Published on March 24, 2019 |
by Paul Fosse
24. March 2019 by Paul Fosse
As I reveal in my bio, I own some Tesla shares in one of my investment firms. I own the shares because I believe the company is a promising speculation path, with great risk and a lot of potential reward. I'm not trying to pump the stock price, but you can come to that conclusion based on my inventory and my bullish comments on the company. Please do not see this investment advice.
You can see from the chart above that Tesla has had incredible sales growth over the past 10 years, and grew from about $ 15 million in annual sales in 2008 to over $ 21 billion in the past completed in 2018 calendar year. This 107% compound growth rate is not uncommon for small startups, but rapid growth becomes much tougher to maintain as the company grows. So far, Tesla has been able to maintain a very high growth rate of 74% over the past 3 years, only slightly slower than 100%. So I thought about this article, I would wonder how Tesla could continue to grow at high prices for a few years until its mission to accelerate the transition to sustainable energy. This mission includes cars, trucks, storage and sun. I'm not going to discuss semi trucks, storage or sun, even though they are exciting areas. At a high level, for Tesla to grow, it needs to build more cars that people will have at a price that allows the company to make money.
Building Cars People Want
There are two parts to building cars people want. Design the car and build it. Of course, the two parts are related, as the decisions you make in the design (cough, falcon wing doors, cough) can make the car's building extremely difficult. Elon mentioned by model Y disclosure that the design of the factory to build the car is 100 times more difficult than building the car.
The model Y announcement helped me realize that Tesla's strategy has now been changed. Instead of trying to prove to the world that it can make the best car in the world, profitable, which was more or less its target for model S, model X and model 3, the goal of model Y is more modest. Their goal is to show how they can address the largest part of the world car market (the small and medium crossover and SUV segments) with a few adjustments to the revolutionary model 3 design. This hopefully means that Tesla can reuse most of the hard work of building a model 3 factory to build the model Y line.
It is also possible and just as likely that model 3 and model Y could be built on the same production line. If Tesla can use existing batteries, engines, electronics and interiors to build its next two vehicles, the pickup and the $ 25,000 model 2, Tesla can avoid the hell of production as it endured for the model S, X and 3 ramps. market for $ 15,000 electric cars, but depending on how the transfer rate of transfers goes, we may not have to build many. If Teslas can last a million miles, there will be many cars with 500,000 miles available to meet the demand for lower priced cars. Some would prefer a lower quality new car for $ 15,000, and I'm sure hundreds of Chinese and other emerging market producers will be able to satisfy that need.
Another problem that Tesla (or the aftermarket) must solve is that they will build so many of a few models that the parking lot in the local shopping center will have 100 copies of the same car. This is not a serious problem with finding your car, since your app will lead you to your car, but people will not drive as usual. I will not address how this will be solved other than to say it is a good problem to have. This is a problem the traditional producers are very good at solving. They make many cars look different, which are not really significantly different.
So Tesla has stated that designing a desired car is easy, but building it is difficult, but it has come up with a plan to avoid designing new factories by just reusing what the company learned to build model 3 production lines . You still have to pay for the new factories, and how do you do that?
Financing of New Gigafactories
Tesla has generated about $ 4 billion a year in cash flows from existing operations (taking the last two quarters of the year and doubling them, I will explain below – Tesla Cycle – why they will experience less seasonal variation in sales than other companies.)
Learning from former factory builder, Tesla believes it can reduce the cost of building future gigas from about $ 4 billion a year to around $ 2 billion a year (I think the note is from 4Q- the call, but it may be from the factory's groundbreaking or other article). This means they can share their cash flow to fund about one gigafactory annually and spend the other $ 2 billion to improve existing factories and design new cars and production systems. It does not allow them to pay off debt, but companies that are growing rapidly are thrilled that they do not have to go to the capital market to fund growth.
So which cars and volumes do I see the Tesla building?  Vehicle Production / Sales
As you can see from the tables above and below, Tesla is planning to become a leading manufacturer of vehicles in the world, with only 4 high volume models.
