Sirwin
Sirwin

Tesla Investment Turned into Gambling


This week Tesla announced it would lay off 10% of its workforce, roughly 14,000 people. Close to 20% layoffs are expected in some departments. The market loved the news. Actually, there wasn't much of a problem, but then it was announced that two important managers would leave. From there, we wonder if these managers know anything, if things are complicated at Tesla, and on top of that, there are two bad news streams on Monday. First of all, retail sales in America were much better than expected. I think it's a good news flow, but Wall Street doesn't evaluate it that way. Because when retail sales are so good, the worry that inflation will not stop in America becomes heavy. However, inflation has nothing to do with retail sales. There is also the question of what Israel will do. Israel also said, we will take our revenge too. Now, the story of Tesla is as far as I see it. Of course, it is difficult to guess what is going on in Elon Musk's mind, but I think he decided to make a big transformation in the company. Now, as you know, his previous master plan was to release an economical car worth $25,000. That economical car will be the car that normal citizens will buy. There will also be a version of the same car without a steering wheel. From there, I was going to establish a robot taxi fleet.

But I think the $25000 car has no advantage against this succession of super cheap electric cars coming from China. Elon Musk thinks so. So he says BYD's Seagull model is a 10000 dollar car, how can I deal with it? In other words, it is going to a pointless place and the Chinese are not looking at profit or loss right now. So they have such a sense of competition. They are currently eating each other among themselves. BYD is especially playing a very destructive game right now. In other words, it reduces the prices to an incredible level and we will dominate this business in electric cars. He says we will get the West out of this. Tesla is a slightly more prestigious brand compared to them, but only up to a point. So, when we say that the electric car you are considering is very cheap, it costs 25000 dollars, compared to BYD's 10000 dollar car. That's why I think he decided to run away from the competition. So I was criticizing the Cyber Truck decision. In my mind, I was wondering why you bother with the Cyber Truck, if you should take out that cheap car first. But as far as I understand, his real strategy was structured like this. That's because I can't deal with this cheap car and these Chinese people anyway.

Cyber Truck is a special vehicle, a special design, and it has a certain customer base. Let him walk from here. Let me focus on autonomous driving. Because let's look at the changes in 2 - 3 weeks. First of all, the following news came from Reuters. The 25000 dollar car project was canceled because of Tesla. Elon Musk said it was a lie, but he didn't explain exactly what the lie was. In other words, he did not say that he would release a car that would cost 25,000 dollars to be used by citizens, but sent a tweet and said that on August 8, we will announce and explain FSD and robot taxi. From there, I actually think that the news captured by Reuters is correct. Elon Musk never wanted this 25000 dollar car issue anyway. Franz, the friend in production design, wanted it very much. This will be an interim transition and then we will enter autonomous driving.

Because a fully autonomous robot taxi is not an idea that people will adapt to so easily. You suddenly give up owning a car. You go with the model that a service like Uber picks you up and takes you somewhere. At that time, Nvidia's H100 microchips were not yet on the market. Tesla didn't have enough of any. That's why, since autonomous driving was not going well enough, Elon Musk said, "Okay, then let's build the $25 car." I think the strategy in mind right now is as follows. China is killing us with these cheap cars and we are doing well with the autonomous car. So, as you know, very fast version updates are coming one after the other. Tesla doesn't write programs anymore. Cars learn on their own with end-to-end neural networks. More precisely, the software develops on its own at the center with what it learns from the road. That's why software started to arrive every 2 weeks, and not only Elon Musk but also other Tesla engineers said that we are at the beginning of the end, and they think that this summer they will reach a fully autonomous car that can drive itself under all conditions and on all roads.

In this context, I think Elon Musk is giving up on expanding production too much. The fact that they're getting laid off right now has something to do with it. I'm sure they're hiring a lot of people for this $25,000 car project. Meanwhile, Tesla regularly hires people. So this isn't the first time. This is the second time the staff has been reduced by 10%. Actually, it's not a new thing, the guy has a traditional trimming. Because these guys are efficiency freaks. He then brought forward the issue of transforming from being a car manufacturing company to being an autonomous taxi fleet operator. You can say that he did this out of desperation, it's up to you, or you can say that the man is actually following the right strategy. This decision is up to you. How this will affect the company's valuation is a super controversial topic.

