VW’s market cap is currently $68B. That should be in this chart instead of Audi
We don’t generally cover much current news here, but as historians, when history is being made, it is compelling and occasionally worth writing about. As of this morning, Tesla (TSLA) has a market capitalization of some $53 billion, exceeding both GM ($50B) and Ford ($45B), as well as a number of other global car makers. And this is for a company that sold roughly 1.6% of the number of cars in the US in March than either GM or Ford. What gives? Tulips or Apples?
The stock market is all about the future, and for many, Tesla clearly offers a bright one, even if it’s down the road a ways. But the EV makes exceeded the lower end of its guidance in first quarter sales (it only posts sales quarterly), having delivered a bit over 25,000 of its Model S and X globally. That’s up 69% over the first quarter a year ago. And Tesla’s guidance is that it will ramp up to make 500k cars in 2018, on the strength of some 400k reservations for its new lower-priced Model 3, which is scheduled to go into production later this year.
Elon Musk has claimed that Tesla’s future revenue, driven by Model 3 sales, will hit some $20billion in revenue with 25% profit margins. The stock market is essentially saying that it believes he can execute that goal.
Meanwhile, GM and Ford sales are stagnant; GM eked out a small gain in March; Ford took a good-sized hit. The market overall is clearly getting weaker, and investors see nothing rosy in the future for either of them, as well as other automakers.
There are other reasons to help explain this huge divergence in investor sentiments. Tesla is now quite a bit more than just a carmaker; it’s an alternative energy company. Having acquired Solar City, it now offers a complete sun-to-wheels system, including its new Solar Roof, as well as the new Power Wall 2 home battery storage system.
And Tesla is struggling to meet demand for its Powerpack 2 battery storage units as utilities around the world are scrambling to utilize them in utility-sized buffering systems, which are ever-more critical in order to smooth out the increasing output of the growing installed solar systems, both on residences and large commercial installations. Tesla’s Gigafactory in Nevada is now cranking out the new 2170 batteries and packs to supply both the Model 3 and the two storage systems.
Of course, Tesla stock doesn’t exactly trade in the usual patterns like old legacy companies, because it’s not that widely held, and also because it has been one of the most heavily shorted stocks, some $9 billion in February. But TSLA’s strong rise in the past month or so is forcing many of the short sellers to unwind their positions, at considerable losses. That also is undoubtedly fueling the stock rise.
It will be fascinating to see how this unfolds; so far, Musk has consistently stayed ahead of the naysayers, reaching or exceeding growth and revenue targets. In any case, there’s absolutely no doubt that Tesla is the first major new US carmaker success story since Walter Chrysler created Chrysler’s similarly huge success in just a few years in the mid-late 1920s with which to challenge GM and Ford.
Update: a Google study just came out that ranks Tesla as the “Most cool” automaker among teens and millennials. And among millenials, Tesla was one of the 5 coolest brands overall, right up there with Google, Youtube, Netflix and Amazon.
More: NYT Business
Is this a case of how the lowly have grown, or is it that the mighty have fallen? Is Tesla just growing fast, or have GM and Ford become second tier? Say what you will of Tesla, they have started something, and the end game is batteries, not cars. They are better compared to Apple than GM. As Apple did, they took an existing product and made changes to design and offered something unique to the market. Today, one rarely thinks of owning a Mac PC, but we buy tons of iPhones, iPads, Apple watches (okay, maybe not so many of the watches) and we wait for the next breakout item. Tesla will do the same, but with power storage. This is not really about the cars, other than they are a means to an end.
That 500K number for next year will be interesting to watch. It will have to come out of someone else’s share in an industry that has too much capacity as it is. 500K is not far from everything Dodge sold last year, or the combination of Buick and Chrysler divisions. I wonder whose share Tesla will come out of – I am betting it will not be the Korean or US brands (low price or conservative buyers) as much as the European and Japanese (more fashion forward or modern).
I have a sister in law who put down her deposit a year or so ago and is eagerly waiting on one of those new Model 3s.
Ever the contrarian, I have to wonder if Musk can really deliver. I have read that there is talk of unionization of his plant which would hurt his image as a new kind of auto builder. Lots of experienced manufacturers have gagged on too much business, or on too much overhead if sales come in below predictions. But then Musk continues to prove naysayers wrong, so maybe he will again this time.
Keep in mind those are production numbers (500k), not US sales. Tesla exports roughly 50% of its sales , and is moving aggressively to increase that all the time. They’re opening sales/service facilities in new countries all the time. Tesla, kind of like Apple/Mercedes/Porsche/BMW, is truly a global brand.
So US sales might be in the 200-250k range. That still has to come out of someone’s hide. Have you noticed how Prius sales have been slumping badly? There’s one source. And it will affect cars like the BMW3 Series and its ilk.
The Prius just isn’t cool anymore. People still buy them all the time but they’re a victim of their own success–just another everyday hybrid. The spacecraft restyle is trying to keep it from becoming another appliance, but I don’t think it’s working. (Not that they’re going anywhere, they’ve just become a typical Toyota.)
