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@kathygriffin On principle or from an investment standpoint?

The former is always understandable. But never make investment decisions based on emotion. Unless the business case has radically changed in the past couple months, it's an emotional decision.

I choose the opposite path. The company's fundamentals remain incredibly strong. Hence I'm focused on decreasing Elon's power via shareholder resolutions.

@nafnlaus @kathygriffin may I ask, what market fundamentals are strong for Tesla currently?

@Timmy @kathygriffin I'd start with this thread.

https://fosstodon.org/@nafnlaus/109354768737444130

But there's so much more than this - this could be a multi-hour conversation.

@nafnlaus I have a lot of trouble with the idea that Tesla isn’t overvalued with a market cap at double Toyota’s, 10x Ford’s and GM’s. Especially with capable legacy automakers really jumping into the electric car market with competitive offerings. GM has so many models either at market or about to hit, and large investments into battery production which will quickly become critical if demand is high enough to justify your 50% YoY growth projection for Tesla

@Timmy Okay, a few basics.

1) #MarketCap is not "what a company is worth". Market cap is what the fraction of the company *owned by stockholders* is worth. Stockholders are near dead-last on the pecking order of corporate assets. Things like debt are near the top. Old-school #automakers
are loaded up in debt and other obligations, and those creditors own most of those companies - thus leaving less available for stockholders.

The question to ask yourself first off is thus...

@Timmy ... not "Why is #Tesla as valuable as it is?", but "Why are other automakers, which are producing huge numbers of extremely valuable objects, not valued more than they are?" And that's a large part of it. Tesla by contrast is nearly debt and obligation free; stockholders own essentially the whole company.

2) Valuations are not a trophy for past achievements. Past achievements matter for basically nothing whatsoever in stock valuations. And the present very little.

@Timmy The valuation of a company is the net present value of the future net income (profits) of the company, evaluated as a #MonteCarlo simulation to discount for risk and varying scenarios.

3) It is not randos on the internet who drive the price of such a large company. They *can't* - it's simply too big. It's institutionals, doing the above sort of calculations. Cold, by-the-numbers investors. Retirement funds, hedge funds, sovereign wealth funds, etc etc.

@Timmy They're the ones who own most of #Tesla, and they're the ones who drive the price. Some base it on analyst estimates, others on their own internal experts.

4) Analysts do not simply take Tesla's forecasts at face value. Their forecasts are *way* more pessimistic than Tesla's, and IMHO, insanely pessimistic. And always have been, which is why Tesla keeps making these easy beats in the long term.

@Timmy 5) "The number of offerings" is an entirely irrelevant metric. And not simply because most people start out by choosing "Tesla or non-Tesla?" and then if the answer is "non-Tesla", picking a model among the rest. Rather, there are two key numbers of relevance:

A) Volumes

and

B) Margins.

And quite simply, #Tesla *crushes* on these fronts, Has been crushing, continues to crush, and by all reasonable measures for the forseeable future, will continue to crush (you can't grow faster than..

@Timmy your factory and cell supply, and both of these can be forseen for years out) - plus many margin metrics are readily forseeable). Excepting the very high end (say, the #Taycan), most automakers have approximately zero margins on their EVs. EVs are basically a side business to where their actual net income comes from, internal combustion vehicles. Which will be dying. Which is a time bomb for these companies.

@Timmy Nobody is going to value these companies much for their *internal combustion vehicles*, because valuations are the net present value of *future revenues*.

You either grow margins and volumes on ***EVs***, or you die. It's that simple. & others keep failing to do so in comparison, despite years and years of trying. It's not that they're not improving - they absolutely are. It's just that Tesla is improving faster, which puts pressure on the market on the capabilities-vs-price point axis.

@Timmy Thus pushing their margin gains back down. Some day they might accelerate faster than Tesla in reducing COGS, this most crucial of metrics - but there have been no signs of that yet.

6) Let's detour for a second to the sideshow that is credits. While Tesla has many markets, the US is the largest. And thusfar, the US has been paying taxpayers $7500 each to NOT buy a Tesla. That changes 1 January. And indeed, it may well reerse. There's rather strict requirements on the new credit...

@Timmy ... under the #InflationReductionAct, but #Tesla has suggested that they'll be able to meet them. It's questionable whether their competitors will meet the full - or even half - credit. So the US looks to be poised to be shifting at least net $7,5k to Tesla's favour, possibly at as much as $15k.

And that's just part of the act, because there's a ton of others incentives in there, including HUGE incentives for domestic #battery manufacturing. Which nobody even compares to #Tesla on.

@Timmy On the #Europe front, there's a different but equally powerful story unfolding. Plagued by bureaucratic delays, #GigaBerlin is finally starting to accelerate production, and - key issue - production *local to Europe*. Which doesn't simply eliminate international shipping costs, but lets the company avoid an 8% tariff on imported cars. Which is an effective 8% reduction in COGS and 25% increase in margins. I don't think I need to describe how massive that is.

@Timmy In recent quarters #Tesla's two new factories - #GigaBerlin and #GigaAustin - have been holding back their margins. Because new factories always do - you have to amortize a lot of cost with low production. But as production scales, new factories turn from margin sinks to margin boosts. And this is happening with two factories simultaneously.

It's not all roses - Tesla's third major market is #China, and their economy is cratering right now. I expect more price stimulus there...

@Timmy ... to match, but thankfully #GigaShanghai has extremely low COGS, and after the recent upgrade they should have fallen even more .

7) I could talk a LOT more about the automotive side, but I'd rather detour. Because analyst valuations for #Tesla are based almost entirely on the automotive side and value everything else #Tesla Energy, #FSD, #Optimus, etc at nearly nothing by comparison.

