Category Archives: investing

Why I think Tesla is a good investment

November 26, 2016 | Filed under: investing

I’ve owned a Tesla model S for almost a year now. here is a fab picture of mine taken shortly after I got it:

tesla

It has a few minor scratches. At one point it went back to have the charging flap replaced, but I suspect this was actually only a problem caused by a spot of glue melting in heat on one side of the car. It also needed a door handle replacement recently. Other than this, its been fine. I wont bore you with my personal opinion of the car (its fucking amazing), I want to talk about the company.

Tesla hasn’t made a profit yet. they have paid zero dividends. They have a market cap of $32 billion , revenue of $4billion and a loss of $700 million. Why would anybody invest in such a company?

Tesla is the first major new car company to establish itself in a long time. In fact many people thought it could not happen. That they are still here…is impressive. that they did this as a completely new type of car company (electric) is even more insane. That they are also world leaders in self-driving technology at the same time…is getting ridiculous. That their first mainstream product (the model S) has won numerous ‘car of the year’ and customer satisfaction awards, and is rated the safest car you can drive…is getting beyond parody.

So the product is VERY good, and they have massively beaten the odds. That alone is room to be optimistic, but there is much, much more.

The companies next product (the Model 3) collected so many pre-orders that it was the biggest consumer pre-order event ever. Not this year, or not in cars…its the biggest pre order in history. This is a company with a huge (free) media presence and fan-base. Its marketing costs are practically zero. Ever seen a Tesla ad? me neither. They don’t need them. Think about all that money EVERY other car company spends on ads, and that Tesla don’t need to spend a penny. Even apple advertises.

model3

So they have a good product and a big marketing advantage. What else?

Tesla has pioneered the selling direct-to-customers business model in the US and in Europe. They have even had to fight court cases for permission to do this. The competition is *so bad* that they try to take out court injunctions to stop people buying from tesla. Thats when you know you have the best product. By cutting out the dealership, tesla ensures potential customers get accurate advice, a decent demonstration and test drive, and the company controls everything from production of the car to sales and servicing. Oh… and also the fuel.

Ford sell you a car, but not direct, thats through a third party dealership. You are then on your own. You don’t stop at Ford petrol stations to fill up with Ford petrol that was pumped out of the ground with Ford oil rigs. Tesla are on their way to doing this with the supercharger network and their acquisition of solar city.  Tesla aren’t just selling you a car, but potentially a new Tesla roof that powers your new Tesla car and which tops up your Tesla powerpack in-between trips where you stop at the Tesla supercharger to fill up with energy generated by Tesla solar panels. At some point they will likely buy up an industrial robot company like KUKA, and have even more vertical integration.

This isn’t a car company, its an end-to-end energy and transportation company. The market cap potential of tesla isn’t General Motors, its general motors + uber + exxon mobil.

The *risk* in all this, is that competition with deeper pockets comes along and beats Tesla at its own game. In theory, this is a big risk. In practice…its kinda laughable. Apple, the famously deep-pocketed tech superstar have been quietly and smugly talking about their driverless apple car business for years. Still no car, not even a concept car, not even a sketch. It’s not going to happen. Apple takes years to make a phone with a new button, they aren’t about to make cars.

Every week a new ‘concept car’ or ‘preview model’ of a 2018 or 2019 car gets announced by Jaguar or Mercedes or BMW. Every time, without exception, the cars tech specs are laughably behind the model s and the model 3. The model S exists RIGHT NOW. For a company entirely new to electric cars to beat Tesla, they need a BETTER car than the S, a supercharger network already in place, fantastic brand-awareness and cutting-edge in-car tech. Nobody is close to this. Nobody is even within binocular range of this. The Tesla P100DL is faster (0-60) than a Bugatti Veyron costing $2.25Million. (The tesla is $135k). Thats not a slightly better car, its like a different fucking species.

I haven’t even mentioned the fact that electric cars are actually MORE convenient than petrol (My car starts each day fully charged), costs 4p/mile in fuel, and that Tesla are building the worlds biggest factory to literally double the global supply of lithium ion batteries to get costs down. This is not a normal company. Apple think removing a headphone jack is ‘visionary’. Tesla management must collapse in hysterics when they read statements like that.

Yup, I have Tesla stock. I have a fucking Tesla T-shirt, I’m a believer. I also read about them a lot. I simply cannot see how anyone will stop this company. Lets check in a year from now and see if I feel the same way :D.