I think the Model 3 may make the biggest impact on marginal luxury brands like Infiniti and Acura (and Hyundai’s recently off-spun Genesis brand). If you’re a limited player already, and then 50% of the people who buy your entry-level model bolt to Tesla, the picture doesn’t look too good. If Tesla comes out with something priced in between the $35K Model 3 and the $75K Model S a few years down the road, I think it’s game over for those guys.
Agreed about the Prius not being cool anymore, because it’s essentially 20 years old, with new duds. But I know several Prius owners that are not going to replace them with anything but a Model 3. I think current Prius owners, many of whom have had them for some years now, will make up perhaps the single biggest source for Model 3 buyers. These are classic ‘early adopters’, and a Tesla is the next technology step for them, if they haven’t already bought a Model S.
Agreed about near-luxury brands, as I mentioned. But I tend to think that it will come more from the higher-visibility “cooler” brands (like BMW, etc) precisely for the same reason: Many Tesla buyers are very fashion-conscious, and more likely drive an “in” car now. But that’s possibly splitting fine hairs.
Neither are millenials cool anymore. They were for 15 minutes but those days are gone.
The Prius may be “not cool,” but Toyota sells a lot of them. It is the #1 car in Japan, for example, and dominates the local taxi market.
Chevy B-Bodies used to be cool and then became “not cool”, but still dominant taxis and police cars… Used to.
“The Prius just isn’t cool anymore.”
The Prius (and every other hybrid) was NEVER ‘cool’. Fashionable amongst a certain set, sure…but don’t confuse the two. In the Puritan days, anything pleasurable was considered sinful and evil and as a result those who bought into that ethos lived a very austere life…it sure as hell wasn’t considered ‘cool’. Hybrids are austerity measures, and if youre obsessed with whittling down your expenses to the last penny or throwing yourself on top of every last carbon molecule that is just itching to kill us all then theres a good case for owning a hybrid. Taxi companies are a business just like anyone who drives Uber/Lyft so if the goal there is to find the cheapest way to make a profit then that’s what youre gonna do. What you DONT see is the kids itching to get their hands on lightly used hybrids so they can crack the hood and get to work. Has anyone EVER seen a hybrid that was modified, or customized? Dressed up at all? Freshly washed/waxed? Hell, less than 5 years old and not completely trashed and filthy? The Tesla is a different animal…its a status symbol for the wealthy much like BMWs and Mercedes. The fact that its viewed as ‘forward thinking’ while also having an attractive shape and a level of performance makes it something that carries pride of ownership.
‘Cool’ is a very nebulous concept. Consider that to someone of the hipster persuasion, its considered ‘cool’ to be as traditionaly ‘uncool’ as possible…at least by traditional standards. Make of that what you will. The prius is popular with the same baby boomers that back in the day wouldn’t be caught dead in a Hemi Charger or Chevelle SS…rather, they went with Volvo 240s, VW buses and other imports which were completely counter to the tastes of knuckle dragging gearheads.
This is of course coming from the world-renown arbiter of “cool”. ?
Dude, you need to get your head out of the sand; folks have been modifying Prii for quite a few years. There’s a whole Prius tuner/modifier subset. Try Googling once in a while to expand your horizons.
Your rant is so full of gross generalizations, it’s not worth responding to any further. You’ve vented your Prius hate here for so long, it’s like a broken record. Frankly, it’s getting tedious.
Anyway, you contradicted yourself totally with your last line. You don’t think old Volvos, VW buses and such are/were cool? If you think not, you really are lost.
What’s wrong with simply wanting to get good gas mileage, spending as little as possible with Big Oil and having more left over to spend on what one would rather spend it on? There is nothing at all cool about filling up at the gas station every other day.
Once again, it looks like youve siezed on a few tidbits easily bent out of whack (admittedly due to my crude writing style) while missing the big picture. We’re discussing opinions and car culture here, not hard facts so yes my little spiel is very much a generalization, and it had to be. I assume that most CC’ers get that right off the bat. I contradicted myself…where? I said old Volvos, VWs resonated with a very different crowd than muscle cars and for different reasons. I left my opinion on those out of it since that’s an example…you just made a (wrong) assumption. Literally ANYTHING can be tuned or modded and usually is. Your one pic (with a Toyo logo in the corner) just shows what a corporation can do with megabucks thrown at it. That’s not indicative of a grassroots level phenomenon of true enthusiasts. Prius fans are overwhelmingly focused on penny pinching and/or the environmentalist lifestyle NOT the cars themselves. That’s been my point and yes its a generalization since it’s an observation not a bunch of numbers on a spreadsheet.
Jim K, there is absolutely nothing wrong with any of those things. But ‘good gas mileage’ is a very relative term. My non MDS Hemi Challenger has hit 28 mpg on the freeway…in a 4100 lb 370 hp ball breaker, that’s nothing short of amazing. However, using 2 power sources and sacrificing all semblance of style and driving dynamics to eke out a few more mpgs is absurd in my eyes. If I were an electrical engineer and fascinated with all things electron-driven (as at least one other CC’er is) then that’s understandable. The notion that Big Oil is going to crumble because some people choose to suffer in a dinky penalty box to rob them of of a few bucks a month is laughable at best.
