Back To Square One
Let’s be honest, Tesla’s Q1 results are horrible by any financial measures. They delivered much fewer cars than the last quarter, -9% to 389K, and burned $2.5B Cash. Its Free Cash Flow is -674%. The market expected Tesla to deliver a High Growth result. But, Tesla behaved like a Start-up/Young Growth company, burning a lot of cash. As an EV company, there is no hope because of the high interest rate and fierce competition from Chinese OEMs. So, what can a great lead do?
Get Back To The Horse
Today, Tesla is still 82% (17.378/21.301 B) of a car company according to its revenue. There is no other way out. Tesla has to show its ability to compete and grow no matter what. In the Q&A, the CEO of Tesla, Elon Musk promised a more affordable model is coming in early 2025, if not late 2024. With it, Tesla can ship 3M smart cars in 2025. It will get back to the high growth mode: +66% in 2 years even if 2024 shipment does not increase much. Then, Tesla will be the №9 car maker in the world, bypassing BMW shipping 2.5M cars in 2023. What a good CEO, who can get the company back to the fast growth track even facing tough situations.
OK, how about a visionary founder. What can one do to push the envelope further? Psst! What if smart cars are just the Trojan horses to open doors for the Tesla ecosystem.
Inventing Tesla Only Games
Musk also revealed some crazy ambitious: the games only Tesla can play well. Sure, they are still early stages, burning a lot of cash and risks are very high as it today. But, they can be the huge moats for the longer run.
1. Location, Location, Location
Tesla is already on track to reinvent energy generation, storage and distribution. In Q1, it is a $1.6B business for Tesla. Stellantis became the last major automaker to adopt Tesla’s charging plug. Consequently, Charge Enterprises, Stellantis & GM charging station partner goes bankrupt. Tesla’s Supercharger network is already redefining the popular paths forward, and Destination Charging is becoming even more attractive, and giving Tesla unique power no car companies can have.
2. Self-Driving : A Killer App At Scale
Tesla FSD flywheel is not only spinning fast, but also accelerating. Tesla started to release FSD V12 to customers in Jan. 2024. To Apr. FSD V12 has driven 300M miles. It’s a 7.5x of Waymo’s impressive 40M Self-Driving mileage. Also in North America, Tesla has about 1.8M FSD ready cars, and only about 0.9M drivers use it so far. Tesla halved the price to $99 subscription monthly. It’s not only the subscription businesses evey car makers dream of: a recurring revenue with high margin. But also, it’ll grow the user base and increase its Serviceable Available Market (SAM). Now, let me know which company can catch up Tesla 🤔.
Oh BTW, a major carmaker is already in the licensing FSD discussion. Even it will still take another 2–3 years for the carmaker to hit the road, all major carmakers could only join the club to play sooner or later. FSD is likely becoming the de facto, just like what happens to Tesla’s charging plug.
3. The Uber For Robotaxi At Scale
It was 97 years ago, Ford Model T made cars mass-affordable from 1927. Till 14 years ago, Uber’s taxi two-sided market & platform allow consumers to make money with their cars from 2010. Which increases the utility of personal vehicle a bit at scale. 2024 is not just the “day two” of Self-driving but also Robotaxi. This August, Tesla Robotaxi will be unveiled. Not only, Tesla will be operating the fleet to eat Uber’s lunch. Tesla also plans to make it works for Tesla car owners. They can choice to let the cars to serve their friends & family. Or, the cars can make money to shuffling people or goods around. As a car is typically used about 10 hours a week, a Tesla car can be running 50 hours a week with over 100 hours for charging, etc. It’s a 5x of the utility. In a such new world, one key missing piece is how liability may be blamed & settled. But no worries, Tesla happens to run an insurance business too.
4. The Amazon For Distributed Inference Farm At Scale
So, what can a smart car do while idle and charging about 100 hours a week? If it’s not the smart place on wheels, why not mining cryptocurrency making up $800 monthly as a Tesla owner tried in 2022. Anyway, in Musk’s back of the napkin calculation:
- While majority Tesla cars on the road are on Hardware 3. All new cars are being made with Hardware 4. Hardware 5 should be in cars around the end of 2025.
- This Mar., Tesla has produced 6m smart cars in 11 years. But just for 2 more years to 2025, Tesla will be shipping 10m. As long as Tesla keeps shipping, soon there will be a fleet of tens of millions and eventually 100 millions smart cars. When they are charging idly, they may inference or compute.
