The original UBS report on Tesla economics

In a product life cycle there are different stages. They are: introduction, growth, maturity and decline. Even though Tesla has been around for years, as a product EV market has not reached the maturity stage yet and there is room for market expansion. The hybrid market on the other hand is mature and might be flirting with decline. I do remember reading many years back that Toyota and others considered the hybrid as an interim step before transiting to BEV or Fuel Cells and it was going to be more of a niche. Toyota may have changed their thinking about BEV's possibly due to their market position in hybrids. One thing missing in this analysis is the macro economic factors and how they could shift these volumes. If crude oil prices were to reach $110 a barrel, demands will shift and Toyota may have to ramp up. A lot things could happen to change the trajectory of the BEV market.

Bob is right in his view point that competition so far has been on powerpoint and the products have not reached the dealer showrooms. Again, I do not know what the state of the EV market will be in six months, or 12 months, but I am going to guess there will be more products to choose from and there will be actual physical products that customers can walk out from a showroom with. One can be dismissive and say that will not happen, and Tesla is secure in its position. If I were Tesla management, I would not take this competition lightly and would be paying great attention to what others are doing. To an uninitiated lay person like me, it does not sound like distant thunder, it sounds real.

Elon Musk and others know a lot that I don't, and may be confident that there is nothing to worry about. However I do not think a smaller manufacturer like Jaguar Landrover would have spent so much money on product development, unless they were confident of breaking into the market. I looked at their sales growth and they have been growing under the Tata ownership and want to sell a million cars a year soon. I am going guess they see a big portion of that growth coming from BEV's.

I am going to reserve judgement and will wait for things to play out. In less than an year we will know if the competition is real or were just paper tigers.

 

It's "cachet", not "cache", but yes. #GrammarNazi

This is why it is important that Tesla not slow down in its expansion. Tesla very much needs to "Damn the torpedoes, full speed ahead!" over at least the next two years. Tesla needs to expand its market while there isn't any serious competition. If they wait until later, after real competition arrives, then it will become far harder to grab market share.

Arguably real competition has already arrived, with the Jaguar I-Pace, but that will be made in such small numbers that it won't have a serious impact on Tesla's sales. A much bigger threat to Tesla being able to rapidly expand its sales are entries from VW and other legacy auto makers, which reportedly will start appearing in (presumably fall of) 2020. Between now and then, Tesla has a window of opportunity that it needs to exploit as far as it possibly can.

Tesla needs to ignore the cries that it should slow down its expansion; the cries that it should start concentrating on making profits. Needs to ignore those cries until at least the second half of 2020. Once real competition in volume emerges, that will be the time for Tesla to slow its growth and start concentrating on being profitable.

All just my opinion, of course. But hopefully an informed opinion, and -- unlike the opinions expressed by investors (both "short" and "long") -- it's an opinion not biased by personal greed.

 

Continuing expansion is an argument that Elon/Tesla can make. Investors can then make an informed decision if they think it is a) reasonable and feasible and b) if they are willing to stay on for the ride. They will and are even now voting with their money. The feasibility issue here is "does Tesla have the cash or can get the cash to be able to weather two more years of negative cash flow, assuming increased investment in new products and services?" Tesla has many plans including self driving trucks, ride services, other cars, solar energy etc. Do they have money for all of that? Or are some plans going to be put off? If so which ones? The solar energy business may not have the "cachet" (Thank you #GrammarNazi ) of the BEV business but, as long as it remains a part of Tesla, it still needs attention and investment.