Tesla is shifting towards a radical innovation area where there are great uncertainties in the coming period. So it has proven itself as an automobile manufacturer. Kar'lı showed that it is the only company in the world that can produce electric cars. It completely changed the industry. It indirectly paved the way for the Chinese. Now I'm going from here to robot taxi, he says, and this will lead to tremendous uncertainties for the coming months. That's why this balance sheet period is so important. Next week is already coming and Tesla's balance sheet will be bad. The balance sheet is unlikely to be good. There are places that can be corrected with a little make-up. There is a provision of around 3 billion dollars for autonomous driving. If they transfer it to turnover, they will collect the profit, but basically it will be bad. So there is no possibility of this balance sheet being good.

Because they sold few cars. There is a growth in energy. But not enough. Therefore, it is very difficult to come up with a good balance sheet. Elon Musk needs to tell us about the new Tesla after that balance sheet. So he didn't at the beginning of the year. He didn't even make any predictions. Now he needs to tell us about the new Tesla. If he doesn't tell us about the new Tesla, the robot taxi business model that has ceased to be a car manufacturer and turned into a service company like Uber, Tesla will go much lower. Look, let me be clear, we will go below $100. If he explains these things convincingly that day, we will go up. So, if any of you have Tesla shares, you should understand that this has now become the gamble of Elon Musk's strategic statement.

The game has changed completely, so with these three actions in a month, giving up the $ 25,000 car, announcing the autonomous vehicle and this week's big layoffs, Tesla is now turning into something else. It's up to you whether to take this gamble or not. So no one can know. Frankly, I don't know if it will be successful either. I'm taking the risk, I'm full long. I continued taking tests today. I'm taking this gamble. But this is a gamble now. If that day doesn't come up with a convincing plan, Wall Street will run through Tesla. So Wall Street has accustomed itself to the idea of bad balance sheets. We don't have any problems there, but if Elon Musk doesn't come up with a smart, thoughtful plan that knows where it's going, Tesla will go down a lot. Take your precautions accordingly, no one can know right now.

But we need to understand that there are two options. Either Tesla will prove to us that day that Uber can turn into a much more profitable business model, or Tesla will not be able to prove it. Already, the problem on the electric car side is growing due to competition. Now I want to show you the financial value of this. Very simply, a lot of very crazy calculations can be made. So between the profit when you sell the car and the profit when you operate an autonomous taxi. Because let's say he sells these new cars for $25,000. Let's assume it costs 15000 dollars. You make a profit of 10000 dollars on the car, that's all. You don't have another wife again. Because Tesla does not have much service income. You walk away with a profit of 10000 dollars.

However, when you introduce it into the fleet as an autonomous taxi, there is a chance of making money from it for life, and many mathematical, complex, hypothetical calculations can be made for this. So how many taxis will there be? How many hours a day will they be active? Will Tesla operate the fleet of those cars? There can be a lot of hypothetical complexities, such as whether to have someone outside run it. Wall Street doesn't like such things and uncertainties anyway. In these uncertainties, I can say this clearly. It's sure to be worth more than the car itself. You can see this as an example with taxi license plates. So why is a taxi worth so much more than the car on its license plate? Because they know it makes money. So it's very simple, you can even do the math from there. We like a little more detail, let's look at the details a little bit.

