Elon Musk once scoffed at the notion that BYD could compete with his company. Now, the automaker run by billionaire Wang Chuanfu is poised to be the new No. 1 in electric vehicles.
The energy business, primarily commercial, has actually been doing really well. It was stalled during covid in favor of vehicles, but it’s ramping now. They have done much more than just Australia, and they’ve actually been very successful. You just don’t hear about it the same as it’s less flashy than cars or AI. They also sell AI driven software to help optimize power grids power arbitrage, which is successful recurring recenue software tack on as well.
Their new facility that’s ramping right now will put out 40gwh a year which is more batteries than some legacy auto manufacturers are using, and they are building a second in China that’s going to start producing in 2024. That’s over a million cars worth of batteries being sold at commercial margins. As the business ramps its going to be as or more profitable than cars excluding a future where FSD is successful. (edit: just for reference, they deployed about 66,000 60kwh cars worth of batteries in Q3)
They’re also getting into the power business in Texas and I’d expect to see that to expand, and their virtual power plant product is also growing and will be a big thing in the future. I’m actually excited about VPP from any and all providers as it’s really going to add security to the power grid while helping out the home owners. A Vermont power company wants to get a home battery in 100% of their customers homes over the next few years.
So keep an eye on all this if it interests you at all, it’s going to be big, and as I said, people are going to start accounting for it. They made almost a billion profit on that on Q3 (edit: I’m an idiot and can’t line items up. It was 381 million profit at about 40% scaled. I mixed up a line with service and other. The point still stands though, you can’t ignore almost 400 million in profit with the rapid growth its showing)
As for the AI, analysts really weren’t accounting for it and they weren’t accounting for energy either. You can say they are all crazy for having given tesla those valuations without it if you want, but im just telling you what was really happening. A few like Cathie Woods were, but most weren’t.
And like my edit about car payments. I wouldn’t ever expect the same margins on the 3/y again, but do expect margins and prices to go up as interest rates come down. People buy cars based off the car payment, and those are the same today as when margins were higher and Tesla still sold around 1.8 million vehicles this year at those same payments. If payments become cheaper because interest rates come down, prices will go up somewhat at all manufacturers as there will be more demand for cheaper payments. Those other manufacturers are suffering more than Tesla due to the interest rates and they desperately need them to go down to help with their profitability. The longer this drags on, the worse they’re going to be as ICE restriction start coming into play in various countries.
Also, the competition is coming and teslas market share going down is old and tiring to hear. Tesla isn’t competing against other EV makers, their competing against ICE sales. Their total market share is increasing. The story is always going to be their EV market share is decreasing because if you are at 100% and someone sells 1 car, you’re decreasing. If their total market share is decreasing in a region, then that might be a real problem.
The real competition (edit: within the EV space) is going to be the Chinese EV makers. That I feel is legit. But Ford, GM, Stellantis, Toyota etc, it’s the same story and they’re still struggling and even cutting back plans. They talk a big talk, but the jury is still out on that one.
I don’t think Tesla AI is worthless without FSD either, but clearly dramatically less without. They do use AI for power as I mentioned, and they’ve diversified their FSD computer into the bot, which is a long shot, but it puts their eggs in 2 baskets instead of 1 which could prevent a complete disaster if FSD fails. The bot is easier to solve than FSD so it’s not out of the question.___
Thank you, that’s a very interesting and thorough response. 👍
From what you write, it all sounds very impressive, question is then why Musk would call Tesla basically worthless without AI?
Also, the competition is coming and teslas market share going down is old and tiring to hear.
Well I wrote the competition has already arrived, and yes Tesla may increase market share total, because the total EV market is increasing market share. What I meant is that they can’t sustain their current market share and margins in the EV market. So they will not become as big as the rest of top 10 combined. Tesla may be able to hold their market share for the total market, maybe even increase it a bit. But I strongly suspect even that will go down when the competition is nearer completing the transition period, and compete at full strength. Tesla had a 10 year head start, but in 10 years that won’t matter as much.
The real competition is going to be the Chinese EV makers.
The competition from China is already real, and Chinese cars dominate China with BYD having 7 out of 10 top selling cars in China and Tesla only 2, and China is now the biggest market in the world. China is expanding quickly to other markets. We have many Chinese brands in Europe now, that all arrived very recently. But European and American makers like for instance VW and Ford, are also improving rapidly. Then of course there is Hyundai/KIA which is the world 3rd largest maker, that makes some very good EV offerings here.
