Can Tesla Overcome Challenges for Future Growth?

Tesla is facing challenges in production, demand, and supply chain issues, but there is potential for a turnaround and future growth, especially with advancements in self-driving technology and potential for disruption in multiple industries 

Questions to inspire discussion

• What challenges is Tesla facing in production and supply chain?

  —Tesla is facing challenges in production, delivery, and supply chain issues, leading to concerns about demand for the Model 3 and impact of tax credit in the US.

• What is the potential for Tesla's future growth?

  —Despite challenges, there is potential for a turnaround and future growth for Tesla, especially with advancements in self-driving technology and disruption in multiple industries.

• Is Tesla's inventory problem a concern?

  —Tesla's days of inventory is increasing, but the speaker believes it is necessary for the company to grow its business and that Tesla does not have an inventory problem.

• What is the impact of rising interest rates on demand for Tesla cars?

  —The impact of rising interest rates on demand for Tesla cars is self-inflicted, and the Chinese market is facing increased competition in the EV sector.

• What is the speaker's view on investing in Tesla?

  —The speaker believes that investing in Tesla in 2019 was a better choice due to the company's growth and potential, despite the negative media coverage and lower stock valuation.

Key Insights

Future Prospects and Challenges in FSD and Energy Sector

• 🚗 Despite the challenges in the auto business, Tesla's future prospects with the compact car, Robo taxi, and energy are still promising.
• 🚗 The catalysts for Tesla's success are now other industries, not just auto, potentially making them leaders in multiple sectors.
• 🚗 "The car auto industry is a 2.86 trillion dollar size market today, but we're talking about energy which is larger than the Auto industry."
• 📈 "I would be shocked if we don't see significant flow through to the bottom line in 2025 from FSD as a SAS Revenue product."
• 📅 A realistic date for the quality of FSD Adas system to reach level three is January 1st, 2025, raising questions about when Tesla or other insurance companies will assume liability for any damage or injury.
• 🤖 The rate of progress in AI training systems is shocking beyond wildest expectations, with the potential for level three Robo taxis within the next couple of years.
• 🚗 The rollout of level five Robo taxi will be a long and complex process due to insurance and legislative implications.
• 🚗 "It's got to be 10 times safer than human. So. Let's say humans today across the world kills or sorry across the US kills 44,000 people per year right so if it's 20 times safer than that then you can't kill more than 2,000 people per year."
• 🚗 "This car today is already safer than a human a supervised me using it as a supervised driving. It's already safer than me not using it."
• 🚗 Tesla will be offering different levels of FSD, whether it's FSD for everyday use or Uber drivers or Robo taxis.

Tesla's Strategic Direction and Investor Confidence

• 📉 Some people are saying the EV growth story is over and Tesla will face downward trends, while others believe the focus should be on FSD and energy.
• 📈 Tesla needs to clearly articulate their strategy on the q1 call to restore investor confidence after a significant miss in year-over-year performance.
• 🚗 "Honestly, there's only one thing that matters for Tesla in the next quarter, and that is the progress of FSD and any changes to pricing strategy moving forward." 

