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I published an article yesterday on Tesla’s crazy-high market cap, more than the following automakers’ combined: Toyota, BYD, GM, Ford, Hyundai, Kia, Mercedes-Benz, Stellantis, Geely, Ferrari, BMW, Volkswagen Group, Honda, Nissan, Renault, XPENG, and NIO. Unfortunately, we had a tech crisis today and had to republish several articles, which led to losing the comments under them. There were a bunch of great and interesting comments on this one, but the good news is that I had the article open and can still see most of those comments. So, I’m going to paste them in here.
From goneskiing:
It is also a mystery to compare Tesla market cap to BYD, XPeng or NIO. Is Tesla really worth more than 10 times BYD, 80 times XPeng? What is Tesla going to do to grow revenues with a sufficiently high margin to justify it’s market cap. Maybe Tesla will create products like Apple that seem to command 50% margins for years but what are they because they are not EVs, robots or self driving tech.
From Matthew2312:
There are only 1.8 million total vehicles in the US that are actively deployed in taxi service or ride hailing service. If 100% of these were replaced by autonomous robotaxis, it would require around 700,000 vehicles in total. (Better utilization.) If you assume these last 7 years, it is 100,000 a year. That is if literally every taxi is replaced.
There is no danger that Tesla will suddenly start selling hundreds of thousands, much less millions of robotaxis every year. Indeed, it is difficult to see the Cybercab line even hitting Cybertruck volumes. That is likely why Elon said today that he is going to start selling it as a regular old low cost sedan instead. The Cybercivic?
Jan Tjarks responded:
Cyber nonsense. Build a production line for a car without a steering wheel and be surprised by the outcome.
But as long as the meme stock finds enough gamblers, it will stay a meme stock. It’s that simple.
Leeroy wrote:
All that money is a bet on Tesla’s Robots and AI now
Jan Tjarks responded:
Gambling. Tesla isn’t an AI company, that went to SpaceX lately. And Optimus is certainly not going to be a savior either.
Geoff Willingham also responded:
The recent robotics videos coming out of China (showing ‘bots bouncing around doing ‘martial art’ flips / styling, etc) should show how far behind Tesla is in this sector…
As for AI — they don’t even get mentioned in the discussion around AI models and which ones perform best at different tasks, etc… the only place I’ve seen e.g. Grok mentioned semi-consistently is in discussions for new laws (as a ‘negative example’).
And freedomev responded:
Yes that is the problem. AI or robots tech at Tesla are not ahead of the others, his other AI just went broke, and Musk forced SpaceX to buy it like he did with 1,000 Cybertrucks that couldn’t be sold.
He trained his AI to be a Nazi, not reliable, doesn’t help. The RT/FSD has a big problem, it doesn’t work! And it has many competitors.
Obviously these can never make trillions and trillions of profits Musk claims to justify, keep his con going.
I seriously doubt these will even pay off cap-ex, much less make trillions. People got a clue ~4 yrs ago then started growing the con again and here we are, a company that could have beaten Toyota, shrinking on purpose!! With inflation, Tesla still hasn’t beat that high.
Vincent Wolf wrote:
The thinking of the majority of stockholders is ‘Never trouble bubbles until bubbles trouble you’. The trouble with that is bubbles always burst eventually and when they do, they burst very very rapidly. And most of the stockholders will be burned beyond recognition.
Ole Laursen wrote:
The big money in robotaxis is not selling the cars, it’s operating a robotaxi service — at a low cost.
If you only look at the car market, or the current (high-cost) taxi market, you are missing most of the anticipated market. Perhaps you could ask someone like Solarguy who’s actually thought deeply about this to come up with some numbers for what kind of income a robotaxi service company with a durable 30,000 USD car might be seeing in 5 years?
In any case, Michael’s right that there’s something wrong with the risk premium of Tesla.
Dylan MacDonald wrote:
Isn’t at least some of Tesla’s market cap a reflection on Musk’s success in SpaceX, Starlink, xAI, etc.? That is, he’s been so wildly successful that it seems inconceivable that his marquee company could fail? Doesn’t make it right, but it does help to explain the psychology.
Ole Laursen responded:
I think that explains some of the missing risk premium. But there still needs to be a future revenue stream. My impression is that the anticipated future revenue stream is operating a robotaxi network.
freedomev also responded:
xAI, X failed, broke, is why Musk forced SpaceX to buy them at 10x real value. Where is SpaceX board? WTH is SpaceX owning X about? It’ll just hurt them.
SpaceX is interesting they keep Musk at arm’s length and they likely just told Musk Mars is not happening as no money in it, not viable.
Thus now to the Moon!!!, that the government will pay for! I’ve questioned long just who is going to pay for Mars, as SpaceX isn’t, and the answer is no one now.
Ed wrote:
It seems to me that while The Street is slow to grasp what Tesla is — EV maker? grid-scale storage supplier? robotics company? — there are plenty of investors who see Tesla as a company creating new spaces in which to play … and doing so far better and far more quickly than traditional players can match. Tesla’s first-mover advantage (early revenues at very high margins) allow early debt retirement and hurls them far down the learning curve before others can get their footing.
Matthew2312 responded:
“The Street” does not exist. Idiot analysts and investment shills on Wall Street are exactly who is propping up this ridiculous valuation underpinned by an uninformed and reflexive retail investor army mostly from overseas. They are behind on every single technology they are involved in, so your hypothesis about learning curve does not hold water. And you can easily add up the value of its component parts (4th tier solar company, energy storage company, EV company, second tier Robotics startup, third tier autonomous taxi startup) and guess what … it is still worth 10% of its current value.
