Tesla investment
I've never bought a stock before. My background is that I am naturally drawn to popular science and engineering. And among many others I follow Elon Musk's SpaceX and Tesla development. This blog post is intended for my future self, to note down the reasons why I am committing to buying Tesla stocks.
Please take those notes with skepticism and critical thinking. I am biased and newbie.
I believe most of our children will not want to drive "dumb" ICE cars with knobs and so on. And we as parents would be much more comfortable letting the car drive them.
The price of batteries is coming close to 120$ per kWh. It has the potential of going to 100$ or less.
Did Tesla bought Maxwell - I am not sure now.. With path to even lower price per kWh and cleaner, simpler and cheaper build. Are they going to integrate capacitors in the cars, especially in the Semi - to increase the efficiency of breaking recovery?
The best place to buy is 6 months after crisis ends. So probably my next .. bigger investment would be then.
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Tesla strong points
This section list the strong points of Tesla as a longer term investment from my point of view.
Elon Musk
Obviously mr. Musk is a quite strong character and driver for investing in his company. With his strong innovative mind, charming in his own way personality, powerful leader, obsessive workaholic and ludicrous marvel in marketing. He likes to create things, "engineer" and "designer" is his primary focus. I feel that he is CEO out of necessity to make the object of his engineering and designs come to life.
He is often straightforward when he makes errors. In this sense he comes as humbe. In the summer of 2018 he was sleeping in the Fremont factory in order to help fix the issues with the production of Model 3. Which shows strong commitment and leadership by example.
He has build a quite strong team around him with knowledge of building hardware, neural networks, scalable backend infrastructure, control and security software for the Tesla fleet, superchargers and power solutions.
I think that mr. Musk is genius in advertising and branding. He is on another level by putting a Tesla car en route to Mars, or tweeting silly things. People are talking about him, following him, forming a cult. I am not aware that they are paying for any advertisement so far.
Tesla as car manufacturer
I strongly believe that as much effort and thought is put into the car - the same or more is put into engineering the factories. Tesla believes in economies of scale and massive automation down the road.
I am betting that every few years there would be significant vertical improvement in the factories and horizontal coverage as well. Factory in China is under way. I hope for factory in Europe - hopefully in Greece!
Tesla as a FSD software company
Full self driving is important, very costly and hard to develop feature. There are companies (e.g. Lyft and Waymo) that focus only on this point. Tesla has a great team, has own hardware designed for the FSD. Most importantly thousands and soon millions of people will teach the FSD how to drive.
In some years when you let your teen "drive" to the seaside with his friends - you could be sure that the FSD with hundreds of human years of experiences (and possibility to software limit the speed) that your young adult is much safer than driving on his own with peers distracting and pressuring him to show off.
In some years when you let your teen "drive" to the seaside with his friends - you could be sure that the FSD with hundreds of human years of experiences (and possibility to software limit the speed) that your young adult is much safer than driving on his own with peers distracting and pressuring him to show off.
Tesla as a car
Obviously I am sold on the car and dream about it. Never actually drove in one.. The electric drive, the acceleration, the silence, the stability, the security, the design - all clicks with me.
I believe that the car is a datacenter on wheels that trains the FSD neural networks to get better and better. As mr. Musk said "Google search is getting better, because so many people are using it and training it." The same thing is happening with Tesla FSD neural networks - it is getting better because people driving around are training it - in active and shadow mode and especially when human overrides happen or in exceptional road conditions.
The car is kind of always connected to the cloud - updates regularly, has extensive infotainment and dedicated app. Feels like 2019 smartphone, and not 1995 flip phone.
I believe most of our children will not want to drive "dumb" ICE cars with knobs and so on. And we as parents would be much more comfortable letting the car drive them.
I still do believe that experienced human will be much more versatile in the various unexpected road conditions.. but that does not apply to young adults that die prematurely because of inexperience, misjudgements, "showing off" and being distracted with other peers in the car ..
Car is expected to lose value much more slowly than the "dumb" cars, due to constant updates, possibility for FSD and the future possibility to lease the car for taxies (i.e. the car making money when not in use). Also the batteries and the drivetrain are aimed at 300K - 500K miles before need for maintenance. Cars should be build like this, and not to fail at the 5 year mark as ICEs are. ICE are complex beasts, marvels of engineering (like RS-25 is to the Rutherford engine in rockets), but require a lot of maintenance past the warranty period.
The Tesla Model Y could be a strong selling point if they manage to manufacture it at scale and keep the cost down.
The Tesla Semi truck - this could be quite a strong point if they manage to build it at scale. At Europe Tesla Bus with 800 km and FSD could be game changer for intra and inter city transport.
The Tesla Roadster with 1.8s to 100km/h and possibility for cold thrusters for stability around corners, even more insane acceleration 1s to 100km???, and breaking. Space technology. Will take the minds of people that are thrilled by speed.
In all cases running a car on electricity for now is cheaper than gas. And for 5 years the difference in the price comes towards the Tesla side strongly - in the order of 2-5 thousand euro or dollars.
