Also, the 'products' in question are not Teslas. Those patents are available. The product is the Gigafactory. A much harder thing to knock off.
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Also, the 'products' in question are not Teslas. Those patents are available. The product is the Gigafactory. A much harder thing to knock off.
JRP3
Hyperactive Member
Ah, don't be so quick. Since you're an analyst look up China smartphone sales by brand today. That may help you understand that though many tried and failed not all did, and a couple of them are massive successes, including exports. FWIW, many international travelers require multiple SIMs. How many iPhones support multiple SIMs? Right, zero. How many Chinese smartphones support multiple SIMs. Right, again, all of them.
Chinese smartphones are gaining share worldwide, partly on price, partly on features.
Bizarrely, not too many US securities analysts have bothers to study China. In autos they remain similarly ignorant. Alex Potter is the only one following Tesla who actually visited China in the process. of course he's discredited because he speaks Mandarin, isn't he?
I apologize if my tone seems to be sarcastic. I am old enough to remember the analysts who in the last 1960's said the Toyota "would never sell in the US" because their Crown was so crude. A couple of years later Honda "...had zero chance in the US" but I had owned an S600 so bought their first ADR's because I thought they would succeed anyway. A little more than a decade later I had a Hyundai Pony to drive in Kuwait. That, too, "is doomed to failure in the US". With analysts almost uniform in their ability to understand learning curves they perpetually miss new markets and new competitors.
China is the world's largest auto market. GM is threatened but 80% of all Buicks are sold in China. Both VW and Daimler Benz are targeting China for their first serious BEV automobiles. Tesla is doing the same, but not many people understand how radical is was when. Elon Musk went to China and had a personal audience with the Premier, IIRC the first ever with an indicial foreign businessman. Then there is Tencent. That was not just about money, it was about entering the China market as a domestic player. That will be transformational.
If you noticed, Hong Kong alone was 7% of Tesla sales just prior to their incentive changes. Imagine the opportunity in China.
Just after that, you might want to rethink India.
Hint: China has more middle class car buying population than the US has total population. India produced not only the wealthiest person in the UK but the CEO's of Pepsi and Microsoft. The Indian middle class buys >20,000 Mercedes Benz per year, produced locally. Now India is poised to follow China with BEV incentives. Of course Bajaj (look it up if you don't know it) will quickly transform itself as will the Jaguar/Land Rover parent company. Tesla can play a major role in all that.
Trick question: how many Indian-origin and China-origin engineers and executives does Tesla have as a proportion of the whole?
Second trick question: part A: what country dominates photovoltaic production today? Part B: Why? (hint: you'll flunk if you say "low cost").
Again, please accept my apologies if my tone has any hint of sarcasm.
Background notes: during my life I have lived in more than a dozen countries. I have watched Japan, South Korea, Singapore, India, Dubai and other places go from disaster areas to global forces. None were sure things. Dubai, for example, did not do it on oil but more than a century of past success as an entrepôt (read: smugglers). I have learned to understand that ethnocentric views are always, not almost always, wrong! if I am in error, blame my life experiences. I am reminded of Rudyard Kipling "...a fool lies here who tried to hustle the East". I also lived in Iran just before the revolution and was abruptly dismissed from my job for predicting that event. I wasn't wise, I only could understand what I heard in the streets. The process of photovoltaics, wind power, BEV's all seem just like so many past events to me. To my eyes the world is not North America/Eurocentric.
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Fantastic post - thanks very much for sharing your experience.
Great post!
I won't comment on all of it but did want to echo the sentiment that dismissing China-based auto and/or battery manufacturers on the ground that they can't match US/European quality is likely to be a big mistake for all of the reasons you eloquently summarize. I think Tesla has a massive head start but would not be at all surprised if within the next 5-10 years some of the strongest BEV manufacturers in the worldwide market (other than Tesla) are from China (they already dominate the Chinese market).
