Tesla Won’t Sell 20 Million Cars A Year By 2030

During their latest episode of the VALUE: After Hours Podcast, Dickson, Taylor, and Carlisle discuss Tesla Won’t Sell 20 Million Cars A Year By 2030. Here’s an excerpt from the episode:

Tobias: Can I ask you, Drew? How can you hold a car maker when Tesla is going to produce 100% of the cars at some point in the future?

Drew: I was waiting, Toby, for you to bring up Tesla.

Tobias: [crosstalk] trying to get in in there a few times.

Jake: You should provide a little context that you’ve been publicly critical of Tesla and that have had some debate– [crosstalk]

Tobias: Of the valuation– [crosstalk]

Jake: Yeah.

Drew: No, it’s a fascinating story to me. I think the benefit of historical perspective in 20 or 30 years, we’re going to look back on Tesla and call it one of the most fascinating single events in the history of capitalism. It’s either going to be as some folks that we know, the largest company in the world again, or it’s not. Despite my focus on Europe, obviously, I’m looking at all the automakers. So, you can’t ignore Tesla, even though it’s still relatively tiny. There’s a lot of things that they do very well. I mean, extremely well. But it became such a disconnect between what they actually did and did well and what their share price reflected that it really caught my interest, and I started doing some op-eds in the FT and MarketWatch a couple of years ago.

I think the stock got split adjustment. I think I got up to over $400 a share and I was like, “Well, I can’t get there, in any circumstance.” I think a very naive analogy people use is that Tesla is the next Apple, and that everyone else is the next Nokia or BlackBerry. So, I tried to push back against that a lot. The dynamics of why people buy handsets and automobiles is quite different. I know it sounds good, but when you look at the demand for autos, we kind of know what it is, give or take five million units globally a year, and we can project it out, and we can make estimates about how much EV share will be of that and how that progresses as we march toward 2030 and 2035.

We can also see the plans that Stellantis, or Ford, or GM, or Mercedes, or any of them have in terms of what’s launched in ranges and aesthetics. I will say that I’ve met some Tesla– usually, especially on Twitter, you see a lot of folks, it’s kind of a religion for a lot of folks. They don’t want to hear anything that’s negative, and they really band together as a tribe, and just hook, line, and sink, anything Elon says is gospel. But not everybody’s that way. There are some smart Tesla owners. Actually, last year, I was approached by someone who I didn’t know and said, “Hey, Drew, we’d like to have you on our podcast. You seem like a reasonable bear.” And I was like, “Ugh, I don’t know.” [crosstalk]

Jake: Yeah. Right into the lion’s den.

Drew: My experience on Twitter has not been one where it was a lot of sharing of knowledge and learning on both sides. And so, I didn’t respond at first. Then, Wes Gray, whom I think you both know, at Alpha Architect wrote to me and said, “Hey, you should speak to Emmett. He’s a smart guy, and you’d enjoy it, and have a nice bull-bear debate.” And so, when Wes said that, I was like, “Okay, fine.” So, I had it and it was fantastic. We both agreed to disagree, but it was civil, and it was cordial, and I think we both learned a little bit. He does the podcast, I think it’s called Good Soil. Let me double check it. Good Soil Podcast. Not trying to give– [crosstalk]

Tobias: Did you factor the fleet of robotaxis into your evaluation, Drew?

Drew: No, I do not factor the fleet of robotaxis. I think the thing that the Tesla fans miss is that if we really do achieve that, which is a whole another debate. This is an Isaac Asimov-Douglas Hofstadter kind of debate about hitting level five and governments allowing it to happen. People actually wanting to do that. The young kids that love Tesla, all think it’s an automatic, but guess what happens in that scenario, that Tony Seba scenario where we’re driving robotaxis. You don’t need as many cars. So, it changed the whole dynamic in terms of global SAR, USR, and how many units we’re selling.

I’ve tried a million ways to come up with some of these projections that Musk has made, “We’re going to sell 20 million units by 2030,” and people just take it a gospel. I’m just like, “There’s no way on God’s green earth, that’s going to happen.” I think they did 1.3– I’m going to get this wrong. Someone on Twitter is already yelling at me. Maybe 1.6 last year.

Jake: [laughs]

Drew: What Volkswagen has recognized, what Toyota has recognized is they do stuff really well. They take costs out. They’re innovative in their assembly line. They mega cast. They put a lot of stuff together, so it’s just less parts when you’re assembling a vehicle. I know there’s a lot of people that ride them hard on their quality, and maybe that’s an issue. But in terms of the safety and stuff, I’ve dug deep trying to be negative. I’ve dug deep into the– Jake, what do we call our regulatory agency here? The NH, the people that look at the–

Jake: Yeah. NHTSA.