If we compare Tesla's determination with other automobile companies, Tesla, Toyota, Stellantis, Mercedes-Benz, Volkswagen, Ford net profit per employee, the number before the last layoffs is 106000 dollars in Tesla, when we look at the latest balance sheet. The annual figure is, of course, a profit of 106,000 dollars per employee in 2023. The closest competitor, Mercedes-Benz, is $94,000. Then comes Toyota, $85000. Stellantis is 79000 dollars, Volkswagen is 26000 dollars, Ford is 24000 dollars. The reason I mention this is because this guy is crazy about this. So this wants to push 106000 even higher. That's why I think he would lay off employees even if he continued in his traditional job. But the reason why he hired more employees than expected is that he turned Tesla from being just a manufacturing company to this autonomous taxi fleet business. For this reason, he eliminated some positions in the squad.

A second thing I want to point out is Uber's profitability. Uber's gross profit is 32.55%. As you know, Uber does not own its own cars. Uber is basically just plain software. That software brings together car owners and drivers. He gets his commission from them. From here the gross profit is 32.55%. Currently Tesla's gross profit is 18.25%. So Uber's gross profit is more than Tesla. But Tesla can move this 32.55% up. Because there will be no drivers in the cars and very economical electric cars will do this job. Since cars are autonomous, they will probably work more hours during the day. There is a possibility of increasing profitability. When we look now, Uber's operating profit is quite low, around 3%. Tesla's is already higher at 9%, but I think its core operating profit multiplier will be much higher since the vehicles in an Uber fleet operated by Tesla are also its own.

As of now, Uber's value is $156 billion and Tesla's value is $544 billion. In other words, it has roughly 3.5 times the value of Tesla compared to Uber, and it is a much larger company in terms of turnover and all. So Tesla is much bigger in the bottom line and all. Why is Uber so valuable because its gross profit is high? Wall Street loves companies with high gross profit, they love gross profit very much. Because if the company's gross profit is high, it can leave a lot of money at the bottom when the company grows. I think the fully autonomous taxi fleet operated by Tesla could be super highly profitable. I think Tesla can achieve autonomous driving. I think you can achieve 100% autonomy. If he doesn't succeed, all these stories will be lies.

But if this is achieved, if this company called Uber is worth 150 billion dollars, Tesla will not reach 500, Tesla will go towards numbers much higher than that. That's my assumption at least. If you assume that autonomous driving is the future, we need to make our valuation comparable to Uber. It's the best example because it's ahead of us and we can get a much higher gross margin than Uber. Because we do not have a driver and our vehicles are very economical vehicles that we produce and design ourselves. The model is that simple, this is the story of Tesla. Therefore, there is only one question you need to ask yourself about Tesla.

If you have a Tesla investment, will Tesla be able to drive autonomously or not? If he can't do it, run away, don't stop. So there is no one who can guarantee this. Don't stop even for a day. Even if it does, be prepared for a volatile stock price for a very long time in the meantime. Because it will take a very long time for Wall Street to price this new model. So 1000 assumptions will need to change. Because guesswork was easy with the car. In other words, it will take days or months for Wall Street to make decisions on this issue, to be convinced, and to do the math. That's why I say, if you don't really believe that Tesla will be able to achieve autonomous driving, if you don't understand the calculations, Run Away from Tesla.

There are lots of other simpler investments out there right now. So, for example, I think that Meta, Amazon, YouTube, Google, of course Nvidia and Microsoft will bring better balance sheets in this balance sheet period. Let me be frank, they are easier companies. So Tesla's balance sheet looks bad, there is a lot of uncertainty about the future. That's why it's a runaway who doesn't have the heart to do it. Look, I'm saying it clearly over and over again, but if you say that I believe that autonomous driving will be successful, I believe that the value of this company will be much higher compared to Uber. Then you will silence your voice and collect constantly. I am not giving investment advice, I am telling you which of two different alternatives to choose. Look, I continued to buy it again today. I don't listen to anything. This is my opinion, but as I said, I believe that autonomous driving will happen.

The information, comments and recommendations contained herein are not within the scope of investment consultancy. Investment consultancy services are provided within the framework of the investment consultancy agreement to be signed between brokerage firms, portfolio management companies, banks that do not accept deposits and customers. The comments in this article are only my personal comments and these comments may not be appropriate for your financial situation and risk return. For this reason, investments should not be made based on the information and comments in my articles.

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