FWIW, I 100% approve of this:
https://www.revvolution.com/rivet/this-prius-is-definitely-going-to-hurt-some-feelings-srt8-whatsmpg-muscle-car-mayhem-american-racing-headers-weldracing-nxgonzovideo-197776
Some kindred nutjob is about to swap a SRT-8 drivetrain in a Prius!
The 3 people I know who claim to have put down a deposit on a 3 are all coming from other plug in vehicles. 1 has a Focus Electric, 1 has a C-Max Energi and the couple will replace their Leaf but are keeping their Roadster and 1st gen RAV-4 EV.
In other plug-in news my friend who had the Volt replaced it with an i3 sans REX. Another who has an Elantra Touring is considering a Bolt. The 3 Prius owners I know have expressed not expressed interest in the 3.
So I think those the lower range EV and Plug in Hybrid owners will make up a lot of the the 3 buyers.
I’m not questioning what JPC is saying about the effect of unionization on Tesla’s image in the US, because I wouldn’t really know, but I find that logic bizarre. (as a pesky foreigner)
For market capitalization purposes, I think that a unionized Tesla would have higher costs and less flexibility in its manufacturing processes, both of which would reduce market cap (which is nothing more than a prediction of how profitable the company will be in the future).
More generally, I suspect that among Tesla’s customer base, a unionized plant would be evidence that Tesla is not a hip, cool, aware place to work and would make it seem more like one of the Detroit 3 with its often antagonistic relationship with its labor force. In other words, Tesla would look mortal and not like the “SuperCompany” that many think it is.
I’m not aware of the fact that most of the Big 3’s unionized plants are really any less efficient or substantially more expensive than the non-unionized plants by the transplants. And I certainly don’t see any evidence of an “antagonistic” relationship with the UAW and the Big 3. In fact, it often borders on rather cozy. The antagonistic era seems long past.
And in terms of image, actually a lot of progressives are of course pro-union, so that might actually be a positive for them.
FWIW, I rather doubt they’ll unionize, because their pay and benefits and stock vesting is already worth more than what most UAW worker get. but who knows.
For the moment, the UAW plants are operating under the two tier wage system that was ushered in during the bad years, and has made wage costs much more in line with what nonunion transplants are paying. However, that two tier plan is under some stress within the UAW. At some point those younger lower paid workers will become a major voting voice in the UAW and there will be a big battle fought over wage levels. Also, with “right to work” laws gaining a foothold in several states where UAW plants operate, it is going to be harder to represent workers unless they are able to show some big wage gains that make those dues worthwhile. It will be interesting to see how this shakes out. And those threats of unionization might be more about UAW wishful thinking than about actual conditions in the Tesla plant.
This does nothing to change my perception of the stock market as a highly sophisticated casino designed to enrich those who are already wealthy and disadvantage everyone else. Tesla absolutely deserves a decent market valuation, but its current number is quite over-inflated. Its especially galling that GM and Ford have struggled to raise their stock values in an environment that penalizes the automakers for investing in autonomous vehicle technology and ride sharing companies, which is something that has recently occurred. After all the speculation in the housing market that led to the great recession, my faith in Wall Street and all the investment firms and credit agencies that comprise the financial sector is nonexistent.
EDIT: This piece on Vox makes me think my stance on Tesla and Wall Street needs to soften a bit.
http://www.vox.com/new-money/2017/4/4/15176904/tesla-ford-stock-price
This does nothing to change my perception of the stock market as a highly sophisticated casino designed to enrich those who are already wealthy and disadvantage everyone else
It took my quite a while to get to the point where I felt I understood adequately how the stock market works. In my opinion, it’s not really quite how you see it, but maybe with time you’ll arrive at a somewhat more nuanced and balanced POV.
Keep in mind that Wall Street doesn’t set the stock price or company valuations: it’s the individual (and institutional) investors in a completely open and transparent marketplace. “Wall Street” actually has little or nothing to do with the price of Tesla and other publicly traded stocks. The act as underwriters (essentially the sales agent) for initial stock offerings, and their analysts do of course evaluate and make recommendations. But for the most part, that’s largely it.
Clearly, investing in individual stocks, especially intrinsically more volatile ones, is not the best recipe for steady, secure long-term growth. Hence the reason index funds have taken over ever huger chunks of the market.
The Great Recession was created by too many individuals taking advantage of super-easy credit. That was the result of lax govt. regulations and Wall Street firms finding ways to market these subprime loans to buyers who also got sucked into the bubble. But the stock market had little or nothing to do with creating the financial crisis and recession.
How are GM and Ford penalized for investing in autonomous technology? They both have, to the tune of many billions.
Thank you for your response Paul. My educational background in American history, combined with my personal experience in the post-recession job market, and my political views often color my reaction to current events in ways that aren’t exactly academic. The result was my above comment that ignores some facts about the financial industry that you clarified in the above reply.
