Wednesday, February 24, 2021

Can Big Auto Catch Up to Tesla?





Hell no.  That horse left the gate five years ago.  Catch up is hte best they hope to do while fighting to retain market share.  In the meantime they have factories to convert along with supply chains.  The industry has dragged its feert on evs from the behginning.

Yet the future was always completely predictable.  Better battery tech was need driven and a simpke matter of time and was techically always possible.  That clock has now run out and the base line is good enough.  Better is simply wonderful and makes the internal combustion engine as hopelessly obsolete as the xtem engine we do not use anymore except as a heat engine.

Read and understand the scale of the transition happening.  It will seem overnight but that is because the giant factories are rising now.

Understand also that change in the auto industry is completely out of control with an army of horses pulling..

Can Big Auto Catch Up to Tesla?


Brian Wang | February 19, 2021


https://www.nextbigfuture.com/2021/02/can-big-auto-catch-up-to-tesla.html?


You have chosen not to invest in Tesla and missed more than a 100 times runup in stock price.

Now you are still “scared” to invest in Tesla.

You think maybe the other car makers will catch up.


A car expert, Sandy Munro, tells you that legacy carmakers will not catch up. They needed to start five years ago or earlier. Sandy Munro thinks new entrants have a better chance of catching Tesla. Legacy carmakers will have to get rid of factories, unionized employees, have retirement expense obligations and many other issues to make the transition. The dealer network is a problem for the old car companies.

Tesla sells direct to consumers and is able to sell every car they make without paying to advertise its cars.

Legacy carmakers currently buy most of their parts from many other contracted companies. Legacy carmakers do not make their own batteries. Tesla currently has a joint venture and partnership with Panasonic for the Nevada gigafactory Tesla also gets batteries from CATL, LG Chem and Samsung.

Ford has $160 billion total debt. GM has $110 billion in total debt. Volkswagen has over $230 billion in debt and Toyota has $21 billion in debt.

Ford Motor Credit generates about half of the automaker’s profit. This is up from 15 to 20 percent as recently as 2016. A lot of the rest of Ford’s profit is from servicing cars at dealers.

Ford took a $2 billion hit to earnings due to adjustment to pensions and airbag costs. Pension funds were underfunded and they had more airbag liabilities.

Nextbigfuture notices that Volkswagen is one of the biggest of the old carmakers and they did start over 5 years ago. Volkswagen spent $50 billion. Volkswagen is somewhat competitive with good electric cars that people are willing to buy. However, Volkswagen has to sell the ID3 and ID4 at a loss of $4000-5000 for each car. This is offset by not paying a penalty to sell their profitable gas or diesel SUV.

Why didn’t Nokia crush Apple the smartphone?

In 2007, Apple introduced the iPhone and the company had annual sales of $20-25 billion. In 2010, Apple had annual revenue of $50 billion. In 2011, Apple passed $100 billion in revenue. In 2015, Apple passed $200 billion in annual revenue.

In 2007, Nokia had over $70 billion in annual revenue. In 2011, Nokia had $57 billion in revenue. Nokia was ahead on revenue for four years after the iPhone was introduced.

Tesla went from $24 billion per year annual revenue run rate to $42 billion per year in the fourth quarter. If Tesla makes 900,000 cars in 2021 and battery and solar revenue increases then Tesla should make $80 billion in revenue in 2021. If Tesla makes 1.6 million cars in 2022, 110 GWh of batteries, solar and has more autopilot sales then Tesla will be making about $150 billion in 2022.

Nokia sold 485 million cellphones in 2007. Apple sold 200 million smartphones in 2020. Apple’s market value is over ten times more than Nokia at Nokia’s peak.

Tesla makes 22-25% gross margin on its cars. This is about $10,000 for each model 3 and model Y. Tesla can also make $10,000 selling full self-driving auto pilot. This is likely 80% margin. About 30% of US buyers buy the full self-driving.

A highly valuable technology company can have a corporate valuation that is far higher than its revenue. Tesla can make 50% margin on its battery storage. Tesla can make 80% margin on its self-driving software. Tesla can make 30% margin on its cars.

Tesla makes their own AI semiconductor chips. Tesla makes their own software. Tesla sells games and entertainment to connected cars. Tesla is making their own alloys and making new manufacturing equipment. Tesla has created an innovative solar roof. Tesla has created a new battery, new battery form factor and battery will not become part of the structure of the cars.



Tesla has installed two giant presses to eliminate 169 parts in forming the rear trunk of its cars. Tesla has 11 more giant presses on order. Tesla invested new 386 steel alloy so that they do not have to heat treat the casting and so that cast forms properly. No other carmaker has this new steel alloy. The other carmakers have not ordered giant presses. It takes many months to a year or more of lead time to get the giant presses ordered from the one company that is the parent of both makers of the presses. It takes months to install the giant presses. The giant presses save about 10% of the floor space of a factory. 100,000 square feet saved. It replaces many robots and hundreds of staff.

Tesla already has the best batteries and best electronics for those batteries. Tesla gets about 30% more range per kWh from their battery packs because of superior electronics.

Tesla at battery day last year described their plan to make batteries and systems at 50% lower cost and with greater production efficiency.

The competitors were promising cars that would be better than Tesla in 2020 and earlier but this never happened. Tesla still has 80% of the US market. Tesla is growing its market share in China. Tesla is expanding its factory in China and will grow its market share in China and Asia. Tesla completing its factory in Berlin.

Berlin and Texas at 500,000 cars per year in 2022, expanded factories in China would mean about 2 million cars per year in 2022.

Tesla is reportedly 30% ahead of schedule for a 100 GWh/year battery factory in Texas. CATL is the largest battery company in the world and is valued at $150 billion. Tesla would match CATL planned production in 2021 with the Texas batteries in 2022. This would be a $150 billion valuation business created from scratch.

Tesla is reportedly making over 50% margin over its cost for its battery storage Power Walls.

Tesla has more cash than its competitors now. Tesla can raise more money with less dilution because they are over 4 times more market value than Toyota.

Tesla biggest competitors make a lot more cars currently, but Tesla will be producing comparable levels of cars in 2025 and more batteries. Tesla makes more money on every car and every battery that it sells.

Tesla has had 50% per year annual growth for 8 years.

But I Like Other Cars More?

Toyota makes 10 million cars in a year. This means 80-90% of the people do not buy a Toyota. 80% of people never buy a Toyota. A car company can become huge and most people never buy their product.

Tesla is will be expanding its product line. They will make the Cybertruck. They will make a van. They will make the small $25K cars.

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