Tesla’s Future: Beyond the Hype: A Look at Battery Tech and Infrastructure

During their recent episode, Taylor, Carlisle, and Katsenelson discussed Tesla’s Future: Beyond the Hype: A Look at Battery Tech and Infrastructure, here’s an excerpt from the episode:

Tobias: Vitaliy, can we talk about Tesla for a little bit, because I know that you did a write up about Tesla. Tesla is one of those interesting stocks that it was running out of money at one point. But because it had such a high stock price, Musk was able to take advantage of maybe that idea of a little bit of self reflex. It’s an example of self reflexivity in the market, where the high stock price made it possible for them to raise some money, which probably got rid of that blow up risk at that time, and it’s gone on to do very well. Your article came out at a pretty timely– That was a pretty good entry point I think for that stock. Do you still hold it? Can you talk to us a little bit about?

Vitaliy: Okay, let me embarrass myself that I literally wrote a little booklet, which I don’t have a prob, but you can actually get an Amazon for $3 or something. [Jake chuckles] In that 2018, but basically, literally writing 7,000 worth resource paper on Tesla.

Jake: But came out in 2018.

Vitaliy: Yeah, 2018.

Jake: Wow. It feels like it was like two years ago.

Tobias: Yeah, I would have said much more recent than that.

Jake: [laughs]

Vitaliy: Yeah. Basically, my argument was, I saw a lot of positive in Tesla and also saw a lot of risks. And my conclusion was it was pretty path-dependent company. I was right in the sense that the path dependency was, if they can get to escape velocity, then they were going to be incredibly successful. And escape velocity in this case meant, they have to get to the cash flow positive without going bankrupt, or diluting the hell out of the shareholders.

This is where Musk’s magic comes in. He basically creates a religion behind it. And Jeremy Grantham described that part brilliantly. So, basically, Musk come out and said, “We’re going to issue shares.” If it was any other company, the stock price would have declined. In this case, the stock price actually went up, because the cult basically says, “Oh, this is great, we’re going to issue shares, the company is going to survive. Let’s buy more shares.”

I don’t think it ever has ever happened in history, though I’m sure there are exceptions, but that’s exactly what happened. And then they did get to escape velocity. So, I never owned the stock. I own two cars, I never owned the stock. It’s one of those things where instead of buying the first iPhone, you should have bought the stock. I’m sorry, it’s the same thing, you would have a lot more money to buy hundred more iPhones. Well, I should have bought the stock instead of buying a car, I guess.

Today, I just actually wrote about this and maybe that’s what you’re referring to. Like, a few months ago, I wrote about this that I think today, we reached the point where peak electric cars. Let me qualify this. This is very important. Today, electric cars are basically about 15% to 20% of new car sales. I would argue that everybody who wanted to buy an electric car already owns one. And let me explain you. This is very important point. Basically, people who bought the car, people like me, who like the electric car, and I really do. I like how it drives. But for me, it’s one of two–

I also have IC car as a backup if I need to do long distance travel. I live in a house, so therefore, I have a gas station basically in my garage. I commute mostly locally. Because today they’re basically three things that works against electric cars, probably more than that. It’s range anxiety, because today have 300 miles if you’re lucky on an electric car. If it’s too hot, it’s going to get to 200. But if it’s too cold, it gets to 200. It takes a long time to charge it, so it’s still not great for long-distance commute. And finally, the infrastructure sucks.

Tesla has the best infrastructure. But if you buy a car from General Motors or somebody else, well, now you can use Tesla’s infrastructure. But the infrastructure outside of Tesla is not very good. So, my argument is this. Unless we have a technological shift in battery technology, in charging and infrastructure, this is where the market share will stay. Toyota talks about how by 2027, they’re going to have a car that’s going to have 600 miles range. And then by 2030, like 900 miles range. Who knows if it’s true or not. But my point is, once we get to these kind of levels, this is where the adoption will increase tremendously. If at this level of technology, we basically at 15% or 20% of new car sales, and it’s going to stay here for a long time, basically, if that doesn’t change.

Tobias: I don’t want to make you feel bad, Vitaliy, but Tesla was about $20 in 2018. Funnily enough, it’s $166 today. It’s off 5% today. So, you would have missed out on that 5% drop today.

Jake: I [crosstalk] would have dodged that bullet.

Vitaliy: Think about this. I could have basically bought eight cars. I would have had eight cars instead of one. Yeah, it’s just– Yeah.

Tobias: Yeah, it’s down 30% for the year. It hasn’t had much of a year so far this year.

Vitaliy: I think the stock price is overvalued. It was overvalued 50% higher still overall today. There will be time when I made my own Tesla stock, it’s going to be at a very different price.

Jake: Five times PE.

Vitaliy: Yeah, maybe a little bit higher than that. By the way, Tesla does– [crosstalk]

Jake: It is a car company. I don’t know, if you’ve looked at other PEs in the auto industry.

Tobias: It’s got a robot and roof tiles.

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