Teslas 2024 business prospects

From: allin

Tesla’s 2024 outlook has been a subject of significant market interest and varying expert opinions, characterized by stock volatility, strategic shifts, and long-term vision. The company’s performance has been viewed through the lens of “sharps” versus “squares” in the stock market 00:24:49.

Recent Performance and Strategic Adjustments

Tesla’s stock was down over 40% year-to-date by mid-April 2024, primarily attributed to a decrease in demand for Electric Vehicles (EVs) 00:23:01. This led to a significant drop in market capitalization from $750billionto$460 billion 00:23:05. However, after reporting its Q1 earnings, the stock saw a rise of 12% 00:23:11, indicating a positive investor reaction to recent announcements.

Key strategic moves and announcements in 2024 include:

• FSD (Full Self-Driving) 2.0 Launch and Price Cut [00:22:38]: FSD2 has been launched and is reportedly “pretty great” [00:22:41]. Its price was reduced by one-third, from $12,000to$8,000, and is also available for a $100 monthly subscription [00:22:44].
• Workforce Reduction [00:22:48]: Tesla announced a 10% reduction in its workforce, affecting approximately 14,000 employees [00:22:48].
• Reincorporation [00:22:57]: The company is planning to reincorporate in Texas, moving from Delaware [00:22:57].
• New Models and Robo Taxi [00:23:17]: Elon Musk announced that production for Tesla’s new line of models could begin by the end of 2024 or early 2025 [00:23:17]. He also plans to share more details about the robo taxi (Cybercab) in August [00:23:26], a concept that has been part of Tesla’s master plan for years [00:23:32].

Investment Perspectives: “Sharps” vs. “Squares”

According to Chamath Palihapitiya, the “sharps” (smart money) in the market viewed Tesla as a dislocated stock and a buying opportunity after its price drop [00:25:04]. This perspective hinges on the belief that Elon Musk is executing “Master Plan Part Deux” [00:23:56], which was laid out in 2016 and includes building models like the Model 3, Model Y, a pickup truck, a heavy-duty truck, and high-passenger density urban transport vehicles (robo taxis) [00:24:18]. The plan also focuses on software and investments in FSD to enhance vehicle safety and appeal [00:24:44].

The market’s positive reaction to Tesla’s Q1 earnings, despite missing on revenue estimates, suggests that capital allocators saw a reasonable allocation of approximately $1 billion in capital expenditure this quarter towards AI infrastructure for FSD training [00:25:22]. This contrasts with Meta’s stock drop, which was attributed to perceived misallocation of funds towards Nvidia for inference, a market segment where Nvidia is considered less efficient [00:20:42].

External Challenges

Tesla faces several macroeconomic headwinds:

• Slowing GDP Growth [00:27:49]: The US GDP growth rate slowed to 1.6% in Q1 2024 [00:27:51].
• High Interest Rates [00:28:03]: Elevated interest rates increase car payments, impacting consumer demand for new vehicles [00:28:06].
• Chinese Competition [00:28:29]: Companies like BYD are increasing production of lower-priced electric vehicles, posing a long-term challenge [00:28:31]. These macro forces and competition represent significant challenges and innovations in Teslas operations.

Future Business Potential

Experts rank Tesla’s future business units based on potential impact and value:

1. Ride-Sharing (Robo Taxi)

• Highest Potential: Ranked as number one by Chamath Palihapitiya and Jason Calacanis [00:29:11].
• Core to Autonomy: This relies on achieving Level 5 autonomy, allowing cars to be summoned via an app or even from “bus stop equivalents” [00:29:21].
• Economic Impact: Robo taxis are expected to offer significant value through increased passenger safety, environmental sustainability, and reduced traffic [00:29:50]. They could “gut pricing” in the ride-sharing market by eliminating the cost of human drivers, making transportation significantly cheaper [00:30:15].
• Current State: While FSD2 is a significant improvement, widespread self-driving at scale (e.g., 5-10% of rides) is still estimated to be 5-10 years away [00:39:01].

2. Optimus Robot

• High Alpha, High Beta: David Friedberg notes Optimus has the highest upside but also the highest uncertainty regarding its path and capital requirements [00:32:22].
• Market Potential: Sachs believes Optimus has the potential to create an entirely new market and bring science fiction to reality [00:30:27], with the possibility of more robots than humans on Earth [00:30:50].
• Cost Efficiency: Jason Calacanis speculates a Bill of Materials (BOM) for Optimus could be $10,000 or less [00:36:26], leading to a potential rental/subscription model [00:36:41].
• Counterpoint: Chamath suggests that instead of generalized robots, the market might favor specialized robots for specific use cases, which could limit Optimus’s total addressable market (TAM) [00:35:10].

3. Energy

• Disruptive Potential: Ranked number two by Chamath, this involves making 100 million homes “mini-utilities” through solar panels and battery systems [00:33:50].
• Market Dynamics: This initiative could disrupt the incumbent utility industry, which faces massive capex requirements and passes costs to consumers despite declining energy generation costs [00:33:05].
• Examples: Companies like Palmetto are already enabling residential solar adoption [00:34:47].
• Increasing Demand: The rise of data centers, now consuming nearly 20% of energy, will drive demand for decentralized energy solutions and potentially catalyze regulatory changes to promote batteries and solar [00:37:06].

4. Trucking

• Lower Ranked: This business unit received zero points in the internal ranking [00:36:06], suggesting it has the least immediate or long-term disruptive potential among the four discussed.

Overall, despite market volatility and external challenges, Tesla’s 2024 prospects are largely seen through the lens of Elon Musk’s long-term master plan and the transformative potential of its core products and emerging business lines.