Will Tesla 7x its value in the next 4 years?

Maddy: [00:00:21] Hello and welcome to youre In Good Company, a podcast that makes investing accessible for everyone. I'm Maddie and as always, I'm in some very good company with my co-host, Sophie. [00:00:30][9.2]

Sophie: [00:00:31] Mads, how is your weekend? It's currently a Sunday night. [00:00:33][2.3]

Maddy: [00:00:33] Every Sunday night. Not awake. It's been lovely. Thank you. I got into bed. I got into bed yesterday. On Saturday, I woke up, went to the gym, came home, had a shower and got back into bed for the entire day. [00:00:48][14.5]

Sophie: [00:00:48] Well, I actually saw your bay Rio. Yeah. If it rains on to various, then you use social media. [00:00:54][5.4]

Maddy: [00:00:55] Do overlays. [00:00:55][0.9]

Sophie: [00:00:56] I saw your thing and it was like you're in bed reading a book. I was so jealous. [00:00:59][2.6]

Maddy: [00:00:59] But it was like 7 p.m. like everyone. I was like scrolling through and everyone was out on Saturday night and I was like, Oh, so it's not right. And then I was like, No, I'm going to do it and I'm going to publicise the fact I'm resting now. [00:01:10][10.8]

Sophie: [00:01:10] I really liked it. I was like, I want to get into bed now. [00:01:12][2.2]

Maddy: [00:01:14] How was your weekend? [00:01:14][0.5]

Sophie: [00:01:15] Yeah, it was good. I actually have a story for you. I caught up with a friend on the weekend, a mutual friend of ours, and I thought I'd share an investing story that she actually came to me with. Love is a bit of a premise for this story. She's a long time listener, started investing because of the podcast. Very enthusiastic about investing these days. Like I get like one minute audio notes from about her investment decisions, which I love. [00:01:38][23.9]

Maddy: [00:01:39] It fills my heart. [00:01:40][0.7]

Sophie: [00:01:40] Yeah, it actually really makes me feel happy. And it's so funny when she audio, she starts off like, I know you properly don't really care about this, but I'm going to miss you anyway. Like I care. I've got up. We've got a whole podcast about. [00:01:50][10.3]

Maddy: [00:01:51] This Irish here. Send them to me. [00:01:52][1.3]

Sophie: [00:01:52] Well it's because she actually well, she's the time of. [00:01:54][2.0]

Maddy: [00:01:54] Megachurch. [00:01:54][0.0]

Sophie: [00:01:57] So she was telling me that she went into the office the other day and a guy that she works with like was obviously writing the paper in the morning and was like, oh you know the ASX is down 20% or whatever the number was and she was like, who? And he's like, No, that's not good. Like it's down. She's like, No, no, everything's on sale, it's really good. And he's like, No, like it's down. Inflation's coming, interest rates are rising. Like, this is a bad thing, this is a bad thing. And she's like, Oh my God. This guy was like, so excited about fear mongering. She's like, well, actually, no. Like, it's a great time. The other day I bought two shares, I bought I Grew Group and I bought Woolworths. Yeah. And I go, Yeah. And he's like, well did you know that those shares are probably keep going down? And she's like, okay, now this guy's just obviously trying to like put me in a box and tell me that I'm like some stupid kid that doesn't know how to invest, but. But she's like, well, actually, no, I've done research over the past three months and like, I know that people retail shop like supermarket shops, even with inflation and regroups at the lowest point it's been in a couple of years and blah blah. Like she went on this whole like tangent. Good. [00:02:55][58.5]

Maddy: [00:02:55] I saw her. [00:02:56][0.9]

Sophie: [00:02:57] I know. And then she messages me the other day and she was like, look at I grew up and it's like completely like spiked back up and she's like, I don't want to brag or anything, but I think I bought at the bottom. [00:03:07][9.9]

Speaker 3: [00:03:07] Of. [00:03:07][0.0]

Maddy: [00:03:08] The chart is gold. [00:03:09][1.1]

Sophie: [00:03:10] And I was just like, I feel like that was a good, good story to share. I love it. [00:03:14][4.4]

Maddy: [00:03:15] Very hard when. [00:03:15][0.5]

Sophie: [00:03:15] Investing. So if you have an investing story you want to share with us. But now just like. [00:03:19][3.9]

Maddy: [00:03:20] How good that she feels information as well. [00:03:22][2.0]

Sophie: [00:03:22] She's right. And yeah, that was the best thing. She was like she said to him, she's like, research, research, research. I've been told you got to reset your stocks and that's what I'm doing. And you know who I'm talking about. We got somebody in the room with this one. [00:03:34][12.1]