“The Great Recession was created by too many individuals taking advantage of super-easy credit. That was the result of lax govt. regulations and Wall Street firms finding ways to market these subprime loans to buyers who also got sucked into the bubble. But the stock market had little or nothing to do with creating the financial crisis and recession.”
You’re definitely right on all fronts here, but my understanding of the Great Recession centered on the impact credit default swaps had on falsely portraying a healthy investment atmosphere when in fact those AAA bond ratings were built on a house of cards. Isn’t that related to the stock market?
My criticism of Wall Street as it relates to the auto industry stems from this article I read a while ago on Auto News:
http://www.autonews.com/article/20160125/OEM/301259958/no-love-for-ford-on-wall-street
In a rational marketplace you would expect Ford to be rewarded for ramping up investments in ventures designed to help the company navigate the coming seismic shifts in technology. I suppose American automakers still haven’t escaped their past, and the upcoming disruptions from Tesla and others is too powerful too ignore.
Even after the events of last November I still forget that America doesn’t strictly rely on facts and reasonable judgement when making decisions. Seems like this extends to almost all facets of modern society.
You’re definitely right on all fronts here, but my understanding of the Great Recession centered on the impact credit default swaps had on falsely portraying a healthy investment atmosphere when in fact those AAA bond ratings were built on a house of cards. Isn’t that related to the stock market?
The bond market certainly played apart. But there’s lots of markets, and the bond and stock markets are just two of them. But I get your point, and there’s no question that complex financial instruments like those can be very hard for an average investor to understand. If individual investors bought those instruments, it was at their peril. But you’re absolutely right that the bond houses did their best to make them look safer than they were. And there’s serious culpability for doing that. Caveat emptor!
Ford and GM stock is weak, because the car market (presumably) is at (or slightly past) its cyclical peak. Incentives are rising strongly and sales are flat to down. That doesn’t look good for the legacy automakers.
The other reason is that there is a school of thought that autonomous cars will potentially have a very negative effect on aspects of the car market. if it comes to be, will people really care what brand pod drives them to work? If car makers end up like Android phone makers, that’s not good.
Investors simply don’t see prospects for growth, which is what investors want most of all, right or wrong. The stock market is a bet on future growth, or not.
“But you’re absolutely right that the bond houses did their best to make them look safer than they were. And there’s serious culpability for doing that. Caveat emptor!”
X2. I am very familiar with the type of financial instruments you and Edward referred to and can confirm that – other than one or two persons at the law firm who created the documentation evidencing them plus one or two at the issuing financial institute – very few people could understand them (well, certainly not at first sight). And as for caveat emptor, in many cases the “buyers” were themselves institutional investors, who often simply relied on the instrument’s issuer (“it’s Lehman for goodness’ sake. No need to do a full study”) when deciding to purchase.
As for bond houses, of course – but let us not forget the rating agencies (in my view, the real villains in the story) who colluded, one way or another, with said houses.
I remember thinking about how things are simply too good to be true in 2007 but did not have the money to do what my brains was telling me to do, which was to buy gold. On the other hand, I never invested in the crazier products from back then, so I did not lose as much as some acquaintances when the crash came.
@ Edward: “Even after the events of last November I still forget that America doesn’t strictly rely on facts and reasonable judgement when making decisions. Seems like this extends to almost all facets of modern society.”
Given Paul’s aversion to heated political discussions on his page I’ll only say that if you refer to the US presidential election (bearing in mind certain developments here in the EU which are not covered truthfully by the media), I beg to differ. But let us leave it at that.
And scarily subprime auto loans seem to be the next credit bubble:
https://www.bloomberg.com/news/articles/2017-03-31/eisman-of-the-big-short-says-subprime-auto-loans-concern-him
That will be a “normal” bubble burst, because the risk has been correctly priced.
Considering how “Vox” botched this car styling video:
http://youtu.be/IVjmIovOPek
I’m not sure that would be my ” go to ” source for automotive analysis.
It’s not my go-to source for automotive analysis news James, and in this case the piece is less focused on autos and more concerned with Wall Street.
I’m under no illusion that any news organization can get it right 100 percent of the time. It seems in today’s political climate we’re all too quick to dismiss any source that even hints at an error, and that piece Vox produced on car designs strikes me as a very minor one.
I didn’t even hint at politics and (believe this or not…) The piece I referenced was the only “vox” video I’ve seen (and only because of Jalopnik). I didn’t know it was a news/politics site (I thought it was a video site or blog) I saw that video, it was automotive history related and laughably wrong. I don’t know if the article you referenced is valid or not, Hell I don’t know market cap from a beer tap. I barely know my mortgage interest rate. But the styling video is in the wheelhouse of CC.
Thank you for clarifying your comment James, I now know where you’re coming from.
The make money on stocks, one has to do a lot of reading and researching. It is all about having as much information as possible, and having reasonable expectations.
It is also about having the intestinal fortitude to realise downturns are not permanent.
Index stock funds. No need to read upon anything, and they do better over the long term than managed funds. Forget about individual stock picking; that’s so 1980s. 🙂
Gotta love a P/E of -64.89.