#HerbertOng #Tesla #Finance

X Mentions: @herbertong

Clips 

• 00:00 🚗 Tesla's recent production and delivery numbers have sparked debate about the future of the EV industry, with concerns about demand, supply issues, and inventory growth, but the company is working to resolve these challenges and improve performance.
  • Tesla's recent delivery and production numbers have sparked debate about the future of the EV industry, with some predicting a downward trend while others focus on factors like FSD, energy, and inventory growth.
  • Tesla's days of inventory is increasing, but the speaker believes it is necessary for the company to grow its business and that Tesla does not have an inventory problem.
  • Tesla has resolved some production and supply issues, but there are still concerns about the demand for the Model 3 and the impact of the tax credit in the US.
  • Tesla is facing inventory timing issues and supply shortfalls, with some factors within their control and others outside of their control, leading to delivery shortfalls and production challenges.
  • Tesla faced challenges in China, Berlin, and a power outage, leading to production and distribution issues, but with proper management, they should be able to reduce inventory in the coming quarters.
  • Tesla's recent performance is not due to China's macroeconomic factors, but rather a result of specific numbers, and the discussion will later compare investing in Tesla in 2019 versus investing in Tesla today.
• 16:53 🚗 Tesla may be facing a demand issue and needs to change strategy, but there is potential for a turnaround after a challenging quarter.
  • The speaker discusses their logical and experienced judgment calls regarding the turnaround of TSLA after a disastrous quarter.
  • Tesla may be facing a demand issue and may need to change their strategy to restore investor confidence.
  • The speaker discusses the potential turnaround for TSLA after a challenging quarter, attributing the issues to supply and demand components, and expressing uncertainty about the impact on Q2.
  • Tesla has cut prices to keep demand up and now they are in a position to switch the game and ask suppliers and partners to stretch with them in order to be part of the next product.
  • Tesla's production numbers exceeded expectations, the stock is on sale, and the focus for the next quarter is on the progress of FSD and pricing strategy.
  • Investing in Tesla in 2019 was a better choice due to the company's growth and potential, despite the negative media coverage and lower stock valuation.
• 33:48 🚗 Tesla faces challenges in increasing revenue through FSD software, but its potential for disruption in multiple industries and future milestones make it a reasonable investment despite uncertainties and increased competition.
  • The challenge for Tesla is to increase revenue through FSD software as the EV business is slowing and compact models won't be available until 2026, making it harder to predict the best time for investment.
  • The economy and cost of capital were more favorable in 2019, making it easier to grow, but now there is a longer runway for potential growth with $30 billion in cash and opportunities in EVs, energy, AI, bots, and robo taxis.
  • Tesla's potential for disruption in multiple industries, including robotics, AI, and energy, is a reason to stay invested despite previous uncertainties.
  • The speaker believes that the success of TSLA will depend on the time horizon, with key milestones such as the $25,000 car, FSD release, and cybertruck production being critical for surpassing previous highs.
  • Tesla is now a robo taxi and AI company with the potential for much larger revenue and margins than the traditional auto industry.
  • The speaker believes that Tesla's stock valuation is reasonable, but they are hesitant to buy the dip due to increased competition and doubts about Tesla's ability to effectively market and differentiate their products.
• 46:10 📉 Tesla's valuation is uncertain due to FSD limitations, stock drop expected after bad earnings, inventory increase may lead to price cuts, need to increase inventory turnover and resolve supply issues.
  • FSD is not yet at a point where it can be considered a robo taxi, making it difficult to determine the valuation of TSLA.
  • The stock only dropped 5% after a bad earnings report because it was already expected, but the real test will be the upcoming earnings and if Tesla can provide a clear plan for the future.
  • Tesla's inventory has increased, and the speaker predicts that Tesla will likely cut prices to reduce inventory, as they have historically done, which may not be good for the stock.
  • Tesla needs to increase inventory to meet demand and adapt their selling approach to accommodate customers who want to purchase a car within one to two weeks.
  • Tesla needs to increase inventory turnover in order to avoid building up excessive inventory, and the potential solution may involve cutting prices to flush out inventory.
  • Issues with inventory and supply disruptions in the first quarter affected Tesla's ability to recognize revenue, and they need to resolve the Model 3 supply issue and elevate their inventory levels.
• 56:34 🚗 Tesla's decision to not prioritize the development of a $25,000 car has led to inventory issues and intense competition in China and Europe, impacting sales and supply chain constraints.
  • The impact of rising interest rates on demand for Tesla cars is self-inflicted and the Chinese market is facing increased competition in the EV sector.