Maddy: [00:03:36] I absolutely. [00:03:36][0.5]

Sophie: [00:03:37] Love it. But it's true, though. I feel like it's good. If you do your own research, you can go back and just tell people absolutely. Go away in the nice, nice words. [00:03:44][6.9]

Maddy: [00:03:44] Well, speaking of research, I came across an article last week by Ark Invest, who is headed up by the one and only Cathie Wood. And I sent it to you because the headline was very eye catching. It was Ark's expected value for Tesla in 2026 is $4,600 per share. [00:04:03][19.0]

Sophie: [00:04:04] That is great. [00:04:04][0.4]

Maddy: [00:04:05] Well, the reason why it really cool my eyes, because I happen to be aware that the current share price of Tesla is $700. [00:04:11][6.2]

Sophie: [00:04:13] So I think it's a good idea today if we did an episode on the Bull and Bear case for Tesla and I know that Elon Musk has been in the news a lot and we speak about Elon Musk a lot, but I feel like this is a really topical conversation because Tesla has been super volatile, the stock price and like a lot of people are talking about it. So should we jump into like what the article says. [00:04:33][20.2]

Maddy: [00:04:33] Let's do it. So there are a couple of sort of key assumptions that the article sort of runs through at the headline, and it sort of talks about how they built up this idea that Tesla could be worth so much now that some of the assumptions like number of cars sold, what process sold out. But I think probably the most important one that is really pivotal to this is the launch of Robotaxis somewhere between 2022 and 20. [00:04:59][25.4]

Sophie: [00:05:00] Yes, sir. If you don't know what the robo taxi is, which I know I actually had, I hadn't heard about it. It was interesting, but pretty much it's just like a Uber service. But it's autonomous, spontaneous driving. [00:05:13][12.5]

Maddy: [00:05:13] I no drive. [00:05:14][0.8]

Sophie: [00:05:14] No drive. So you have like a system of cars that come and pick you up just like an Uber would. And the big part of this article is that they're going to have this up and running. So if it's not up and running at all, it's kind of like, where does the valuation sit? [00:05:27][12.7]

Maddy: [00:05:27] Yes. Which we will get into. But I mean, they're saying that this whole industry is estimated to be worth 11 to $12 trillion, which I mean, really quite an exciting sort of, I guess, insight into the future. [00:05:39][11.7]

Sophie: [00:05:39] I would be so scared getting into a car with no drive out run. But like who? Like how? You know what I mean? [00:05:47][7.3]

Maddy: [00:05:47] Like, how it's safer. Yeah. I mean, once that up and running, it will be because it removes human error. [00:05:52][4.5]

Sophie: [00:05:52] I know, I know. I just like. I just wish I could be a visionary that sees this stuff. Yeah, and I can I get the premise of it, but I like. [00:06:00][7.9]

Maddy: [00:06:00] How I'm kind of sad about it. I like driving. [00:06:03][2.7]

Sophie: [00:06:04] Automated driving at all. So I'm, I'm happy about it if it happens. [00:06:08][4.0]

Maddy: [00:06:09] Okay, fair. [00:06:09][0.5]

Sophie: [00:06:09] Enough. You can remember it. Yeah. You like driving? One time, Matty drove me to the airport for no reason, but it was great. [00:06:15][5.7]

Maddy: [00:06:16] And nothing is in forefront. [00:06:17][1.0]

Sophie: [00:06:18] You okay, so let's frame this then. Let's look at the bookcase first, which is the positive side of Tesla, and then we'll jump into the bear case afterwards and kind of dissect it a little bit. And let's bring in some of the points from the article and also some points from our own research. Alright, so let's talk about then first the bull case for Tesla. What's one of the things that you think is going to make this company propel into the future based off industry research? [00:06:44][26.2]

Maddy: [00:06:46] I think the first thing that comes to mind for me is it's powerful. Brands like Tesla is so well known and yet they have never spent a dollar on marketing, which is just wild. [00:06:54][8.8]

Sophie: [00:06:55] Elon Musk kind of his their marketing techniques. [00:06:57][1.6]

Maddy: [00:06:58] The thing they do have like arguably the world's most powerful. And I think he is the richest man in the world as a CEO. He has a huge presence on Twitter. So, you know, it has a lot of influence. I was reading the other day that a couple of years ago he tweeted about one of their new cars. I think it's the Roadster. Yeah. And he talked about how it was going to have like some kind of certain engine that may or may not allow it to fly. Wow. Which. Okay, obviously, like, I feel like he's joking, right? I mean, maybe not. He does well from a cleaning space. However, I think the genius in this is that the perception it creates about Tesla, like the fact that they are so innovative that I now in the back of my mind, I'm like, maybe Tesla is making fine cars. Yeah, maybe that is actually something they would do. [00:07:44][46.2]