See, maybe I’m a bit of a contrarian, but all the buzz around the Model 3 makes me specifically *not* want one. I find it interesting in concept and in a technical sense, and if they were to install chargers at my workplace (it’s a LEED-certified building so I could see them doing so at some point) it would save me money on gas. It’s just way too trendy right now, and the people who own the Model S seem a little too self-congratulatory to be part of The Experience. Admittedly this is based on a small sample size.
As to the market cap–we’ll see where it goes once Model 3 production starts. Yes, the cars will in the long run probably be consumer-facing window dressing for the battery business. But you can’t make yourself a lifestyle brand without that buzz. If they can pull off being a lifestyle brand as well as a behind-the-scenes ndustrial force at the same time, then the sky really is the limit.
Again, if they ape the Apple experience, then they win. Hands down. And right now, they are doing the Apple experience. Lots of hype? Check. Exclusivity? Check. Overpromising but under-delivering? Check. But, and here is the big one, they have people plunking down deposits on the next thing well before production has started in earnest. The Tesla store is so similar to the Apple store (other than having stock in the back room) that it is eerie. Every driver of a Tesla seems to be a sanctimonious schmuck about driving one (apologies to the owners, but you beat the Prius owner rep by far) and the fact that it is 50% higher priced than a similarly performing ICE car on the market now while offering minimal benefit (so like the Mac versus PC debates of old, with Mac users thinking they were so much better, while the business market chose PCs for everyday use). Tesla is a lifestyle brand.
The cost of a Tesla Model S is quite competitive with E and S class Daimler products.
Yes, and I would argue that the cars you mention are also lifestyle cars as well. People (other than afficianados) do not really by a Benz or a BMW for their superior attributes, they buy them to show off. For the most part, the same with Tesla. Yes, they are all “luxury” marques, but in the end, why buy luxury when you can get most of the same appointments in a much cheaper product that performs similarly? It goes against economic sense and becomes a lifestyle choice.
+1?!
I think we have a fair bit in common there, Chris. While in an academic sense I can admire what Tesla is doing technology-wise, and to a certain extent stand in awe at their rapid rise to this degree of popularity, I too steer away from anything that smacks of hype. Or over-popularity.
It’s like that Toyota hybrid thingy whose name I have momentarily forgotten. I was similarly amazed at it, until everybody and his dog started buying them. Then, because so many prominent airheads drove them, it became ‘the car you like to hate’. Wonder whether that’ll ever happen to Tesla?
Here’s what I think:
I’m not an expert on Wall Street, but I think it’s fair to say that high stock valuations have a mixed record on predicting future success.
Enron market cap peaked at $60 billion.
Worldcom: $186 billion
AOL: $222 billion
On the other side of this comparison, you can’t forget that people who held GM and Chrysler stock in 2009 got wiped out. It’s completely rational for all of the Detroit 3 to bear a stigma from that with investors for a long while.
And then there’s Amazon, with a market cap of $435B, and it hardly ever makes a profit.
I thought of Amazon before I responded yesterday – the difference is their scale is so huge now, they easily survive on the cash flow. And virtually all profits are completely reinvested into an endless array of further avenues for expansion instead of being booked as profit (to very oversimplify, first books, then developing kindles, then cloud/servers, now getting into their own freight/shipping instead of staying put and just selling books.
I’ve owned a chunk of it for years now and all I can say is God Bless America and Jeff Bezos….
Yeah, I saw that on the news this morning. Very interesting.
The only experience I have with market capitalization announcements was the day that my mining technology employer announced it had surpassed the mining company that had birthed it in market capitalization.
Lots of strutting roosters that day at head office.
Of course, shortly afterwards both the mining company AND the mining technology company’s shares tanked, no official announcement on that but I was happy to not have bought into the company shares program.
Anyway, my opinion of Tesla is unchanged with this announcement. There is some percentage of overblown BS at work, but there always is with these things and I hope they can do what they say. Sure is interesting to watch.
I’m so out of touch with my own generation
That’s okay, I was never in touch with mine.
I think I’m roughly the same age as you, Matt? And at least of the same generation as Joseph, if I recall correctly.
What strikes me is how Tesla is seen as cool by both car enthusiast and non-enthusiast friends my age. Enthusiasts appreciate the amazing performance and the technology, while non-enthusiasts appreciate the green aspect, style and technology. It’s seen as a car of the future and one that doesn’t seem compromised, whereas a Leaf is too “out there” and a Prius is now pretty mainstream. Tesla was very clever to target the luxury market and create a car that was not only an impressive green car but also an impressive luxury car.
Me? I find the Model S genuinely desirable, even though at its price point there are a LOT of other cars I’d love. I’m curious to see more of the Model 3, even if its frontend is… unconventional.
I feel as though Tesla’s cars appeal to people my age who would never call a Leaf or a Prius cool.
Late 20s. I can admire the car for what it is, I even like how the facelifted Teslas look, but the whole futurist tech worship angle is the part of Tesla and Elon Musk I just find offputting.
Much as I like Tesla (and I own some shares, in fact, so I like the news), I’m going with tulips.