Related: Which Electric Vehicles can score 500,000 + sales a year ?
Depending on how much sales of other manufacturers fall when customers around the world realize that electric cars are superior and do not want to buy another gas or diesel car, Tesla could be the world's largest producer by 2025. When this tipping on anyway happens, although the other manufacturers have designed good cars that meet their customers 'needs, they will not be able to secure enough batteries to quickly switch production to EV when customers' tastes change.
How Does Tesla Match Supply Work?
One of Tesla's competitive advantages is the relative ease of selling its cars to different markets. Most cars need to be redesigned significantly to meet local safety and emission standards. Tesla vehicles have no emissions and are designed to be far safer than any regional standard, so they only need to update their charging port since it varies by market.
So, how does Tesla use its international designs to match the supply to demand?
- Tesla announces a unique vehicle that has value far beyond anything available today anywhere in the world. This generates a long waiting list for the product and causes people to keep their existing vehicles a little longer than normal, waiting for Tesla.
- Tesla sends the new vehicle or model to the US and Canada as it hits production and lowers its production costs.
- Tesla sends the new vehicle or model to left and left markets in Europe and China during the break in demand arising in the United States after it has worked through the waiting list.
- Tesla sends the new vehicle or model to the right-door markets during the break in demand that arises in Europe and China after meeting the busy demand.
Then it starts again at the top with a new model ($ 35,000 Model 3 at the moment) or a new vehicle (model Y, pickup or model 2). When demand softens in one market, they just start sending to the next market. Shorts shout "Demand Problem ", but Tesla continues to increase production and sales to existing markets and expand into new markets. They only need a new car design every year or so to start the cycle. Given how slow the competition is moving, it is not difficult.
But what about competition?
Of course, Tesla must continue to handle various events that will increase and decrease demand. Land will add and drop purchase subsidies and other EV incentives. They will put on petrol and diesel car bans in certain cities that will increase demand ahead of their effective dates. The competition will introduce cars that are competitive with Tesla. The 5 areas that will be difficult for the competition to match are:
- Battery supply and cost. Tesla, the world's largest manufacturer of battery modules (non-cells) in the world, has significant economies of scale and has established a reliable supply chain.
- Effective EV constructs that minimize the size of battery needed for acceptable range. As we see, many companies can do a good EV, but making one as effective as a Tesla is very challenging. I have only been impressed with the Hyundia / Kia products from an efficiency point of view (other than Tesla).
- Expansion of batteries, charging time and reliability. Elon can't call it a moat, but everyone else thinks it is. If Tesla opens this to other manufacturers, it only provides more funding to expand the already enormous charging system.
- Full Self Driving. Every Tesla car built since October 2016 is equipped to be completely autonomous. Other companies want good self-propelled features in selected models and are offered in new cars, but only Tesla defined a standard sensor array and decided to equip each car with it many years ago.
- Security. Tesla is obsessed with security far beyond the requirements of any public authority. It is no coincidence that the 3 largest cars tested by the NSTSA are all Tesla cars.
I make it easy, but it is not easy to increase production 10 times over the next 6 years. Yes, Tesla has done so before 3 times, but this time it becomes more difficult because the competition no longer sleeps. Some of the companies have had their "Kodak Moment" where they realize that they may or may not switch to the new technology fast enough to survive. Other companies are "zombies" or the wandering dead. They do not realize that they have organizations that cannot build cars that customers want and do not have enough time or resources to make the transition. When they realize it, they will probably put half of their employees down and sell the remaining scrapes to the companies that have successful designs that the customers want. But some major car manufacturers also jump into the EV transition and aim to take advantage of it.
P.S. I have heard that Tesla sells all demo cars at the end of the quarter. Sometimes they give big discounts on models with a few miles. Hurry if you want one of those deals. If you want to take advantage of my Tesla referral link to get 1000 miles of free charge management on a Tesla on a model S, model X or model 3, here's the code: https://ts.la/paul92237 (but as I've said before, if another owner helped you more, please use their link instead of mine.