Thank you for the very informative post.
I would be interested to hear your perspective on the fact that two Chinese backed automotive start-ups trying to built production capacity in US - Lucid and Faraday Future - are struggling with the financing, while Tencent was buying 5% in TSLA, and probably is continuing to buy. Also, why Chinese investors trying to finance US automobile startups, rather than homologate Chinese built cars and import them in US?
ValueAnalyst
Closed
Thank you for your comprehensive reply; it was very helpful.
Regarding Chinese smartphone sales by brand: I agree that Apple has a small market share, but it is important to note that Apple dominates the profit share around the world (last figure I saw was more than 90%).
I am focused on profit share rather than market share (i.e. revenue share).
Reciprocity
Active Member
I would be absolutely shocked if Tesla did not open a substantial manufacturing presence in China. I dont see the same advantages to India unless there is some type of free trade agreement between India and China. There is no reason why you cant supply India from China. I also expect them to break ground on two or more GF at the same time. More then likely EU and China. I think GF5 will be closer to the east coast of the US and will be a fully integrated car + battery plant to focus on Model Y, so asperationaly 2019-20 to get to 30% and another couple of years to get to 100% or 1.5 million Ys/Y and 1.5GWh/Y of batteries by 2022. Port access would be nice, but not as necessary if they choose to also manufacture in EU and South East Asia. More then likely they make the S/X in the US until they completely redesign them to work on the same lines make the Y.
erthquake
Active Member
Last week I noticed a subtle but possibly significant difference between the 17Q1 and 16Q4 letters about the Model 3 ramp.
The Q4 letter reads, "Our Model 3 program is on track to start limited vehicle production in July and to steadily ramp production to exceed 5,000 vehicles per week at some point in the fourth quarter and 10,000 vehicles per week at some point in 2018."
While Q1 letter reads, "preparations at our production facilities are on track to support the ramp of Model 3 production to 5,000 vehicles per week at some point in 2017, and to 10,000 vehicles per week at some point in 2018."
Are they hinting at the possibility that the ramp might hit 5k/week before the end of Q3?
The Q4 letter reads, "Our Model 3 program is on track to start limited vehicle production in July and to steadily ramp production to exceed 5,000 vehicles per week at some point in the fourth quarter and 10,000 vehicles per week at some point in 2018."
While Q1 letter reads, "preparations at our production facilities are on track to support the ramp of Model 3 production to 5,000 vehicles per week at some point in 2017, and to 10,000 vehicles per week at some point in 2018."
Are they hinting at the possibility that the ramp might hit 5k/week before the end of Q3?
RobStark
Well-Known Member
1)Yes, the Chinese have large and increasing market share in smartphones but Apple still takes almost all the profits.
2) In autos Detroit had to break faith with the American buyer by making some absolutely horribly unreliable cars in the 70's and 80's to give the Japanese an opening. The Germans and French never broke that faith with the European buyer. Toyota(combined with Lexus) have 4.8% market share in Europe vs 14% in the US and Nissan(plus Infiniti) have 4.2% market share in Europe vs 9% in the US. Honda (plus Acura) has 9.3% US market share but less than 1% in Europe.
In other words I think Tesla has to really screw the pooch in markets outside China to give the Chinese EV makers an opening in the $30k plus global EV market.
2) In autos Detroit had to break faith with the American buyer by making some absolutely horribly unreliable cars in the 70's and 80's to give the Japanese an opening. The Germans and French never broke that faith with the European buyer. Toyota(combined with Lexus) have 4.8% market share in Europe vs 14% in the US and Nissan(plus Infiniti) have 4.2% market share in Europe vs 9% in the US. Honda (plus Acura) has 9.3% US market share but less than 1% in Europe.
In other words I think Tesla has to really screw the pooch in markets outside China to give the Chinese EV makers an opening in the $30k plus global EV market.
OK, I think they both matter.