One of the reasons I think Tesla may lose in the long run, is that they are a very long time about making new models. Maybe it’s just Musk who promises results unrealistically soon. But the delays are sometimes up to 5 years delivering what he claims they can do now!
The energy business, primarily commercial, has actually been doing really well. It was stalled during covid in favor of vehicles, but it’s ramping now. They have done much more than just Australia, and they’ve actually been very successful. You just don’t hear about it the same as it’s less flashy than cars or AI. They also sell AI driven software to help optimize power grids power arbitrage, which is successful recurring recenue software tack on as well.
Their new facility that’s ramping right now will put out 40gwh a year which is more batteries than some legacy auto manufacturers are using, and they are building a second in China that’s going to start producing in 2024. That’s over a million cars worth of batteries being sold at commercial margins. As the business ramps its going to be as or more profitable than cars excluding a future where FSD is successful. (edit: just for reference, they deployed about 66,000 60kwh cars worth of batteries in Q3)
They’re also getting into the power business in Texas and I’d expect to see that to expand, and their virtual power plant product is also growing and will be a big thing in the future. I’m actually excited about VPP from any and all providers as it’s really going to add security to the power grid while helping out the home owners. A Vermont power company wants to get a home battery in 100% of their customers homes over the next few years.
So keep an eye on all this if it interests you at all, it’s going to be big, and as I said, people are going to start accounting for it.
They made almost a billion profit on that on Q3(edit: I’m an idiot and can’t line items up. It was 381 million profit at about 40% scaled. I mixed up a line with service and other. The point still stands though, you can’t ignore almost 400 million in profit with the rapid growth its showing)As for the AI, analysts really weren’t accounting for it and they weren’t accounting for energy either. You can say they are all crazy for having given tesla those valuations without it if you want, but im just telling you what was really happening. A few like Cathie Woods were, but most weren’t.
And like my edit about car payments. I wouldn’t ever expect the same margins on the 3/y again, but do expect margins and prices to go up as interest rates come down. People buy cars based off the car payment, and those are the same today as when margins were higher and Tesla still sold around 1.8 million vehicles this year at those same payments. If payments become cheaper because interest rates come down, prices will go up somewhat at all manufacturers as there will be more demand for cheaper payments. Those other manufacturers are suffering more than Tesla due to the interest rates and they desperately need them to go down to help with their profitability. The longer this drags on, the worse they’re going to be as ICE restriction start coming into play in various countries.
Also, the competition is coming and teslas market share going down is old and tiring to hear. Tesla isn’t competing against other EV makers, their competing against ICE sales. Their total market share is increasing. The story is always going to be their EV market share is decreasing because if you are at 100% and someone sells 1 car, you’re decreasing. If their total market share is decreasing in a region, then that might be a real problem.
The real competition (edit: within the EV space) is going to be the Chinese EV makers. That I feel is legit. But Ford, GM, Stellantis, Toyota etc, it’s the same story and they’re still struggling and even cutting back plans. They talk a big talk, but the jury is still out on that one.
I don’t think Tesla AI is worthless without FSD either, but clearly dramatically less without. They do use AI for power as I mentioned, and they’ve diversified their FSD computer into the bot, which is a long shot, but it puts their eggs in 2 baskets instead of 1 which could prevent a complete disaster if FSD fails. The bot is easier to solve than FSD so it’s not out of the question.___
Thank you, that’s a very interesting and thorough response. 👍 From what you write, it all sounds very impressive, question is then why Musk would call Tesla basically worthless without AI?
Well I wrote the competition has already arrived, and yes Tesla may increase market share total, because the total EV market is increasing market share. What I meant is that they can’t sustain their current market share and margins in the EV market. So they will not become as big as the rest of top 10 combined. Tesla may be able to hold their market share for the total market, maybe even increase it a bit. But I strongly suspect even that will go down when the competition is nearer completing the transition period, and compete at full strength. Tesla had a 10 year head start, but in 10 years that won’t matter as much.
The competition from China is already real, and Chinese cars dominate China with BYD having 7 out of 10 top selling cars in China and Tesla only 2, and China is now the biggest market in the world. China is expanding quickly to other markets. We have many Chinese brands in Europe now, that all arrived very recently. But European and American makers like for instance VW and Ford, are also improving rapidly. Then of course there is Hyundai/KIA which is the world 3rd largest maker, that makes some very good EV offerings here.
One of the reasons I think Tesla may lose in the long run, is that they are a very long time about making new models. Maybe it’s just Musk who promises results unrealistically soon. But the delays are sometimes up to 5 years delivering what he claims they can do now!