I do believe in the company, and the future of the electric vehicle. But standard valuation of a company is called “4 + Book”, which means 4 times yearly EBIT (essentially 4 years of net profits). The value of their proprietary technology would be fairly high, as is their plant. $10 billion maybe? So if they are making $5 billion as they claim they will (and I do think they will manage it at some point), that would place standard valuation of $30 billion. They are already over that.
So really what the valuation suggests is people think this company will be making 10-15 billion in profits in the foreseeable future. I find that hard to believe.
I tend to agree that the stock price is overly optimistic. Only the bluest sky scenarios will support that. But it’s a fascinating story to watch as it unfolds.
Love him or hate him, you have to credit Elon Musk for what he has created with Tesla. How refreshing to see a new North American manufacturing venture that combines with the latest in tech. It is great to see an automaker actually wanting to control all parts of their business rather than outsource everything.
As a foreigner, I think it’s great to see America leading in something once again.
I think Tesla has a good product. I have not driven in one of their cars, but have seen them in person, and on the roadway. I can see Tesla blowing away the old money bags (Government Motors, and Ford and Chrysler and the rest…). But the old money is a long way from giving up yet. Lots of people want the trendy new nowadays, especially since high quality control and performance is standard fair in 2017. A quality product will practically sell itself,.. Tesla has this right out of the gate. While all the others have ALL burned someone we know in the past…a neighbour, a friend, or spouse…you get the idea….”had a crap box Ford wind star. …never buy a Ford product again…” I believe if quality was in during the 70’s, 80’s, and so on…Tesla may have never been born.
Personally, if Dodge was the last manufacture of autos on the planet, I’d rather drive a bicycle instead. Tesla is seen as a new puppy, with adult manners, bypassing all the growing pains the others had to pass onto the motoring public. Tesla,…I’d give them a “try”.(and my money).
Pets.com looked pretty good once upon a time as well 🙂
Tesla’s having an interesting run, the next 12-24 months with the model 3 rollout should be quite telling. As opposed to the other carmakers, Tesla is the one without A) profit and hence B) dividends to investors. They need to become profitable from their core business to support the valuation.
We’ll see if the 400k depositors stick around to take delivery. I think a lot of people signed up for what they think will be a $30k Model S which isn’t quite what the car will be. The “refundable” part of the deposit was an important point.
The next couple of years should also start showing some real competition, not stuff like the Leaf and Bolt which while being good/excellent cars are not “premium” in any sense of the word, but more premium players that Tesla took business away from in the first place. An Audi EQ7 should win some Model X business back, same with something like an E4quattro or maybe a BMW 325Ex as opposed to a Model 3 with a few options.
The Supercharger network as well as the battery size/range is still currently the big advantage in Tesla’s favor. Once at least one of the big gas station brands gets in the recharging game and once the Supercharger customers reach a critical mass and overwhelm the available spots at high-density times and locations that aspect may change as well. I fully realize that the whole point of a big battery is that constant out-of-home recharging is not needed but the lower the price point of the car, the more likely it is that it is the ONLY option in one’s driveway as opposed to Model S and Model X where the car is rarely the only car in the household. Hence it will need to be pressed into duty for occasional longer trips – I’m imagining the pilgrimage from SF to LA on I-5 at Thanksgiving or Christmas. Sure there are (some) superchargers along the way but you’re talking about increasing the potential customers by an order of magnitude.
Good points. From over the pond in Europe I can make another observation applicable to “my” part of the world: here we do not even have the Supercharger network Tesla has created in the US. In fact, there are not yet that many charging points at all. So an EV (not just a Tesla) makes sense for people who travel a known distance every day AND have a place to charge the battery at night. Now, given that most people live in flats rather than houses here, this excludes a huge number of potential EV users (try running an extension cord from your flat to the car and see how quickly before someone starts complaining). I cannot see how Tesla (or any other EV manufacturer) can overcome this. Not an issue for the average Model S owner, but the Model 3 I would imagine will compete here with such things as Opel Insignias. The potential purchaser would still fall into the “flat dweller” category…
here we do not even have the Supercharger network Tesla has created in the US
I’m just curious, T., do you ever do a tiny bit of research before you make such statements? Of course Europe has a Supercharger network, and it’s quite extensive and growing all the time. All you have to do is Google “Tesla Supercharger Europe”, and this comes up: https://www.tesla.com/en_EU/supercharger
See map below too:
Obviously, EVs are not going to work for apartment dwellers that don’t have access to a charging plug. That’s a key thing. But eventually more and more apartment garages will get them. It might take a while. But Tesla’s success isn’t dependent on that alone.
My comment was “here we do not even have the Supercharger network Tesla has created _in the US_”. Expand the map and then you’ll see there are 13 Supercharger points in Austria and only one (!) in Vienna with four (!) “docking stations”. That’s it. The bulk is in Germany. Tesla sold 717 cars here in 2016, mostly Model S bought by well-off people who are likely to have another vehicle to use when they don’t want to be bothered with planning ahead. This will not be the case with the kind of person who buys a Model 3. So to me they must greatly extend the charging possibilities to succeed with that car here, and this is something which must happen now, not in 10 years. I’m no Tesla hater – I’d have a Model S as a second car if I could afford it – I just don’t know how this will happen. I’m prepared to eat crow if I’m wrong, but I can see a situation where there will be a lot of angry customers who realize that – in practice – trickle nightly charge is the only option they have. This kind of a situation is not good for any company, let alone a start-up like Tesla.