I'm neither a #FSD optimist nor an optimist about #Optimus. Likewise, while I think the solar...

@Timmy ... roof has great potential on new construction, I question its viability on retrofits, and the long scaleup opens up the path to competitors.

But what I think the market HEAVILY undervalues is #GridScaleStorage.

Right now, there is a quiet revolution going on in electricity grids: large battery facilities are killing the traditional grid services market, with far better economics - limited only by the extremely tight supply of grid-scale #batteries.

@Timmy But right now such grid-scale battery systems cost ~3-4x what the cells themselves cost. As produtions scale up and the ratio of energy-to-power rises, these will converge toward cell costs. Yet cells are in turn en route to halving in cost over the next few years. So there is going to be huge drop in product prices, which will open up the market exponentially - pairing w/the continued rise of wind & #solar.

Grid-scale storage will take a large minority of global electricity spending.

@Timmy Which is a MASSIVE market, and Tesla is positioning itself to be one of the largest players in it. Their grid-scale storage products have been growing faster than automotive, but they're finishing up their first Megapack factory right now, which will 10x their capacity, and simultaneously those first steps toward converging product costs with cell costs.

It's a MASSIVE market that's valued at almost nothing.

@Timmy I could go on here, but I've probably talked your ear off, so I'll stop for now. :)

@nafnlaus you’ve brought up a lot of interesting points, but your two big growth forecasts call for a lot of lithium, don’t they? Won’t the price of lithium go through the roof if many automakers are building cars that use a huge number of lithium cells and grids are investing heavily into lithium battery storage? As you said, we are butting up against battery production capacity, and of course we are rapidly building new production to meet that demand

@Timmy Contrary to popular myth, lithium is quite abundant. In the crust, it's more common than lead, and more importantly, concentrates nicely (brine, #spodumene, salt-rich clays, etc). There's enough in #Nevada alone to convert every vehicle in the US to electric. Estimates for seawater extraction (enough for quadrillions of #EVs) have dropped from $25/kg a decade ago to $5/kg now. It's only not used because land resources are even cheaper. #Lithium is only 1-3% of a #battery anyway.

@Timmy The reason for the current price spike is not about raw material supply, but about refining capacity. Like all raw materials, you have to forecast demand well in advance. If you overestimate demand and overbuild, you go bankrupt when the market crashes. If you underestimate demand and underbuild, you get a price spike like we have now. This #lithium price spike will be alleviated once refining capacity catches up.

@Timmy Of course, pointing out that #liion #batteries are only 1-3% #lithium automatically raises the question, "Okay, then what are they made out of?" And there's two major groupings at present. Shorter-range #EVs tend to use #LFP (Lithium Iron Phosphate) while longer-range EVs tend to use #NMC (Nickel Manganese Cobalt) or #NCA (Nickel Cobalt Alumium). These terms describe the #cathode - the anode in each case is #graphite (either natural or synthetic)

@Timmy again, 100% production limited, not resource-limited - indeed, synthetic #graphite can be literally made from anything at all that contains #carbon).

The two main mass components are the anode and cathode bulk materials - the anode, as mentioned, being graphite. #LFP cathodes are made of iron phosphate, which is basically #fertilizer. Very cheap - react #iron (the most common industrial metal) with #PhosphoricAcid (one of the most common industrial acids).

@Timmy No need to discuss #alumium or #manganese (if you're not familiar with the latter, it's the most common alloying agent in #steel - it's everywhere).

#Cobalt usage has been steadily declining (a couple decades ago it was as high a % as the #nickel), and there's hope it will be entirely eliminated in the coming years - but as for now it's still in use. Cobalt is the most expensive of the metals (offset by its low percentage), which is a major factor driving the work to eliminate it.

@Timmy It's also controversial because while it's found everywhere, the cheapest supplies today (and over half of global prodution) is from the #Congo - mainly as a byproduct of #copper mines, but also (esp. during price spikes) from improvized "artisanal" mines with poor labour and safety practices. That said: (1) that can be said about most things that come from #Africa, including components used to make every vehicle today; cobalt is not unique in this regard; and...

@Timmy (2) #cobalt is already used in a wide variety of things, even #oil refining itself.

#Nickel is the bulk of the long-range #cathode.s, and indeed, its limiting mineral. Most of it today goes towards making #StainlessSteel, where it's a major alloying agent (alongside #chromium). Globally, #Indonesia is the biggest producer; in #NorthAmerica, #Canada is the biggest, thanks to the #Sudbury bolide deposit. #Australia has the largest resources.

@Timmy While there's lots of #nickel out there, the rate of scaling up battery-grade nickel production is believed to be slower than the capability to scale up #LFP production, hence the expected shift to LFP in the coming years.

So we've now covered the #anode and #cathode. The next greatest bulk comes from the casing (#steel) and the #electrolyte (mainly organic carbonates - a #petrochemical product). After this comes the #alumium and #copper current collector foils, then the...

@Timmy ... (#plastic) separator membrane. Beyond all this, there's a variety of minor additives, as well as the small amount of #lithium itself.

The main limiting factor in scaleup however is none of this; it's plant capacity. And in particular, film synthesis for the jelly rolls. Traditionally this is done with a wet-phase process, but this requires #VacuumOven.s the length of a football pitch for each line to extract the #solvent.

@Timmy #Tesla is the first company switching to a vastly more compact (and thus cheaper / faster to build) dry process. It's already in use in some of their vehicles at #GigaAustin, but it's been a long hard slog to bring it into production, and it's still small scale (dry process sounds so simple but there's tons of bedevilling details).

Hope that helps!