The proportion of Tesla engineers/executives who are Chinese/Indian only is important because they are much more likely to clearly perceive relevant development in their countries of origin than are others. IME people who have lived in a given country almost always pay more attention to what is happening there than those who have not, and people who are originally from a given country almost always are more attuned than those who aren't. In short, I think of it as the globalist version of the 'old boys club' so beloved in Japan.
The photovoltaic issue is more of the traditional industrial development cycle. First, cheap labor, second, efficient production, third, improve the product. Second and third often happen at the same time or reverse in order. In the current context the real issue is the huge number of qualified engineers who have been working on photovoltaics in China, driven by the domestic insatiable demand. At the moment there is clear Chinese leadership in that area. FWIW, some Chinese producers now have gone abroad and adopted Western names. Canadian Solar, for example, is a firm started, owned and professionally staffed by Chinese people but based in Canada. The Chinese purchases of Volvo, MG and Rover all serve as examples of this trend.
I hope that answers your question.
BTW, Tesla understands all this very, very well in my opinion. My personal view is that Tesla will have China as their #1 market soon, and India will probably emerge as number 3 or 4, but might also have technical service agreements or supplier relationships with firms like Bajaj and Tata.
Good points.
However, Jaguar Land Rover is Indian owned, Volvo is Chinese owned. The Nissan Europe share needs to have Renault added, but then must be viewed as a French controlled company anyway. The overall Japanese penetration in Europe is anyway less relevant than is their share in countries that do not inhibit their growth. Switzerland, the Scandanavians are good cases.
You're right that if Tesla holds both technical and customer service superiority they'll probably not be hampered unduly by competition. I hope and think you might be correct in your conclusion. I worry about Tesla ability to sustain high growth with high quality customer support.
lastly, Apple market share by price is pretty durable, at least so far. I worry about that too, but not so much that I'll soon change AAPL from being by far my largest personal holding.
Well, I have a perspective on that, but please don't assume I'm correct.
Chinese entrepreneurs have a habit of 'gambling' on very risky bets that might pay off very big. Around the world that is most obviously seem with fairly massive investments in startup extractive minerals, often in high-risk-political climate. It also is seen in distribution and manufacturing wherever, however they can get a foothold. They also invest in unlikely ventures simply to learn, often by finding technical talent. Comac and their newly flying C919 just is a good example, given that to all appearances they managed to reverse-engineer a B717 (nee MD-95).
Lucid, unless I'm wrong was a long shot bet by Jia Yueting, that probably will give lots of education but will fail financially. Faraday is similar, including Jia Yueting, but also has some steadier hands in Mitsui. That too probably will be better with technology transfer than with product launch. I'll speculate that the net of these two will be to spawn a third, successful onslaught in a few years time. We may be confident there have been lots of lessons learned.even though we're not tooo likely to go driving away in either one of them anytime soon. That could change were somebody like BYD to decide to join forces. if that happens it'll be another story.
jhm
Well-Known Member
Perhaps they figure that if they can compete with Tesla in the US, they can compete anywhere. Also, they may want to tap into the talent in the US and know if they can stay at the cutting edge of technology, they can easily bring that back to China.
larmor
Active Member
Yes!!
I can never sell unless somebody eliminates US capital gain taxes. Even though it is 'only'797,143,476,216 as I write this.Frankly, from a value perspective I see few plausible arguments against AAPL, the dividend yield on my portfolio is 1.52% at current prices, the cash hoard beggars belief. There is a plausible road to some growth. What's not to like?
Then just imagine what can happens longer term with China, India and elsewhere. They're just scratching the surface. Soon they'll continue innovating at lower price points. They'll end have dual SIM's in China, which alone could double sales.
Oops, we'r meant to be talking TSLA!
JRP3
Hyperactive Member
Need to correct typo above: the 13Fs are due in a week, by May 15, not April 15. (thank you, @rallykeeper for keeping me straight!)
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