Sophie: [00:07:45] And I also think it kind of ties into like with the no marketing but still such a powerful brand is like their first mover advantage in the EV space, like they are known as the EV company of the world. [00:07:56][11.1]

Maddy: [00:07:56] This is a trailblazer. Yeah, everyone else is following in their way and I think they have really put the pressure on. They're really setting the precedent to kind of drive this space and they're making all the other really big companies sort of stand up and have to get involved. [00:08:08][11.7]

Sophie: [00:08:08] Yeah, 100%. I think there's been a huge shift as well, especially with perception with consumers at the moment. It's like if you're not creating EVs, it's like, was that really a brand that I want to be buying from because you guys can't even like pick up the technology to do that? [00:08:21][12.2]

Maddy: [00:08:21] Yeah, so true. I was listening to a great podcast the other day. Tesla, a Detroit business was. Have you listened? [00:08:26][5.4]

Sophie: [00:08:27] Oh yeah, business was one of my favourites. [00:08:28][1.6]

Maddy: [00:08:29] So they did a Tesla series and it talked about kind of the story of how it started, which there was a lot of new information in there for me. But one of the things that I really liked is how Elon talked about how the initial business plan was to make it like not many cars, high luxury, high end, not very accessible to everyday people, right? Yeah. The cars was super expensive to create this image of luxury and prestige and superiority. And then as time went on to really scale the brand and scale the cars, make them more accessible price points. And that's how this sort of created this image. Yeah. And now in this like at scale phase, he's like, there's this quiet and it's like, we are going to grow extremely fast. [00:09:10][40.7]

Sophie: [00:09:11] Oh, my God. Because we we're going to grow extremely fast, folks. Buy this stuff. Yeah. John In this space, in our. [00:09:19][8.6]

Maddy: [00:09:20] Dream space, which I read and I was like, Oh, that's. [00:09:22][2.7]

Sophie: [00:09:23] My nerd for next time. If you didn't quite something have the quiet. [00:09:26][2.9]

Maddy: [00:09:26] But my thing I will say is that when I launched Model S in 2013, it made headlines because they received a near-perfect score of 99 out of 100 on Consumer Reports, which made it the best car ever tested. Wow. So they've obviously gone very hard, very early on, creating this image for themselves. And now I think they're probably reaping the benefits. [00:09:47][20.9]

Sophie: [00:09:48] Okay. So, one, we've got a powerful brand that you think is going to stick. [00:09:51][3.0]

Maddy: [00:09:51] Yeah. [00:09:51][0.0]

Sophie: [00:09:52] Too. I'm going to go into financials, which we don't always like, but I think it's actually super compelling. Yeah. Like. In 2021 total, they made $5.5 billion. And in this quarter they've made 3.3 billion. So over a whole year they made 5.5. And in one quarter alone they've made 3.3. So their sales are up dramatically. So their revenue is up 81%. And the reason why I find this really fascinating is because we're kind of going through a bit of an economic slump at the moment, and Tesla has been affected by that as well, because obviously there's things like inflation, there's a shortage of chips, you've got supply chain issues, but regardless of that, they're still producing more cars and they did last year and making more money. So kind of makes you think about what are they doing right so that they can actually have these outstanding financials. [00:10:39][46.5]

Maddy: [00:10:40] Yeah, I find it fascinating that I think it was 2018, they produced they sold around a thousand cars. And then a few years later, in 2021, I think they sold just under a million. So like the pace that they are expected to. [00:10:55][14.8]

Sophie: [00:10:55] See hectic and I think that actually does really associate with that powerful brand. Right. You know, because the more it's like that networking effect, it's kind of like the Airbnb effect. Like, you know, once you hear about it, you see it in more cities and then it grows. And I think that's what's really happening at the moment. Another financial metric that I thought was, you know, really incredible was that their net cash flow from operating activities so their day to day manufacturing of cars is up 143%. And what that means is that their core activities are doing really well and they're generating a lot of cash from it. And the reason why cash is really important at a time like this is that we are in an economic downturn. And it also does provide them that extra opportunity to invest in new opportunities. So they kind of hedge against that kind of downturn. But it's also like where can they put their money next to keep expanding? [00:11:42][47.4]

