First of all, I think we all need to take a step back and appreciate how far Tesla has come.
That’s why I rewatched and summarized the unveiling of the Model 3 this morning:
This gives me a lot of confidence for the future.
Remember, it’s not important where Tesla will be in 10 months. It’s important where they will be in 10 years.
When the dust settles, and the current challenges are overcome, Tesla will be stronger than ever. Most other companies will be weakened, because they are in a much worse position.
Positives:
Tesla is hyperfocused on AI. They doubled their compute from Q2 to Q3 and continue to invest aggressively into compute and training.
FSD progress is strong. They have now exceeded 500 million cumulative miles driven, and v12, Tesla’s new end-to-end neural net architecture, is moving closer to wide release. The limiting factor is compute, which is why Tesla is so focused on this.
Once they solve FSD, they have solved real world AI. Which will supercharge their humanoid robot business.
Their balance sheet is extremely strong with now $26.1 billion in cash. And basically no debt. This gives them the ability to both invest heavily into R&D, and also weather any economic storm.
The energy storage business is growing 90% YoY, and together with services, contributed $0.5 billion of gross profit in Q3.
Cybertruck is ready for production, and the first deliveries will start on November 30.
Elon and the team have set conservative & realistic short-term expectations. They err on the side of caution, and I appreciate that.
Tesla is succeeding with continuously decreasing production costs. Their COGS decreased 5.8% QoQ, while ASP decreased only 3.1% QoQ. They will continue to focus on cost reductions.
Negatives:
Elon sounded down. He has legitimate concerns about the economy. It’s the first time that Elon said they’re not going as fast as they can.
He is traumatized by 2009. Tesla barely survived. So they want to err on the side of caution. He doens’t want to go full speed into uncertainty.
Elon is worried about high interest rate environment and affordability. Wants to get a sense on the global economy before going full tilt with building new factories. That’s why they slowed down building Giga Mexico, and focus on increasing capacity in their current factories.
My conclusion:
I believe that long-term, Tesla is on track to become the most valuable company on Earth, by a wide margin.
The macroeconomic and geopolitical conditions will remain challenging for the foreseeable future. All companies are affected, not just Tesla.
Tesla is in an incredibly good position. They have strong momentum, are profitable, and have enough cash to weather any storm.
It’s entirely possible that Elon is too paranoid, and that it won’t be as bad as he thinks. But as Andy Grove, co-founder of Intel, used to preach: “Only the paranoid survive.”
There are two options:
1. The storm won’t be as bad: Then Tesla ended up being too convervative, and achieve their goals a little later.
2. The storm will be bad: Then Tesla’s survival won’t be threatened, they will weather the storm, and come out stronger than ever.
As Benjamin Graham used to say: “In the short run, the market is a voting machine, but in the long run it is a weighing machine.”
I believe Tesla will become an 800-pound Gorilla, and long-term, will create a tremendous amount of value for humanity, and for us shareholders.
But until then, we $TSLA investors need to be patient and prudent. Don’t overexpose yourself. Don’t speculate. Don’t invest on margin. Have a cash reserve. Spend less than you earn.
It’s a marathon, not a sprint. But in the end, Tesla will change the world.
