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Tesla's Investor Day Redux

 4:04 that's how long the investor meeting lasted.  Shortly thereafter the stock price of Tesla tanked by about 5%, standard stuff, "buy the rumor, sell the news".  The information that was given to the investors was mind-blowing and has huge implications for the car industry.

What is clear is that Musk and his team understood the message that Henry Ford gave the world, refine and rethink the process until you achieve your goal.  What was fundamental to the presentation is that through better manufacturing processes, Tesla believes that it can cut its manufacturing costs by half.  This doesn't mean that Tesla will cut the price of its vehicle by half, it means that Tesla's margins will grow again (they were 40% in 2022).  Tesla's p/e is 48 (the average for the ICE OEM is around 12), but in view of the news here, it would seem that it's more than justified.

A few weeks ago, Tesla cut the price of its entire fleet of vehicles by $5,000 -- the cuts were immediate and took the industry (and the analysts) by surprise.  What Tesla did is that today the average price of a Tesla is below the average car price in the United States.  As a whole, Tesla are on average more affordable than average car bought by legacy manufacturers!  It also gave Tesla buyers access to the EV credits that Congress had crafted in a way to exclude Tesla (yeah that's a thing)

Over the next 72 hours, the market figured out the nature of the problem, and the price of ICE OEM dropped rather dramatically (Ford,GM, VW, BMW etc).  Their problem is that Tesla cars are now competing directly with their offering.  Not the cheapest of the cheap but the cars that are purchased by the average American.  

Below is a highlight of the car news over the past week

  • Jim Cramer said: "This showed that Tesla is in trouble"
  • Toyota admitted:  They tore down their first model Y a few weeks ago
  • Tesla announced that 3,500 charging stations will be available to all makes of EV (in the US)
  • Volkswagen fired its CEO, and replaced him with a Petrolhead
  • General Motor is in financial trouble
  • Sandy Munro announced that Tesla's current cars are 5/10 years ahead of the competition
  • Joe Biden hates Tesla / Elon Musk
  • Hertz just bought 100,000 tesla for $4.2 billion (and has the option for another 100,000)
  • US government believes there will be 10 million EV by 2026  (very unlikely)
  • Tesla is looking at implementing new 1,000,000 miles battery technology

The Hertz purchase is a game changer.  Because for the first time, people will be able to rent a Tesla and try it out for a week or 10 days (but only from Hertz -- which was bankrupt just two years ago), no other will be able to compete.  Since no other manufacturer has the scale.  BTW leasing companies (Hertz used to be owned by GM) used to be a way for people to try new cars.

As for the analysts, they get the wrong end of the stick.  Musk wants to reduce wait time for his cars, that's why he's increasing manufacturing capacity.  while you can get a Tesla within weeks, if you want to buy a GM, Hyundai, or other EV you may have to wait years (Hyundai has CLOSED its order book for new Ionic 5 models, there's now a waitlist).  Tesla's high-profit margins -- after the implementation of its manufacturing process it has been estimated that its margins will exceed 50% on each car it sells -- giving Tesla a huge ability to reduce vehicle prices.

Relations with the US government are cold, arctic cold.  President Biden dislikes Tesla and Musk, in 2022, he called GM the US leader in the EV sector (total EV sales 39,096 vehicles) and never once mentioned Tesla (Total EV sales in 2022 of 1.7 million vehicles).  When the White House invited ICE OEM to discuss the EV business, Elon Musk was pointedly not invited.  Maria Barra refuses to say the word Tesla...I mean how f,ing stupid.  

Finally, the impact of the change in manufacturing will not only be to reduce the needed footprint but will also accelerate the manufacturing process.  That means that the current Texas plant will probably be able to increase its manufacturing capacity beyond the stated 250,000 per annum.


 

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