Tesla network of robo taxis
Tesla is not just a car and not just potentially full self driving car. Mr. Musk is seeing "robo taxis" being a major income for Tesla with 25-30% cut on all robo taxis from people that use their car as business. There is major possibility for growth down the road.
Batteries
I am confused about Panasonic - Tesla partnership on the battery production in Nevada. It seems that the batteries themselves are produced by Panasonic. Then packages, wired, controlled, cooled, heated and inverted by Tesla.
The price of batteries is coming close to 120$ per kWh. It has the potential of going to 100$ or less.
Did Tesla bought Maxwell - I am not sure now.. With path to even lower price per kWh and cleaner, simpler and cheaper build. Are they going to integrate capacitors in the cars, especially in the Semi - to increase the efficiency of breaking recovery?
For now I count the batteries as a strong point in Tesla - since they somewhat manufacture them at scale and cheaper than competition. On top of it they seem quite durable.
Tesla Superchargers
In my view the supercharger network is entirely separate line of business and income for Tesla. It is growing and possibilities for nice margins on sales of electricity are quite good. Tesla is expert on manufacturing and storing electricity, which could mean nice profits.
They could be selling electricity to other electric cars.
Tesla energy
This is again separate business than the car, FSD/network and superchargers. They plan of mass producing solar tiles, inverters, batteries and software to manufacture your own electricity in places where there is significant sun, and you own the roof.
I expect if they could figure out the tiles and the batteries in the years ahead this to be a quite strong point.
Tesla risks
Elon Musk
Mr. Musk is the biggest asset, but he is also a big risk. His timelines more often than not come to life, sometimes with significant delay. I personally do not mind, actually enjoy, his playfulness on Twitter and his fights with journalists, SEC or other executives. I do not view it as negative that he puffed a joint on JRE.
A lot of people hate him. I could not help but sometimes wander what is the possibility of a hit job against him. I would not say close to 0. Hope he takes his security seriously.
He seems to have quite strong genes, but he does not exude health overall - he seems overweight around the waist. Probably the lack of exercise, quite dynamic schedule, not great food, not good sleep affects his health. I wander what a genius he is is, like IQ of 200, dumbed down to 160, due to lack of sleep, exercise, and he is still so far ahead of all of us down at 100. The tragedy of the geniuses..
There is the possibility that he might die due to health or just random accident.. The company does not seem to be strong enough to continue without him.
There is higher chance than the normal that he might do some stupid thing on Twitter or elsewhere to fail Tesla.
Tesla as car
A lot of people in the office do not like the Tesla's design, its range limitations - lack of coverage in Bulgaria and Europe, lack of service, panel gaps and lack of knobs and speedometer in front of the steering wheel.
Also you need to have your own garage to charge it overnight. In Europe not many people have it. There is no overnight charging infrastructure yet. There is no supercharger in Bulgaria.
Security
A major blow back would be people hacking the car and killing other people. This would be major, major blowback to the company and the stock.
FSD killing people
Full Self Driving killing people would be major blow back to the company.
Batteries
Major points of failure are the Panasonic - Tesla partnership going bad.. Tesla is depending on the investment and manufacturing capabilities from Panasonic Gigafactory 1 in Nevada.
Batteries exploding and killing people would be pretty negative.
Massive amounts of batteries losing charge capacity and needing replacement in the warranty period.
Underperformance of the batteries in cold weather could become issue..
Competition
I am not seeing serious competition from American and European brands. They can make beautiful shells of a car, they can figure out the electric drivetrain. I am yet to be sold that they could build batteries at scale. And I am highly doubtful they can make the car "smart" with FSD, over the air updates, and possibility for "leasing a car".
But still there are some serious players in the auto industry with a lot of cach. Also the Chinese are hungry for recognition and quite talented and hardworking. I would not be surprised to see smart, capable, long range, good looking and cheap Chinese electric cars.
But still there are some serious players in the auto industry with a lot of cach. Also the Chinese are hungry for recognition and quite talented and hardworking. I would not be surprised to see smart, capable, long range, good looking and cheap Chinese electric cars.
So this point remains non zero chance of hit on Tesla monopoly.
Price of electricity
If you do not have own garage, and own house, and do not live in sunny conditions - you are subject to the price fluctuations of the electricity. Down the road it could become expensive to the level of cheap and sturdy ICE cars.
USD / EUR relationship
I live in Europe, but invest in USD - so the stock might be going higher and I could still be losing money due to EUR being higher to the USD..
USA financial issues
The USA might default on its massive debt. USD could lose its status as reserve currency or as the oil currency.
Slower economy, recession or crisis would dip the demand for pricey cars. Week USD will make taking a profit in EUR difficult.
My strategy
I have no idea when to enter the market. It will be somewhere in late April, 2019.. If the price drops significantly (i.e. 50%+) - I would double down on it and buy more shares at a lower price.
I intend to hold those shares for 3+ years. Ideally for 7+. I have faith in Tesla. My biggest worries are the possibilities for world economic crisis, FSD killing people or weak security and hacking cars for malevolent purposes.
There is possibility to lose large portion of the investment - so those are money that I could afford to lose.
The best place to buy is 6 months after crisis ends. So probably my next .. bigger investment would be then.
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