Maddy: [00:11:43] Yeah, we've been talking a lot recently about how companies have in cash at a time like this is quite important. When interest rates are rising, if they have debt, it's going to become more expensive for them to pay off. So that's really interesting to hear that the cash that they're actually generating is increasing so rapidly. [00:11:57][13.6]

Sophie: [00:11:57] Yeah. And kind of talk about this in their bull case for they talk about one of their assumptions being the amount of cash that they'll have to invest because people that are investing in the space do need a bit of cash. Like you can't do this without a bit of backing because you need to invest in new technology. You need to invest in plants. So kind of having that metric there is like, Ooh, okay, what are they doing right now? [00:12:18][20.6]

Maddy: [00:12:18] Guess you mentioned new technology there and I think that's a good space to go next because we sort of touched on it before. But I really think where Tesla comes through the most is how it is really setting the pace when it comes to new technology. One thing that I find really interesting with with Teslas is this OTA system they have or over the air updates that they can provide. So with traditional cars, you know how there's like that old adage or that old saying that when you drive out of the dealership, it depreciates immediately like you're losing money? Yeah. But what I find really interesting with Teslas is that every time someone drives a Tesla, that company Tesla collects data on the drives, and then they use that data to improve the cars and then they send you software updates. Yeah. So it's like the same with your iPhone or your computer. When you get a software update, you can actually update your car for years and years after buying it. So the company has actually done over 120 OTA updates or over-the-air updates since 2017, which is an average of one every six days. [00:13:20][62.0]

Sophie: [00:13:20] Yeah, they update their software a lot. And I think another really cool thing about the technology there is, you know, Tesla has had cars on the road since like I think it's something like 2008. And if you think about how a Tesla works, like they're pretty much tracking everything around them. The roads, the cars on the road, the people, how people drive. And one of their biggest advantages with their technology is they've been collecting this data since their first car being on the road. So when you think about the future of Avs, it's like, who's going to be the first person that actually makes it an autonomous car where you don't have to drive? And Tesla has all of this data, which a lot of other car makers don't have in comparison because they just haven't had, you know, cars on the road collecting this data. [00:14:00][39.9]

Maddy: [00:14:01] I actually didn't think about how much data they would have from. [00:14:03][2.0]

Sophie: [00:14:03] I know it's like so insane. They have cameras on like every single part of the car. I know it's kind of freaky, but also kind of the other thing which I will quickly mention, is that the technology that Teslas use, you know, the manufacturing plants is just it supersedes that of any other RV maker, like how they make the cars in their gigafactories or their big factories that they have in like Berlin and Gigafactory. I think it's a Gigafactory. I could be scaring them. Does that mean I don't know what like was anything called anything but pretty much it like plates all the metal together in one go, whereas it goes like it's a big machine, it's like zoom and like puts it all on. Whereas with traditional cars they put like a sedan, for example, together in all these different paces along a different supply chain. So it's really quick and they make them really quickly. So I think that's just in the case of like thinking about how many cars they can produce. It's like that kind of technology is really cool as well. They can kind of like under have these efficiencies within their manufacturing process. [00:15:02][59.1]

Maddy: [00:15:03] Nice. Well, before we do get on to the bigger case for Tesla, so our random question for you. [00:15:08][5.2]

Sophie: [00:15:09] Sure. [00:15:09][0.0]

Maddy: [00:15:09] What would you say was your one single main source of information when researching for this episode? If you had to pick one girl, not a particular person in your life, but happens to be very interested in this company. [00:15:25][15.7]

Speaker 3: [00:15:26] Sam Well. [00:15:27][1.7]

Maddy: [00:15:28] I thought it would be wrong of us to do an entire episode dedicated to Tesla without getting some valuable opinion, because I know that he does have a lot to say on this topic. So this way what is your job? So his face is freaking out and. [00:15:43][14.8]

Speaker 3: [00:15:43] I'm so confused. [00:15:44][0.6]

Maddy: [00:15:45] This week I asked Sam, friend of the show and partner Sophie and arguably Tesla's biggest fan, how he would summarise the case for Tesla show. [00:15:54][9.2]

Sophie: [00:15:54] Climate. [00:15:54][0.0]

Maddy: [00:15:55] Event of us. Okay. [00:15:57][1.7]

Sophie: [00:15:57] Tell me these. Yeah, I get that. [00:15:59][1.7]

