money. I'm pretty sure it' wasn't the best option in that case.
The Model 3 sticker price is less than half the S85, though. Short-term, yeah, most people still won't be driving a Tesla, but when I see volume increasing and unit price decreasing, I extrapolate to "Tesla could easily become a major player", not to"this is irrelevant to 99% of us".
Where are all the guys saying that this is just an illusion amd that elon actually doesnt know any physics or engineering, but just is a master salesman in disguise?
Often discussed outside HN, but almost never heard here: Many are investing in his relationship with President Trump. At least two major investment banks [0][1][2] advised their clients of it and many other observers and investors think so too. [3][4] Again, outside HN it's not an uncommon idea; just search a news aggregator for "musk trump".
EDIT: It's a very serious problem if we lose free market competition, and instead success depends - or even appears to depend - on politics and corruption. Even the appearance will encourage others to take that course, and normalize it. Corruption always exists to a degree, the market is never perfect, but that doesn't mean it's not serious. What happens to startups if success depends on access to politicians?
The surge in Tesla's market capitalization corresponds with Musk's public support for Trump, though the stock market in general has recently. Here's the data on Tesla; I recommend just looking at the graphic, which will tell you more:
* It's now at it's all-time high (give or take a buck or two), $294
* Generally, around Election Day it was stable around $190, on Dec 2 it hit bottom at ~181, then it vectored mostly steadily upward to Feb 21 (277), then there was a dip and it stabilized for awhile; now it vectored up again starting ~ March 23. today.
@dang, @mods: I don't care about this one comment, and obviously HN is your forum and you can score things however you want. However, please let us know your policies so that commenters can willingly follow them and so that they don't waste their valuable time contributing things that are unwanted and will be underutilized (and in fairness those contributions are most of HN's value). Please be open about it (whatever 'it' is); we shouldn't have to guess.
When the above comment was posted, it immediately was below 7 other threads and hundreds of comments, and it dropped quickly since then, despite no downvotes. That is odd behavior; usually new comments start at the top, or near it, unless the user is brand new or has some other problem (I'm in neither category AFAIK; most of my other comments seem to behave within the range of normality). I've seen other recent comments exhibit this different behavior. I see nothing that would algorithmically trigger anything; it's not short, it contains no inflammatory words, no all caps, etc.
My guess, based on eyeballing the anecdotal evidence is that mentioning "Trump" is the problem. If you object to it, please just say so. I think it's a bad idea to single him out - his presidency will have a very serious impact on the IT industry, startups, and many broader things that HN readers hold dear. But that's a different issue. Please give us the courtesy of letting us know, whatever it is, Trump or not.
EDIT: You objected previously to something I wrote that mentioned Trump, but I wasn't clear what the objection was - mentioning Trump? something else? I responded and asked, but I think too late to be noticed, so I still don't know. I really have no idea what's going on. The thread with my question is here:
I think the placement has a large degree of randomness. Comments with a lot of Karma will rise to the top, and everything else settles in the middle and bottom.
Tech stocks such as Amazon, Tesla, Facebook, and Google keep going up. ..so much for the myth that Trump is bad for tech. Trump wants the tech community and these tech companies to succeed, as they are American capitalist success stories.
I don't see much support for these claims. He's been in office for two months, so we lack any real data and can't make claims about his impact. Almost certainly, the prior government (President and Congress) has much more impact on current conditions. For example, consider this point in Obama's Presidency, when the Great Recession had begun a couple months before he was elected; conditions on April 3, good or ill, were mostly the responsibility of his predecessor.
The claims about his motives and thinking are speculative; it would be hard to find evidence of them. Even the things he says about himself often turn out to be unreliable. Certainly we can speculate on many other motives and interests, but I don't think that's useful.
If I actually trusted the derivative counterparties to remain solvent, I'd reopen a trading to put a long short strategy on this. Everybody seems so have missed the glaring fact that the electric transport isn't going to go anywhere; the lucky ones will have good bi/tricycles, or horse/mules and cart. Motorized transport wasn't a product of humanity's sheer desire for it! It was only caused by the incomparably immense oversupply of energy from fossil fuels, which was a one-off. We can just pray that the transition won't destroy us. Electric lights and computer networks would be nice to salvage out of it. Did you think you'd never use a 100mhz CPU again? The suckless guys have the right idea; we need more efficiency and standardization, not bigger frameworks running on faster chips. I want a 500mW workstation with relatively fast e-ink like display. I'd sell billions of em. Sell your (e)cars, buy yourselves nice bicycles. You won't regret it.
"While Tesla’s market capitalization has swelled in size, Ford still overshadows the Palo Alto, California-based company in most other financial metrics. Over the last five years, Ford has posted net income totaling $26 billion, while Tesla has lost $2.3 billion. Last year, Ford had annual revenue of $151.8 billion compared with Tesla’s $7 billion.
And when it comes to car sales, Tesla sold 40,697 vehicles in the U.S. last year, according to researcher IHS Markit. Ford sells that many F-Series trucks in the U.S. about every three weeks."