The Bull case is pretty straightforward. There are ~80-100M cars produced every year. Tesla's market cap is ~40% of the total automotive industry. So either they have to 40x their production to match their current market cap or drastically eat into another industry. People like to propose two different possibilities - self driving and energy. Personally, I think self driving will be a race to the bottom. As soon as one person figures it out, they might have one year before others are able to do it. Aside from that, I think it is pretty clear that Tesla is going to lose that race regardless as the money in self driving is having an autonomous fleet. Waymo doesn't need to make the cars or have gigafactories.
As for being the energy provider of the future, as much as people love to hate energy companies, Chevron is not going to roll over so easily. They love oil because it makes money. As soon as it stops making money, they are much better positioned to transform their infrastructure into charging stations than Tesla is to bootstrap that side of their business.
At this point, it is obvious Tesla will be a profitable car company moving forward but I still think they are more likely to end up as another Mercedes-Benz (Daimler market cap is 80B) than eating the automotive industry plus another industry.
10 years ago, you could have said that the existing auto industry was better positioned to electrify their existing vehicles than Tesla is to bootstrap their own electric cars out of nothing - but here we are.
It seems like more an issue of desire than ability though right? The existing auto makers were not making any effort so it feels weird to make a comparison.
Not that they’re making an effort they’ve proven they can make electric cars. The only thing they’re missing imo is the ubiquitous supercharger network.
The question isn't whether there's a bull case for tesla, there obviously is. The question is the bear case which the GP laid out pretty clearly.
Tesla might grow to eclipse the existing auto industry! Certainly the story of "incumbent industries fail to adapt to changing conditions" is a common one but "industry supports several equally sized competitors" is as well.
I just said it above, extrapolating from past exponential performance works until it doesn't and reality implies that it will stop working at some point.
> So either they have to 40x their production to match their current market cap or drastically eat into another industry
They can also justify a higher market cap through higher margins. The challenge with that is that other automakers are showing they can also build electric cars, so there's competition that will drive down margins. It also looks like Ford is beating them to the truck market (and with a truck truck people actually want).
The Bull case should also be that Tesla is lead by Elon Musk and that his companies have generally done, really, really well. He makes the right investments at the right time to continue growing often when most people don't see it yet.
Tesla literally started to work on is in-house battery and battery manufacturing plans years and years ago. When most manufactures didn't even consider having a dedicated battery partner. They even have in-house materials manufactures where they make their own cathode and might even make their own lithium hydroxide. This looks like a brilliant bet right now, in comparison Ford only now realized that they need a dedicated battery manufacturing partnership (something Tesla had in 2014). The margin lost on a battery if you buy it is significant, and that is outside of the chance to make it cheaper and better integrated.
I trust that Musk and Tesla are internally already looking at what the next thing is they need to continue their growth. Grid Energy is only starting to really go of now and will look quite good over time, they just started a new factory fully dedicated to grid storage. Tesla is also not bound to cars, electrification will go to aviation next, as they continue to improve batteries at some point the density will hit a point it simply makes sense to look into aviation and Tesla is a great position to do that at some point.
In my opinion just saying car market size is X therefore Tesla can't be more then Y is a false analysis.
> Waymo doesn't need to make the cars or have gigafactories.
Yes, they just need relay on partners who want them to pay as much as possible and are not fully integrated in what Waymo actually needs.
Waymo has no clear way to profitability, Tesla even without Full-Self Driving can make lot of money selling driver assistance.
> As for being the energy provider of the future, as much as people love to hate energy companies, Chevron is not going to roll over so easily. They love oil because it makes money. As soon as it stops making money, they are much better positioned to transform their infrastructure into charging stations than Tesla is to bootstrap that side of their business.
This makes little sense. First of all, charging is a lost leader, you don't really make money. Its a huge investment and maybe at some distant point in the future you make money. And charging and gas are simply different and have different requirements, and you don't need as many.
Chevron has no expertise in high power electronics needed and all the software required to make it a great experience for costumers.
If that would happen they would need to invest many billions now, and even then, this is something Tesla would welcome as its a good argument and makes their cars more attractive, not less. Tesla can not build ever EV charger in the world.
As for being the energy provider of the future, as much as people love to hate energy companies, Chevron is not going to roll over so easily. They love oil because it makes money. As soon as it stops making money, they are much better positioned to transform their infrastructure into charging stations than Tesla is to bootstrap that side of their business.
At this point, it is obvious Tesla will be a profitable car company moving forward but I still think they are more likely to end up as another Mercedes-Benz (Daimler market cap is 80B) than eating the automotive industry plus another industry.