13 superchargers for such a small country is quite good. You do realize that Superchargers are almost solely intended for long-distance travel, hence almost all of them are strategically located along major freeways/autobahns, and not many are in inner cities. Superchargers are NOT meant for folks who have no place to charge at night. The whole idea with EVs is to charge them at night, so one has a full charge every morning. Therefore Superchargers are only needed on long trips.
EVs are not logical purchases for folks who don’t have an access to a plug at night; simple. End of story. EVs are not for everyone.
That’s where I have a hard time wrapping my head around the situation as well. As the technology currently stands, an electric like a Tesla is best suited to an urban driving environment, yet a lot of residents in these places who do have the means for something like a model 3 might not have access to a reliable charging source. I say this as a Chicago resident. Parking garages are not commonplace. It seems counterintuitive to me. What has been working for a $90,000 luxury item might not nessisarily work for a $40,000 appliance. But who knows? People can be notoriously unpredictable. A car like the model 3 does deserve to succeed.
Paul, I think the point Jim, cjiguy and I were making is that there’s a big difference between the typical Model S and Model 3 purchasers, a difference I am not 100% convinced Tesla has considered (at least in so far as sales in the EU are concerned with). The Supercharging points we have are sufficient for the present numbers of Model S / Model X, but not for, say, 15,000 Model 3s. But like I’ve said, I’m happy to be proved wrong on the above and about the rapid establishment of charging points for us flat-dwelleres, if only because a Model 3 is something which financially should be within my reach and – assuming the charging issue is solved – is a car I would seriously consider buying.
I suppose I ought to know this but – I didn’t realize Toyota’s market cap is over twice as much as any other vehicle manufacturer on the list.
Because they’re about twice as profitable (or more) than any other automaker. And the market expects that to continue.
I’m voting tulips – the ‘gig-economy’ does not in the long- term rewrite the rules of business, in my view. But we’ll see of course.
Teslas are very attractive to me and my 2-car family. They are innovative and the cars are pretty great.
However, their business model bothers me, and in a big way. First off, the closest dealer is 250 miles away. Worse, if I were to buy one, there is no place to service it within 250 miles either. And I don’t just mean for warranty work. Tesla does not allow 3rd party mechanics to work on them. In fact, they won’t even let YOU work on your own car. If you try to modify the software, for example, they will disable your car remotely. This goes beyond even what Apple does.
No thanks. It makes the Bolt look a lot more attractive than waiting for a Model 3.
Well, it’s going to take a bit before Tesla has stores in the smaller markets. As for working on your Tesla, what are you going to want to do on it? Change the oil? 🙂
The Tesla’s software is profoundly complicated; trying to modify it is obviously not a good idea, unless you’re an ace hacker, and some have done just that. I assume that among other things, Tesla considers it a safety issue.
I don’t think Tesla will have stores in smaller markets, at least not to the extent of current dealers, because it doesn’t seem to fit their philosophy. I don’t have an Apple store anywhere near me either, for example.
Your other points are plausible, I just don’t like the principal of it. Tesla’s goal appears to be locking consumers into their ecosystem that they have 100% control of…including the superchargers. I just cannot support that.
On another note, I am also not impressed with the interior of the Model 3, which is essentially a big touchpad with no separate gauges or tactile controls. I much prefer the Bolt in that regard. In fact I think GM really did a great job on the Bolt…though their charging falls short and I wonder what the resale will be.
I’m 1000 times more qualified to work on an electric car myself than most people, and I won’t do it. Paul is right.
I’m a computer hardware electronics engineer with decades of experience and a large number of patents to my name. Several years ago I worked with a professor at Portland State and we developed a two-term course on EV technology for EE/ME seniors and graduate students. I learned a lot doing that.
So much so that I bought a used Think City, an EV whose manufacturer went bust when the majors like Nissan came out with better EVs at better prices. I got what I thought was a good deal on the Think, and I told myself “No factory support, no problem! I’m an expert so I can fix it myself.”
Turns out these’s a bug in the built-in software that can blow up a battery manager board if you cycle the ignition key when the heater is on. Nobody makes those boards anymore. To even touch the board, you have to put the car up on a special lift that lets you drop the battery pack out of the bottom of the car. The board is on top of that battery pack. It couldn’t be more inaccessible for observing and hacking if it was on the Moon. No one on the Think forum including me had an appetite for reverse engineering the software code from binary to fix the bug. I don’t even know how I’d power up the board on a workbench. Hardly any documentation exists of course.
That bug got on my nerves, knowing if wasn’t very careful when the heater was on (i.e. all winter) I could end up with an unrepairable brick. I sold the car, at quite a bit less than I paid for it. Lesson learned.