Speaker 4: [00:15:59] Well, firstly, thanks very much for having me on. It's an honour. After listening from the sideline for a couple of years now. I think so. Tesla in 60 seconds or less. That's a tough one. I think first and foremost. Elon Musk, I'm a big fan. He's proven over many years his ability to execute in different verticals, whether that's basic SolarCity, Tesla, PayPal, in the early days, the list goes on. So big fan of him. And, you know, he's he's proven successful time and time again. I think Tesla specifically their product suite. I don't know if you've ever been in a Tesla, but it's you know, it's unbelievable step change in the automotive industry, in my opinion. I describe it similar to when I felt an iPhone for the first time having used a Nokia. Up until that point, I think, you know, the integration between the software and hardware is phenomenal. And I think, you know, moving forward in the automotive industry, that emphasis on software as well as hardware is going to become more and more important. And I think what we'll say is a consolidation of automotive players, much like we saw with, you know, the Motorola, Nokia. Now it's really just Apple and Samsung. [00:17:14][74.6]

Maddy: [00:17:15] So I have to ask, based on that, how do you think we went doing the Bolt case? [00:17:19][3.8]

Sophie: [00:17:19] Did we go, that's so funny. Well, we've kind of said different things. And to be honest, I only really asked him a little bit because he's just so bias. I kind of wanted like. [00:17:28][8.6]

Maddy: [00:17:28] Well. [00:17:28][0.0]

Sophie: [00:17:29] He said if I had the bad guys as well. No. [00:17:31][2.1]

Maddy: [00:17:32] Does it surprise you that that was only one of three messages he said. [00:17:35][3.0]

Sophie: [00:17:35] That doesn't surprise me. He should be a salesperson for Tesla. He's actually obsessed. [00:17:38][3.3]

Maddy: [00:17:39] By, you know, what I gave him, I mean, at all. That's a mouthful. Yes. [00:17:41][2.1]

Sophie: [00:17:43] That's so funny. Well, Mary, that's hilarious. [00:17:45][1.8]

Maddy: [00:17:46] So we are going to get onto the bear case now, but not before we take a quick break for our sponsors. [00:17:51][5.2]

Sophie: [00:17:53] We've had a pretty compelling bull case, and I feel like Sam really topped it off that journey. Summary Three points what we say, Bull said. [00:18:00][7.1]

Maddy: [00:18:01] Powerful brand, visionary technology and financials. [00:18:03][2.7]

Sophie: [00:18:04] Yes. And a beautiful summary by Sam saying that the market's going to consolidate and Tesla is going to win out. [00:18:09][5.2]

Maddy: [00:18:10] Apparently no bias. [00:18:11][1.1]

Sophie: [00:18:11] At all, I'll say. I wonder if he's bought any Tesla stock. I'm definitely going to ask him that. But we have to give a bear case as well. And there's a lot of people that have, you know, very strong bear case views on Tesla, which are very warranted as well. So let's jump in. What's your first reason for the Bear case? [00:18:28][16.7]

Maddy: [00:18:29] I think the first one for me and I will keep it brief. But the fact that they were actually recently kicked out of the SJ index, I think this is quite a big red flag for me. And you know, it's ironic because they are the lady in the ABA space, which is doing amazing things for the environment, really transitioning the energy industry. Yeah. However, they were kicked out for a lack of low carbon strategy in their manufacturing plants. They were in breach or had problems with their codes of business conduct. They were ranked 22 on last year's Toxic 100 employees index, which is worse than ExxonMobil, I think the world's biggest oil and gas producer, which is pretty like wild and concerning. And they also have had reports of poor working conditions as well as racism. So, you know, for me, this is something that I'm always keeping in mind, you know, sustainability, ESG when investing. So obviously, Tesla does have a lot to show for itself in this realm, but they've also got some pretty big issues. [00:19:25][56.3]

Sophie: [00:19:26] Yeah, what's interesting with that one, I had a conversation with a friend about this the other day about the social issues at Tesla, because we were talking about ESG and we were saying that, you know, if you have a company where people know that it's going to be hard to work there, you're going to really struggle to retain or even ascertain talent. And we had this discussion because I was like, I totally agree with that. But also there's people like lining up around the planet who work at Tesla. Like it's such a funny balance. Like people know that it's going to be a shit work culture, but they still want to be there. Yeah, but then on the other side, actually a couple of days ago, the head of AI and Autopilot actually resigned from Tesla. So this is the guy who is like in charge of autonomous driving. So it's like is it a company that's going to be able to keep people that are really going to propel it into the future or these people are going to go work for a Volkswagen because they've got better culture, which. [00:20:12][46.8]

Maddy: [00:20:13] Is particularly concerning given I guess the entire bull case that is presented here is premised on the success of their autonomous driving business. [00:20:20][7.9]