Drew: Yeah, I’ve looked through all that. Teslas, they’re safe as hell. So, there’s things they do well. They’ve sold way more cars, I think, that anyone expected them to sell, but they’re still a spec. They’re still not a mass market manufacturer. They’re still not dealing with having 20 assemblies around the world and trying to sell 3, 4, 5, 8 million units a year. They have aspirations for that. They just announced plans to build in Monterey. People are excited about that. Presumably to build their Model 2 or whatever they’re going to call it, which is their mass market vehicle, the $25,000, $27,000 car that’s supposed to change the game and help them get to their 20 million. I’m just like, guys, Volkswagen started in 1937. Toyota coincidentally started in 1937, and they’ve both been kicking butt for 85 years. And Volkswagen is up to 10% market share in a world where we sell 80 million units. So, that’s eight million cars. Toyota is at 12%.

If you got to 20% by 2030, I think we’ll do about a hundred million units in 2030 around the world, give or take. You get to 20%, that’s 20 million cars. It’s twice as big as Volkswagen’s market share. As if Volkswagen, and GM, and Mercedes are sitting on their hands and refusing to make the switch. I think they’re being smart. People still want internal combustion vehicles. Now, if you’re in Norway and you get a gazillion dollars in tax rebates and all sorts of incentives to buy EV, you’re going to buy an EV. It’s impossible not to. Huge incentives.

But broadly, 90% of the world still buys EVs. The speed at which these traditional automakers make the transition, I think they’re going to be as smart as they can be about it. I think they recognize they need to step up their game to compete with Tesla on the cost side of these EVs. I think that Tesla has also encouraged people to say, “Actually, driving EV is not such a bad idea, not such a terrible thing.” And so, it’s enough that Ford says, “You know what? Actually, we’ll make the F-150 lightning,” or Ram says, “We’ll make the 1500 Revolution in 2024.” The lightning is out now Ford. “We’ll work on it, we’ll get it even better,” and they’ll sell.

To me, it’s just a share game. Toyota, Volkswagen, and the others, how much share will they seed in this transition as EVs become a larger proportion of the total production annually? We all have debates about it. I get to 75% by 2035, 48% by 2030 or 49%. Maybe it’s 5% higher or lower. A lot of these guys on Twitter think it’s 100% by 2030 and there’s 20 million blah, blah. Question is, what’s the share price reflecting? Man, is it reflecting a lot still? That’s what it still fascinates me. It’s up a bunch today on a debt upgrade by Moody’s or Standard and Poor’s, whoever it was that made him investment grade on the debt side, but that was enough to get the army rolling today.

Jake: [laughs]

Drew: I know you have a 700-billion-dollar valuation. As I think I’ve shared with you guys, it’s pretty impressive. I’m talking a lot here. I don’t want to go on and on, but there’s other things that could happen to this business which have nothing to do with auto making, I think have to happen to this business in order to justify the share price. I think it’s unlikely. But if they do come up with Level 5 autonomous, and they’re the first ones to do it, and then people start licensing Tesla’s technology, wqell, then it does become a monopolistic story where you can come up with whatever number you want.

If they actually figure that out, they’re behind Waymo and depending on whose rankings you use, they’re not in the lead. Of course, the Tesla fans think they’re in the lead. They could get in the lead. But there are a lot of ifs, a lot of uncertainty about getting there, who will take us there? Who will get us there? What will the adoption rate be once we do? That’s one way to get a lot of market cap though, if you did solve that. All of a sudden, in 2040, we’re all forced to drive autonomous vehicles, which Isaac Asimov predicted in 1955.

Tobias: The fact that we’d be forced to drive them?

Drew: Yeah. In his book– Oh, gosh. What was it? It’ll come to me while I did– I know the car. [crosstalk] The car was called Sally in the book. It was a short story. Yeah, there would be collectors that had him in their backyard.

Tobias: The ICEs.

Drew: The ICEs.

Tobias: I see. If you collect– [laughs]

Drew: Yeah. I think it was 2040 or 2045, it was illegal to drive an ICE. Sorry. No, not just an ICE, a car that you could drive yourself. This is the autonomous switch, right? If you solve that–

Jake: [crosstalk] dangerous.

Drew: That’s going to be difficult to define what’s that worth. But a whole lot of that Tesla market cap, I think assumes a whole lot, either on the FSD front, the Level 5 front, or on the energy front and their mega PACs. The insurance front, which arguably shouldn’t be a business they’re even in. I’m missing one other– Oh, Tesla bot. That’s another one.

Jake: Yeah, robots.

Drew: The robots. So, I spent all of my time trying to figure out what the auto company is worth, and then the balance I just call the Musk option. The Musk option is unpredictable. Will the market pay for these things that he might come up with next? He’s brilliant. I don’t have the same negative view about him as a capitalist, as a businessman, as an innovator. I’ve been pretty impressed. I’ve been very impressed. So, I don’t have a similar view.

Jake and I have one very good friend who’s not a big fan at all, to the extent of him thinking he’s a bad person. I’m not there. Also, it makes it very tough to have a civil debate with folks on the other side, if that’s your perspective. “He’s a crook.” “No, he’s God.” “No, he’s a crook.” “No, he’s God.” Okay, thanks.

Jake: [laughs] Yeah.

Drew: Anyway. So, I went on way too long, Toby. I told you not to talk about Tesla. God bless America. Jeez.

Jake: [laughs]

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