tesla

Tesla

> By Duan Yongping · his NetEase blog (nteswjq.blog.163.com, now closed; read from web archives) · 2013-05-31 · [Original link](http://nteswjq.blog.163.com/blog/static/1269981201343162816772/) ([archived](https://web.archive.org/web/20130618200245/http://nteswjq.blog.163.com:80/blog/static/1269981201343162816772/))

> This post includes letters from others or quoted material; Duan Yongping's own words are marked separately.

I saw this on Xueqiu and am reposting it here. Although I don't fully agree with some of the views in it, this piece gives a fairly complete description of Tesla's current situation.

On Wednesday I went to test-drive a Model S, the Performance version, 0–100 km/h in 4.2 seconds. The overall feel was very good; I even felt it was better than the Mercedes S65 (AMG) I drive now. I suspect that driving a Mercedes will gradually start to feel like holding a Vertu phone. Luckily I'll be driving a Tesla before the end of August.

(The red text below was added by me and has nothing to do with the original author.)

===

[Translator's note: a passage quoted from an article by Liang Zhun, contributing author of Securities Market Weekly, on Tesla (passed along via Xueqiu); only Duan Yongping's red comments inserted in it are translated stands here in the original; it is not Duan Yongping's words and is not translated.]

(Actually it reached profit through one-off income, but current sales really are already at the break-even point.)

[Translator's note: a passage quoted from the same article stands here in the original; it is not Duan Yongping's words and is not translated.]

(Such a rich guy actually got to the point of not being able to pay his rent while building Tesla.)

[Translator's note: a passage quoted from the same article stands here in the original; it is not Duan Yongping's words and is not translated.]

(Starting from the high end is really impressive.)

[Translator's note: a passage quoted from the same article stands here in the original; it is not Duan Yongping's words and is not translated.]

(The Model S can reach 400 kilometers.)

[Translator's note: a passage quoted from the same article stands here in the original; it is not Duan Yongping's words and is not translated.]

(As more people come to know Tesla, this number will still change significantly.)

[Translator's note: a passage quoted from the same article stands here in the original; it is not Duan Yongping's words and is not translated.]

(Simply put: the Tesla experience is far beyond gasoline cars at the same price.)

[Translator's note: a passage quoted from the same article stands here in the original; it is not Duan Yongping's words and is not translated.]

(Strongly agree!)

[Translator's note: a passage quoted from the same article stands here in the original; it is not Duan Yongping's words and is not translated.]

(After driving it I found this is true.)

[Translator's note: a passage quoted from the same article stands here in the original; it is not Duan Yongping's words and is not translated.]

(That amounts to cutting costs by 10%.)

[Translator's note: a passage quoted from the same article stands here in the original; it is not Duan Yongping's words and is not translated.]

(This fully reflects Musk's idealism. Actually, if one day Tesla breaks this promise, Musk will probably have to find money to pay the rent again.)

[Translator's note: a passage quoted from the same article stands here in the original; it is not Duan Yongping's words and is not translated.]

(I don't really agree with the "valuation" section below, but to keep the article complete I'll leave it in; there's also quite a lot that makes sense in it.)

[Translator's note: a passage quoted from the same article stands here in the original; it is not Duan Yongping's words and is not translated.]

(When is 307 talking about? Looked at over 10 years, I'm afraid you'd come to a very different conclusion.)

[Translator's note: a passage quoted from the same article stands here in the original; it is not Duan Yongping's words and is not translated.]

(This will have almost no effect on the Model S, because the Model S is a great car in itself; and even if oil fell to $30 a barrel, in America it still wouldn't be cheaper than charging, and electricity prices would also drop sharply by then.)

[Translator's note: a passage quoted from the same article stands here in the original; it is not Duan Yongping's words and is not translated.]

(One in two million per flight?)

[Translator's note: a passage quoted from the same article stands here in the original; it is not Duan Yongping's words and is not translated.]

(Even with a decimal point, ha, interesting.)

[Translator's note: a passage quoted from the same article stands here in the original; it is not Duan Yongping's words and is not translated.]

(Without Tesla spending a cent on advertising, it has already, "extremely slowly," let many of the people who should know about it know.)

[Translator's note: a passage quoted from the same article stands here in the original; it is not Duan Yongping's words and is not translated.]

(I personally think that in the first few years volume will be limited mainly by production capacity, and growth should be quite a bit higher than 25%.)

[Translator's note: a passage quoted from the same article stands here in the original; it is not Duan Yongping's words and is not translated.]

(Go drive a Tesla; actually it has already been disrupted! Every Tesla Model S will be an excellent advertisement, making the friends around it strongly want to buy one.)

[Translator's note: a passage quoted from the same article stands here in the original; it is not Duan Yongping's words and is not translated.]

(Counting 10 to 15 years from now, Tesla selling 5 million cars should be a high-probability event, with a probability of 66.88%.)

[Translator's note: a passage quoted from the same article stands here in the original; it is not Duan Yongping's words and is not translated.]

(Ten years from now we may find the decimal point was put in the wrong place.)

===

To sum up my own view of Tesla; it's only a view and does not constitute investment advice.

Yesterday a friend in LA called to say hello, and Tesla came up. He said, oh, that company that sells electric cars, how come it suddenly went up so much? I asked him what the electric car in his head looked like: a golf cart or one of those electric bikes? Then I described my test drive, and he was very surprised when he heard it.

I said, go and test-drive one; after you've driven it you'll probably understand.

Those who haven't driven a Model S had better find a chance to try one; otherwise don't simply assume, as if you alone were awake, that this is a bubble.

1. The Model S is a great car, not just an electric car.

What impressed me most during the test drive was the feel of its seamless acceleration, even better than the Mercedes S65 (AMG) I drive now.

