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No. of Recommendations: 4
Market cap is $53 billion, so 15x means net earnings over the cycle of about $3.5bn a year.
Pencil in maybe $2000 net profit per vehicle on maybe 1.75 million vehicles per year.
(I can't think of any obvious reason that by the time they are a volume manufacturer their
profitability per unit will be higher than any other mass market builder. Ford makes maybe $1750).
It's quite a climb from 250 cars a day to 4800 per day. e.g, 28%/year compound production and sales growth for 12 years.


You know, this all sounds very reasonable. Sounds like they’ll be a BMW, or Mercedes/Daimler. However, the mistake is you’re trying to compare a disruptive business with stodgy old ones that haven’t changed in a century. Just like with Amazon.

When all is said and done I think chances are Tesla is not a simple car manufacturer. Yes, they’ll have a car division. And a truck division. And a battery division. And a solar roof division. And a charging network division. And then there might be one or two I wasn’t able to think of, just as a year ago nobody seriously thought Tesla would be able to make an electric semi.

Not all of these will become a $50B business in their own right. But chances are more than one will. But no level-headed computation on the back of a beer mat based on comparable businesses will tell you that.

I’m not a Tesla shareholder, the stock is too speculative to my taste. I just drive the car and think it’s fabulous. But any attempt like the one you presented as a counter argument for a Tesla investment is pretty meaningless IMO, because the bet is not on it becoming a BMW. The bet is on its disruption. And so far Tesla is making good on that in spades. And if you’re not a betting man, it’s all good, I understand. I’m not either. But repeating the same beer mat comparisons over and over again just like you do with Amazon gets really old.

Mark
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