Sophie: [00:20:21] I think the second point then on the Bear case linking back to the article is that, you know, oxy in their bull case that they are going to sell 17 million cars by 2026. 2026 is not. That's along the way. And a bit of I guess context. Tesla's current production is a million cars at one factory. So they've got like these big factories like the Berlin factory and the China factory, but that's only two factories. So that, you know, production capacity is 2 million cars to sort of make 17 million cars by 2026, they're going to have to, you know, establish another 15 factories. And these things aren't cheap to build either. [00:20:57][35.5]

Maddy: [00:20:57] Yeah, I think that's a big point for me is like I guess thinking about the current economic environment that we're in and the amount of capital expenditure that Tesla is going to have to put out in order to build these factories to meet those targets like that is a lot of money in an environment where, you know, debt is not going to be cheap or anywhere near as cheap as it has been for a very long time now. [00:21:18][20.4]

Sophie: [00:21:18] Yeah, there's actually I looked it up. So the Gigafactory in Berlin costs €4 billion to create. So if you made another 15 factories, that would be $60 billion, which you have to lay out, which is it's a lot of money within four years. Like that's almost it kind of seems impossible, you know, like. [00:21:34][16.0]

Maddy: [00:21:35] And I think this point around Tesla's ability to scale is quite an interesting one. So I think we can talk about it first in the context of electric vehicle space, but I am also keen to talk about in the autonomous driving space too. [00:21:46][11.8]

Sophie: [00:21:47] Can you give a quick like definition of what you mean when you say scale? [00:21:50][2.8]

Maddy: [00:21:50] It's really talking about Tesla's ability to grow. So if they produced 1 million cars last year, how are they actually going to be able to produce, you know, 6 million in a few years to come, especially in the context of competition that is heading up really rapidly in this space. [00:22:06][15.6]

Sophie: [00:22:06] So is that one of the best arguments in the competition? [00:22:09][2.2]

Maddy: [00:22:09] Absolutely. I actually sent this article to my brother Lucky, because I love hearing his thoughts on this. And hey, he's not really a Tesla fan. I don't think. [00:22:18][8.2]

Sophie: [00:22:18] Maybe we should have got him to do an audio. [00:22:19][1.2]

Maddy: [00:22:20] We should. Oh damn. I want to summarise what. [00:22:22][2.3]

Sophie: [00:22:23] His points were. [00:22:23][0.5]

Maddy: [00:22:24] His main one is around Tesla's valuation, which compared to its competition, is just out of this world. So Tesla has a market cap of $746.4 billion. So market cap is the number of shares tied to share price. The next largest market cap is Toyota, which is $217 billion. And in fact, Tesla's market cap is equal to the size of the next ten largest car companies in the world combined. [00:22:52][28.1]

Sophie: [00:22:53] Yeah. And it's a funny one in terms of the valuation because when you do look at the financials like they're making less, you know, they're making less money than your Toyotas, your Volkswagens. [00:23:02][9.0]

Maddy: [00:23:03] Producing way less cars. Yeah, you're. [00:23:05][1.4]

Sophie: [00:23:05] General Motors, but for some reason, they're trading at such a higher multiple. And the reason why that kind of is seen as a bit of an issue is because if you're trading at too high of a multiple, it's like, well, what's wrong with this business? People are just valuing it based off what they think the future's going to be like, rather than the fundamentals of what's happening right now, because it doesn't make a lot of sense. [00:23:23][18.2]

Maddy: [00:23:23] Exactly. I listened to a really interesting podcast on the F10 News briefing this week, and it was about the race for electric vehicle supremacy. And the reason why they do this episode is because last week Chinese company BYD, which is backed by Berkshire Hathaway or Warren Buffett, Warren Buffett outsold Tesla by 80,000 vehicles, so they are now leading the way in the global market for batteries. And it's super interesting because the amount of money that Chinese companies are raising and spending in this space is completely overshadowing what anyone else is doing. [00:23:57][33.4]

Sophie: [00:23:57] And the other thing with that as well is that all the companies that are outside of China, you know, they have such a reliance on Chinese manufacturers, suppliers, producers. So it's like they kind of can't really compete because they're not really making anything themselves. They're relying on China's, you know, supply chain. [00:24:13][15.6]

Maddy: [00:24:13] Yeah, the podcast made such an interesting point about this. Like this is going sidetracking a little bit. But this paradox of like there is so much global pressure on China to do more on climate change. And then here they are leading the way by a country mile in an industry that's going to be so important for transitioning transport, which is a massive emitter of carbon. And yet everyone is like up in arms about how far ahead they're getting in this space. And I really think it just reflects this sort of changing environment that we've got at the moment with black companies in China that are linked or sponsored by the Chinese Communist Party. And it's like there is so much fear around what these companies or the the power these companies are accumulating and their reliance. So we're going to have on them. [00:24:56][42.4]