Geoff Willingham responded at length after quoting part of that comment:
“here are plenty of investors who see Tesla as a company creating new spaces in which to play … and doing so far better and far more quickly than traditional players can match”
Not really … there’s a lot of talk from Tesla about doing this … but there is zero evidence of execution. The only time they truly managed it was the original release of the Model S, when Tesla proved that mainstream / mass-production (comparatively) EVs were viable — and better than competing ICE vehicles.
But since the release of the Model Y, Tesla have effectively conceeded that space to other automakers, and turned their back on it (pausing / not producing vehicles they’ve already ‘launched’ and taken deposits on, making no attempt to produce a smaller, truly-mass-market vehicle, and so on).
They’ve been pivoted to ‘Robotics’ and ‘AI’ … yet as the recent videos coming out of China (of their ‘martial arts’ robots, etc) show, Tesla is Far behind the competition, and not doing anything that the competition hasn’t already done / proven (not just the Chinese, but the Japanese robot makers too).
As for AI… Grok isn’t winning any awards (it’s getting cited as a negative example in numerous new laws being drafted however), and is far behind its competition there too … and unlike robotics, a lot of that AI competition is based in the US, so you can’t even use anti-China rhetoric to justify the higher Tesla cap.
Edit:
As for combining the two (aka Robotaxi) — Tesla has a declining number of robotaxis actually on the road, Tesla has had to revert to using human ‘supervisors’, and yet the robotaxis are something like 9x more likely to be involved in an accident than a human driver (despite the supervisor).
Compare that e.g. Waymo — which does use ‘remote monitors’ to provide assistance, but doesn’t require ‘safety monitors’ in the vehicle, and which has just put in a framework-order for another 50k vehicles to use as autonomous taxis…
In short, Tesla is by far the worst of the companies trying to build / run a ‘robo-taxi’ solution … and definitely shouldn’t be getting a share-price premium relative to other companies.
And freedomev responded:
Tesla Storage is about to crash, as everyone else is cheaper, some much better and cheaper. Megapacks are ~2x more costly and Powerwalls are 4x more costly than the competition using the same cells.
Even worse, Tesla’s battery suppliers, CATL, BYD are in the business now, CATL with a much better product. How does one compete with their supplier?
And, to wrap up, kurt lowder wrote:
They have 15% of the world’s energy storage market, though they don’t make their own cells. We have sodium-ion cells coming out to either replace lithium-iron-phosphate or act as a hedge to keep lithium prices down. Energy storage is the new oil.
Tesla has a Supercharger network.
Tesla has plans for a robotaxi network and robo trucking and robo shuttles.
It’s vertically intregrated and building its own chips.
Most of these investors are incredibly bullish on a world economy that will explode in growth based on cheaper renewable energy and incredible AI.
So they have poured money into Tesla stock.
But CleanTechnica wants that stock to implode. More worried about Trump than they are believers in technology to solve the world’s problems.
Geoff Willingham responded:
“Tesla currently have a chunk of the energy storage market, but they’re not dominant, and they don’t produce their own cells — so the cell-providers can undercut them easily with their own storage products.
“Supercharger may still be significant in the US (due to your broken market polices and erratic politics), but outside the US it’s far less of a ‘tentpole’ product than it used to be. In most of the EU, there are sufficient chargers that the Supercharger network is no longer essential (not to mention that Tesla has had to open that SC network to non-Tesla vehicles, where ‘technically feasible’, iirc)
Tesla may have ‘robo’ plans — but those are in the future, and Tesla’s current execution throws very strong doubt on their ability to achieve those plans before the competition (Tesla’s current robotaxi offering is leagues behind e.g. Waymo, as one example)
Vertical integration is good when a company needs to rapidly iterate / be agile and innovative … but it’s not always the best option … outsourcing reduces costs (at the cost of reduced responsiveness to change), which is why all legacy automakers are no longer vertically integrated. Tesla is a ‘mature’ automaker now, and the degree of innovation and change required to build EVs is already far lower than it was when they were building the Model S or designing the Model 3, etc.
Whilst it’s possible the economy will ‘explode’ (presuming this was meant in a positive ‘expand’ sense, rather than explode ‘in conflict’ sense :p), it’s unlikely to achieve double-digit growth … and it would need to achieve triple-digit growth to come close to justifying Tesla’s market cap (and even then, every other company would benefit massively from triple-digit economical growth)
So yeah — your analysis fails at virtually every statement.
As does your conclusion that we want Tesla to ‘implode’ because we’re more worried about Trump. Yes, Trump is a concern … hopefully just a short-term one, however.
Personally, I don’t want Tesla to ‘fail’ … what I want to avoid is Tesla collapsing like a house of cards when its stock-bubble pops, and taking all the good bits with it. No matter how much you support a company, having its market valuation be so completely out of alignment with its actual performance is a major concern, and the only people that would be celebrating such a misalignment are those looking to try and play the market to profit from it.
Jan Tjarks also responded:
Believers, that’s the keyword for the Tesla cult. 🤷
What’s the percentage of car sales and energy storage for Tesla right now? It should be somewhere around 80%?
Who believes that the core business is no longer the core business gambles.
And I also responded briefly:
If you support a company and it’s been going in the wrong direction for 2+ years, what should you do?
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