Besides the level of complexity, documentation and expertise required to dig into the guts of an EV, the typically 400 volt battery can easily kill you. So I don’t blame manufacturers for not permitting DIY repairs.
The good thing is that electronics, once it’s well debugged by volume production, is extremely reliable and very rarely needs anyone to dig into it. What I just said shouldn’t scare anyone away from buying and owning an EV. I wouldn’t try to fix a cellphone either, even though I designed a little of the circuitry that’s inside a few of them. It’s just the way high technology is. You may choose to embrace it or not.
I loved being a shadetree mechanic with my VW Bug, but what a primitive, dangerous, dirty and low-performance conveyance it was compared with my agile, torquey, safe, clean, debugged and factory-warranted-and-supported Fiat 500e (powertrain made in Germany by Bosch). I’ll climb down from the CC soapbox now.
You people have gone bananas- Tesla’s are junk. I saw one with it’s brakes squealing up to a free air pump at a gas station. It looks kit car-ish, kinda of quattroporte wannabe for green wussies. Stop drinking the kool-aid, nothing will come from tesla but unintended pollution- 1: Vulcanized rubber from quick wearing tires (The thing ways 5,000lbs) 2: Heavy Metals From horrible brakes 3: Lithium Batteries- what are we going to do with the old ones?
Well, your first two points are a stretch to say the least, but I will say the batteries do concern me if they come close to meeting their sales goals. Production, disposal, and safety.
How can one be a car enthusiast and be so ignorant? I’m not necessarily a huge fan of Tesla but a few seconds of googling shows me that:
1. A Tesla Model S weighs about the same as a Toyota 4Runner, i.e. 4500-4900 pounds, the same as VERY many other common v hicles these days. I’m not too concerned about clouds of rubber dust everywhere…
2. A Tesla Model S’s brakes are no different than any other car EXCEPT that most drivers don’t even use them as the regen braking uses the motor itself to slow the car down. Having driven a Model S myself, it is easily possible to look ahead and in regular driving never even touch the brakes and yes that includes slowing and stopping for a red light. I’d be more worried about the brakes on whatever it is you drive spewing “heavy metals”…
3. Paul addressed the Lithium question.
People, let’s do some very basic research before commenting and regurgitating “facts” you heard at the water cooler…
^^ this. You beat me to it, Jim.
on point # 3, I’d ask the following Q:
Isn’t it easier to dispose of / recycle lithium batteries than it is to rid the Earth’s atmosphere of a gazillion nanoparticles and noxious gasses produced by internal combustion engines (not to mention issues related to oil extraction, transport, refining and wild cost fluctuations)?
On the “shoddily built” point, well I live in a place where BMWs, Mercedes-Benzes and Audis are prevalent and I did not get the that impression on a close observation of the Teslas I encountered so far.
Tesla has done amazingly well. Granted, I’m not interested in spending even $35,000 for one (I don’t buy new cars). But I have to admit, I was skeptical re things like range, power, whether the things would be designed from the ground up AS an electrical vehicle, etc.
Phil L.’s points above mine are valid: production, disposal, and safety. Has Tesla addressed them at all?
Phil L.’s points above mine are valid: production, disposal, and safety. Has Tesla addressed them at all?
SpaceX. Mine the moon and planets for resources, dump the old stuff on them. 🙂
OMG; please stop repeating this nonsense question. Lithium is easily (and environmentally responsibly mined). It can be made from sea water. It’s a salt, in case you’re wondering. It’s very prevalent. And when they batteries are worn out, the lithium is very readily recycled. Got it? Promise never to ask this question here again? 🙂 I could swear this isn’t the first time you’ve raised it.
BTW, extracting, refining and transporting petroleum is hardly an environmentally-sound undertaking. Never mind the CO2 that gets pumped into the atmosphere. That’s the whole point of EVs: they really are gentler on the planet.
Yes, they do have less of an impact than ICEs if everything is handled correctly…however it’s not as simple as you imply Paul. Those batteries still contain nickel, among other things. And utilities are not ready for large scale EV charging.
https://www.theguardian.com/vital-signs/2015/jun/10/tesla-batteries-environment-lithium-elon-musk-powerwall
And just to clarify…I’m not saying EVs are bad…I’d love to have one for our second car if somebody comes out with a true 5 passenger one at a reasonable price (Bolt and Model 3 are a bit smallish). But there are still some things to work through and if Tesla meets their sales goals I don’t know if the supporting industry is really ready yet.
These do exist, actually. The Citroën E-Berlingo Multispace is an example. Compact, yet roomy. And practical.
The numbers on the chart don’t seem quite right to me. Tesla looks too high and GM too low. See this link CNBC
tesla is a good example of why i stopped investing in the stock market. the valuation is absurd. as investor david rocker said to the l.a. times, “If you can’t make money selling a $100,000 car to rich people, how are you going to make money selling a $45,000 car to normal people?” tesla has lost money for it’s entire existence and is unlikely to make any money in the next several years, if at all. the shorts are lined up against it. it’s a great product and i hope they succeed but it’s way too risky for my hard earned money.