Sophie: [00:24:56] Well, especially as I say, already talking about something like a Tesla collects a lot of data. So if your car is collecting a lot of data, obviously it's something that consumers have top of mind when they're considering what, you know, vehicle that they're going to be using it. [00:25:07][11.5]

Maddy: [00:25:08] And as my brother said, there are a lot of people in China and he was like, I'd back that over Tesla. Of course you would. Negative, nasty. [00:25:15][7.3]

Sophie: [00:25:16] And now I know that this like our case kind of built up, you know what it's going to be for the future, what the valuation is going to be for the future, but also kind of siloing into right now. You know, we're going to have a couple of years of probably a lot of difficulties in terms of economic environment, supply chain. So I think when looking at the bear case, it's like I've kind of overlaid that being like, you can't be that optimistic right now. You've got to have a little bit of not not pessimistic, but like cautiously optimistic if you are, you know, excited about a stock because it's like, well, there's going to be issues. We just don't know how long they're going to last for. [00:25:47][31.7]

Maddy: [00:25:48] Especially as Tesla has it. Teslas are expensive and like, yeah, a new car is a consumer discretionary item. When people have to tighten their hip pocket, they're not going out and splurging on a new Tesla 100%. [00:25:57][9.0]

Sophie: [00:25:57] I think something like the Model three or the Model Y, I'm going to stuff out which one it is. I think the Model three lost in six months ago, it was something like $80,000, which is a lot of money. It's a huge amount of money for a car. And now it's gone up to $92,000. And that's happening with lots of car companies. You know, prices are going up because of inflation, but that's a 12 grand jump in six months. That's a lot. [00:26:18][20.2]

Maddy: [00:26:18] That is a. [00:26:18][0.4]

Sophie: [00:26:19] Lot. So that's kind of the points around the EV space. But then you also mentioned autonomous driving. Is there competition in terms of people that are trying to create technology that allow us to drive autonomously? [00:26:30][11.3]

Maddy: [00:26:31] Yeah. [00:26:31][0.0]

Sophie: [00:26:32] For lack of a better sentence. [00:26:33][0.9]

Maddy: [00:26:34] So I'm going to just throw a few companies out because I think it's interesting just to become familiar with the names of these companies. The first one is Waymo. They're a subsidiary of Alphabet, which is the parent company of Google. General Motors is in the space. I mean, they've been around for a long time in the car space. There's Baidu, which is the Chinese equivalent of Google. There's Zoox, which is the autonomous vehicle company owned by Amazon. [00:26:56][22.1]

Sophie: [00:26:57] So what you're saying is that, you know, there's a lot of people that are trying to work out this technology and it's almost like people know the name of Tesla, but we're kind of ignoring, you know, what else is happening in this space. [00:27:07][9.8]

Maddy: [00:27:07] Yeah. There's also been like a number of horror stories about the and, you know, the industry has really been described as the Wild West because there is so much pressure at the moment and so many players who really are just racing to be the first to market with this technology. [00:27:20][13.1]

Sophie: [00:27:21] So quick summary then. What are the big factors that we have looked at with Tesla? [00:27:25][4.2]

Maddy: [00:27:26] So I think the first one has to be its ESG case. There's definitely some issues there. And then the next one is how well is it going to actually be able to scale to compete with everyone else in the space? And the third one is that their value is so high that encompass the next ten largest car companies combined, which would suggest that maybe it is a little bit overvalued. [00:27:44][17.9]

Sophie: [00:27:45] Oh, God, I wish I had a little crystal ball for these things. So you could say just to reference the highest price that OCTG put in the. If I was that Tesla, just to remind you, was going to hit 5800. And the lowest case was that it would hit 2800, which both of them are still a very far away from the $700 value that we're seeing today. [00:28:05][20.3]

Maddy: [00:28:05] I mean, Cathie Wood for many years has been very hot on Tesla, so it kind of makes sense. [00:28:10][4.2]

Sophie: [00:28:10] Mads Let's round out. Do you have a recommendation for me this week? [00:28:13][2.7]

Maddy: [00:28:13] Yes. One of my friends who is currently living over in the US sent me an article. I'm going to recommend an article. I feel like I normally do podcast. [00:28:20][6.7]

Sophie: [00:28:21] Very unlike you. [00:28:21][0.6]