  • Elon Musk's decision to not prioritize the development of a $25,000 car has led to Tesla cutting the prices of Model 3 and Model Y, resulting in inventory issues and intense competition in China and Europe.
  • Tesla's Next Generation platform timing issue would have made it difficult to deliver the vehicle sooner than 2025 due to supply chain constraints and the need for debugging and quality control.
  • The speaker discusses the impact of inventory growth on sales, the importance of prioritizing the Model 2, and the supply bottleneck for batteries.
  • The delay in launching the $25k vehicle was due to battery supply issues and the need to redefine the platform, and the company's strategy was to use profits from higher profit lines to launch lower profit lines and expand the market.
  • Elon Musk initially wanted the next generation car to be self-driving, but his team convinced him to work on the Model 2 alongside a self-driving car.
• 01:10:27 🚗 Tesla's future revenue is uncertain due to advancements in self-driving technology, with the potential for level three Full Self-Driving by the end of the year and the need for perfect autonomous driving for liability assumption.
  • Tesla's ability to reach a reliable self-driving solution is uncertain due to the rapid advancements in technology, and this uncertainty is what separates bullish and bearish perspectives on the company's future revenue.
  • The discussion revolves around the potential for Tesla's Full Self-Driving (FSD) technology to reach level three by the end of the year, with the possibility of significant revenue flow through to the bottom line in 2025.
  • Driverless vehicles can operate in most states, with some states placing limits on autonomous vehicles, and the discussion revolves around the timeline for the quality of FSD Adas system to reach level three and when Tesla or other insurance companies would assume liability for any damage or injury.
  • The speaker discusses the importance of Tesla's autonomous driving system being nearly perfect in order for the company to take liability for any incidents, emphasizing the need for a high level of safety.
  • Tesla is making significant progress in training their AI systems for Full Self-Driving, with the potential for level three Robo taxis within the next couple of years, but the critical milestone of having insurance across the US may still be years away.
  • Tesla has stopped expanding into new states due to insurance and regulatory issues, and the speaker wants to be bullish about Tesla's success but is trying to be logical about it.
• 01:25:00 🚗 Tesla faces challenges in achieving level five Robo taxi and self-driving technology, but there is potential for rapid improvement and mass production in the future, supported by the Department of Transportation.
  • The speaker discusses the challenges and implications of achieving level five Robo taxi and the role of insurance and legislation in the process.
  • Tesla may not be taking liability for vehicle damage or injury caused by their vehicles anytime soon, but there is potential for rapid improvement and mass production of a robo taxi vehicle in the future, supported by the Department of Transportation.
  • Elon Musk's goal for Tesla is to make their self-driving technology 10-20 times safer than human drivers, but they have not yet reached 98% reliability and need to provide milestones to increase revenue and investor confidence.
  • Tesla's future plans and stock performance are uncertain, and the development of fully self-driving cars faces significant challenges.
  • Few people are willing to pay $199 a month for FSD after trying it for a month, even though they find it wonderful and amazing, and the system has shown to be invaluable in preventing accidents.
  • The speaker believes in the future potential of Tesla and its neural net technology, and is willing to invest in it, while acknowledging uncertainty about the timing of certain developments.
• 01:45:10 🚗 Tesla is considering different levels of FSD, shifting to a non-expedite mode, and focusing on service revenue, while investors should consider other opportunities and be aware of competitive threats.
  • The speaker clarifies their position and suggests that the discussion is becoming too absolute in thinking.
  • Tesla will offer different levels of FSD, China is catching up in autonomous driving but may not be globally approved, and Tesla should consider saving on shipping costs to reduce margins.
  • TSLA is shifting to a non-expedite mode to help with cogs, potentially setting up for a service revenue model, with Elon Musk focusing on letting new buyers test FSD before taking over the car, and the delivery process not being significantly slowed down in practice.
  • Tesla has the opportunity to sell enhanced autopilot at a lower price point and apply technology to the bot, which could generate revenue before the development of the robo taxi.
  • The speaker discusses the problem of not being able to break out AI as a separate business due to its size, but highlights the potential for long-term growth and certainty in Tesla's stock.
  • Investors are advised to consider other investment opportunities, use dollar cost averaging for Tesla stock, and be aware of competitive threats and the potential for AI commitment in 2024.

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Duration: 2:5:17

Publication Date: 2024-04-04T23:39:27Z

WatchUrl: https://www.youtube.com/watch?v=4anybGPemns

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