Next was the feel of that big screen, and then the fact that this car can really hold a lot of stuff, ha.

I've met several users who have already bought a Model S, and their eyes all light up when they talk about this car.

(By the way, I also drove a Leaf at the same time. I thought it was actually not bad, but it's not the same thing at all!)

2. These lines are what I said before, copied over:

Tesla's batteries aren't its own, which lets it always use the most suitable batteries, but the way the batteries are used is its own, and this solves many problems people couldn't solve before;

Tesla sells mainly online, which will save it a lot of profit;

Tesla will have very few models, quite a bit of an iPhone flavor;

(Actually the way Tesla is most like Apple is that the staff in its showrooms have no sales targets, but the people inside feel less enthusiastic than those in Apple Stores.)

Tesla's production is highly automated (so product reliability will be better), and as a new Silicon Valley company it doesn't have the labor problems of the old car companies;

Tesla only has electric cars. In future many people who want to drive electric will think this brand is cooler than BMW or Mercedes, even if they all make electric cars. This will also let Tesla sell at a slightly better price, and that little bit is enormously powerful when sales run into the millions.

In short, Tesla is well worth watching; it looks very much like Apple years ago (by like Apple I mean its culture of focusing on the consumer experience in its products), but I don't know whether they can find someone like Tim Cook to help (that's very important for ramping up volume later and controlling costs and inventory. Still, from the business model, Tesla won't have too many models, so inventory control isn't too difficult).

There's a lot of discussion of Tesla's technical details on Xueqiu, so I won't say more here.

3. Is Tesla a good investment target?

First, set aside all other factors, including whether it's a hot stock, whether it has gone up a lot lately, even what Buffett has said and so on, and look calmly at whether you can understand Tesla's business model, and whether you can understand how much money this company will actually make in the future.

Only once you've understood this can you decide whether to invest; otherwise what are you buying?

All right, let's assume we're aliens who have just landed on Earth and plan to start our life here, including investing.

Second, I don't like the word "valuation," because "valuation" always gives me the feeling of guessing how much others will pay for the shares in my hands.

What I can do is try my best to understand the businesses I'm interested in, see how much money the business can make in the future, and then think rationally about whether my capital has somewhere with a better return to go (opportunity cost).

If the investment target I've found is the best-return target I can find (including the consideration of risk), then investing can begin.

Third, I don't believe anyone can see a company's future to one decimal place, so all you can do is a fuzzy rough estimate.

4. What will Tesla look like in the future in my eyes?

When I went to Tesla a few years ago and saw the Roadster, my gut feeling at the time was that it probably didn't have much of a market; it was just a sports-car toy.

When I saw the Model S, I only thought, wow, this car looks pretty nice.

But when I saw how many people felt after test-driving it, I thought, wow, shouldn't I pay attention?

My strong feeling after test-driving it myself was: the car world is finally going to be disrupted!

This disruption may take a long time, maybe 10 years, 15 years, even 20 years (generally a gasoline car lasts about ten-odd years, at most maybe 20), but that day really is already within sight.

a. How many Model S + Model X will be sold?

At present the Model S actually has no real competitor (and probably won't for some years); its sales depend entirely on production capacity and the number of orders.

It looks like, with Tesla having raised money successfully and already being cash-flow positive, doubling output every year definitely shouldn't be a problem.

So you can expect sales of these two models to reach 200,000–300,000 within about 3–5 years.

Global luxury car sales now are about 3 million-plus a year (?), and for now it doesn't seem a problem for Model S + Model X to take 10% or more of that.

If these two models can sell more than 200,000, Tesla could have profits of around US$2 billion (actually a billion in profit would already be good).

Buying US$2 billion of annual profit at the current market value shouldn't count as expensive, should it?

b. What happens once the Model C (maybe called Gen III or something else) comes out?

Musk says they'll launch a car at $30,000 to $40,000 with a range of more than 300 kilometers. When he says this, most of their R&D should actually already be done, but I estimate the product will still take about 3–5 years to launch. When this car comes out, the moment of disruption will truly arrive; it's hard to imagine this car's sales not being in the millions.

c. Model N and the future,

It's now 2025, Tesla is already America's second-largest carmaker, producing and selling 6 million cars a year worldwide, with annual net profit of US$15 billion.

Is this idea going too far?

The above is my rough thinking on Tesla. There's a lot of imagining and assuming in it; it depends entirely on my understanding of the business but is also limited by my insufficient knowledge of the car industry.

As my understanding of this industry deepens and my knowledge of Tesla grows, I'll come back here and upgrade it at any time.

5. Invest or not, and at what price?

If you have any doubts about the imagined and assumed parts above, then the question of whether to invest shouldn't arise; otherwise it's speculation.

Tesla's market value now looks to be about US$11 billion; adding the shares that employee options and convertible bonds will add, the real market value is about 14 billion.

If you had 14 billion of spare money, would you be willing to buy all of Tesla?

Note: let me reveal a bit about where I stand on investing in Tesla: right now I'm watching it very closely but have only put in about 1% so far; that is, I'm still waiting for an opportunity.

What I'm mainly waiting for: 1. further confirmation of what I've imagined and assumed; 2. a better price? 3. weighing the opportunity cost of the capital.

I won't upgrade this part again.

Blog friends with technical questions, please look them up yourselves, ha.

2013.5.31

Turn on the TV and you see a great many car ads; this part alone could save a lot of money. [Translator's note: the original is garbled here (这一块还是了); translated by the apparent sense, that cutting this spending saves a lot.]

http://a.xcar.com.cn/bbs/viewThread.php?tid=18961537

http://club.m.autohome.com.cn/bbs/thread-c-102-17986900-1.html?bsh_bid=240209744

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