Maddy: [00:28:22] It's from The Atlantic and it's called The End of the Millennial Lifestyle Subsidy. It was super interesting. I want to read you a really quick snippet. It's about the rise of unprofitable tech companies on the back of the low interest rate environment. And it says there are a few US references in here, so bear with me. But it says it was as if Silicon Valley had made a sacred pact to subsidise the lifestyles of urban millennials three years ago. If you woke up, worked out with a peloton or a bid to WeWork, ordered a DoorDash for lunch, took a lift home, ordered dinner through Postmates. Don't know. That is only to realise. [00:28:56][34.3]

Sophie: [00:28:57] No, that's only. [00:28:57][0.7]

Maddy: [00:28:58] To realise that your partner had already started a blue apron meal. Your household in one day interacted with eight unprofitable companies that collectively lost about $15 billion in one year. Wow, she says. I call this arrangement the millennial consumer subsidy. And now the subsidy is ending. Rising interest rates has turned off the tap from money losing traps, which is forcing these companies to make their services more expensive. Which I don't know about you, but my services recently have been ridiculous. [00:29:25][27.3]

Sophie: [00:29:26] Oh, ridiculous. I totally agree. But I also understand it. It's like we've been living in this low interest rate environment. Everything's been cheap, like we're all going to feel. [00:29:33][7.5]

Maddy: [00:29:33] It and all of these companies that we have become so reliant upon in our everyday lives. Yes, that's super interesting. So I'll put that in our it's. [00:29:42][8.2]

Sophie: [00:29:42] Kind of like a lifestyle, lifestyle change. Like every now and I go to auto rates, I'm like, oh, like, I don't think I can do this. I think I'm going to have to go and walk down the street and get it. Sorry, but there's like service charge, like there's all these things now that I'm like, well, no. [00:29:56][13.9]

Maddy: [00:29:57] It adds up, that's for sure. What are you recommending? [00:29:58][1.8]

Sophie: [00:29:59] This way. I'm actually recommending a YouTube video whilst researching this episode. I was watching a bit of YouTube with Elon Musk, terrible dancer, but there is a great video, which is a drone footage through their new Berlin factory and it goes around the whole factory. It shows how the cars are made. It's pretty quick. It got some intense music. It was really cool. I just want people to watch it. [00:30:22][22.7]

Maddy: [00:30:22] This is Sam rubbing off on you? [00:30:23][1.2]

Sophie: [00:30:23] Yeah. Yeah, he. Yeah. Look, he showed me the video, and we watched it, like, three times. [00:30:29][5.6]

Speaker 3: [00:30:29] Oh, my girls. [00:30:30][0.6]

Sophie: [00:30:30] Like that so much. I don't know. Think we'll link it in the episode notes. You can just watch on your commute to work or wherever you're listening at the moment. [00:30:37][6.5]

Maddy: [00:30:38] I want to put a poll on our Instagram to determine whether this video is actually interesting or not. [00:30:42][4.6]

Sophie: [00:30:42] It's so not interesting, but it's just like, cool. Like, it's just like one of the I think, you know what it is someone like Sam who loves Tesla, it's like the thing that catches you in that's like, yeah, this technology is cool. Like, you know, it's like a, it's, it's you said that they don't have marketing. This kind of stuff is their marketing you know it's just brand image you be. [00:31:00][17.9]

Speaker 3: [00:31:00] Is. [00:31:00][0.0]

Maddy: [00:31:02] Well we hope that you have enjoyed this episode we're definitely putting a thread in our Facebook group to discuss all things Tesla so. [00:31:09][6.8]

Sophie: [00:31:09] Controversial. [00:31:09][0.0]

Maddy: [00:31:10] You jump in why I say investing podcast discussion group. [00:31:13][3.1]

Sophie: [00:31:14] Also jump on our Instagram at why I say podcast. Maybe we'll talk to a couple of those up there just to understand how you're feeling. We did actually do a poll about whether you wanted this episode and it was 51%. Yes. Oh, 49%. I'm sick of hearing about it. [00:31:29][15.6]

Speaker 3: [00:31:30] Nice. [00:31:30][0.0]

Maddy: [00:31:30] Oh, apologies that I must have missed that one. [00:31:33][2.5]

Sophie: [00:31:34] But we're doing it because the 51% spoke out. [00:31:36][2.6]

Maddy: [00:31:37] And if you have enjoyed today's episode, we would really appreciate it if you sent it to a friend because it really does make all the difference. [00:31:43][5.7]

Sophie: [00:31:43] You'll hear from us next week. [00:31:44][1.4]

Maddy: [00:31:45] Catch you then. [00:31:45][0.4]

Sophie: [00:31:46] By. [00:31:46][0.0]

[1787.7]