The market can speak. In the bull market, most technology stocks and large stocks have hit record highs. At this time, Tesla has fallen by 10.47% this year. It is one of the few large stocks that have significantly underperformed the market. Why?
Can’t see the profit schedule
Although Tesla began to make profits in the third quarter of 2018, there have been occasional net profits or losses since then. But until now, if Tesla did not rely on the large income from carbon rights trading at all, Tesla has actually suffered a substantial loss since its establishment (2016-2020 book net profits are -773.0, -2,241.0, -1,063.0,- 775.0, +862.0 million U.S. dollars); the point is that the company has never put forward a profit schedule, which is a warning sign for any listed company (Tesla is currently the only money-losing company in the top ten market capitalization in the U.S. stock market, the other 9 companies are cash cows).
The unique advantage that Tesla relies on for its livelihood has begun to disintegrate, because other car manufacturers have already begun to ship electric vehicles, and there is no need to spend money to fund their common worst enemy, Tesla. In past, they need to spend the money earned by the car to buys a large amount of carbon rights from Tesla (Tesla is lying down and making money? It sounds like Tesla’s blatant robbery, yes, this is a bandit clause granted by the global government). This point is very important!
How important carbon rights trading is to Tesla
How important carbon rights trading is to Tesla, and interested readers can refer to my analysis on section 4-2 of my book “The Rules of Super Growth Stocks Investing”. Of Tesla’s 13 billion yuan operating profit in 2020, 10.5 billion yuan is brought by carbon credit trading, accounting for 81%. (Tesla will sell the carbon credits obtained from the production of new energy vehicles to companies that have insufficient sales of new energy vehicles) In the first half of 2021, of the 12.3 billion yuan in operating profit achieved by Tesla, 5.8 billion yuan will still come from carbon credits Transaction, accounting for 47%.
Losing first mover advantage
In the past few years, Tesla’s stock has risen sharply. There are several major advantages:
- In the past, Tesla’s achievements mainly came from Musk’s amazing perseverance and personal qualities. He is the biggest advantage Tesla can survive. This is why he defended Tesla’s 2016 acquisition of SolarCity, a solar company, in court on 7/13/2021; he stated that if he did not act properly, Tesla would be “dead”. He deserves it, and in fact it is.
- Over the past few years, Tesla has obviously completely out of its rivals in terms of technology, scale, and supply and manufacturing, because consumers really cannot buy electric cars in the market. The basic principle of economics is the principle of supply and demand. In the past few years, Tesla has been the only major manufacturer that can provide a large number of high-quality electric vehicles. Tesla can ship in large quantities, investors and consumers do not account for its hidden shortcomings; because there is no choice, and consumers need it (this argument is extremely important, please refer to my book “The Rules of Super Growth Stocks Investing” explanation on section 2-2).
- China: In 2019, Tesla completed the construction of the factory in less than a year and started production and delivery, creating a miracle in the history of human engineering. China fully cooperate with regulations, loans and procedures. The China Prime Minister also received an unprecedented number of public interviews with Elon Musk. Not only that, China is also Tesla’s second largest single market. The Shanghai factory is not only responsible for supplying to the Chinese mainland, but also for exporting to the European market. No one would doubt that without China, Tesla’s best situation is to lose 1/3 of its market value, and it may not even have its current status. Imagine that if Alphabet (ticker:s: GOOGL and GOOG) and Facebook (ticker: META) can now operate in China, then the market value of these two companies’ market value can be increased by 30% in the worst case, and the best case can threaten the two companies that can operate in China, Apple and Microsoft, these two companies’ 2 trillion dollars in listed value (how important the Chinese market is to all listed companies, please refer to my explanation on section 4-1 of my book “The Rules of Super Growth Stocks Investing”).
Competitors are rising
The following are the main progress and achievements of Tesla’s main competitors in Europe and the United States. You can easily see that almost all of them have begun mass production of electric vehicles. (we only show the most popular, best-selling, and most iconic car model) Tesla has been unable to be as dominant as it has been in the past few years. This is the biggest difference:
|Competitor||ticker:||Plan and achievement|
|General motor||GM||Launch of electric flashcards (rivals Cybertruck) before the fall of 2021, and use Cadillac as its leading brand of electric vehicles; electric vehicles will not make money in the first half of the next 10 years|
|Ford||F||The domestic Mustang Mach-E (rivals Model Y) will be launched in 2021, and the F-150 Lightning electric pickup truck (rivals Cybertruck’s) will be launched in the middle of 2022; in 2030, only electric vehicles will be launched in Europe.|
|Lucid||LCID||Air (rivals Model S) will be launched in the second quarter of 2021, and low-priced Air Pure (rivals Model 3) will be launched in 2022|
|Rivian||RIVN||The R1S (rivals Model Y) will be launched at the end of 2021, and the R1T pickup truck will be launched at the end of 2022.|
|Fisker||FSR||Ocean SUV launched in the 4th quarter of 2022, Project PEAR launched in the 4th quarter of 2023|
|Volkswagen||VWAGY||ID3 has beaten Model 3, Porsche Taycan (rivals Model S) in 2020, Macan EV SUV, Audi e-tron (rivals Model X); 1 million electric vehicles sold in 2021, and it will become a global electric vehicle by 2025, as a global leader in the EV market, with an annual production capacity of 1.5 million EV. For the latest developments of Volkswagen’s electric vehicles, please refer to my other blog article “The future electric vehicle giant Volkswagen“|
As I mentioned on section 4-1 of my book “The Rules of Super Growth Stocks Investing”, the latest research report of JD Power, the U.S. research institution that has the supreme commentary status in the auto industry, showed in 2021; With the rise of automakers, Tesla’s ranking in the mainland China car quality survey has fallen to “below the average level.”
China is Tesla’s second largest market, accounting for about one-third of Tesla’s sales; Tesla’s stock price has risen sharply in the past two years. It is mass-produced, and it has always occupied the first place in the global electric vehicle sales (China accounts for 30% of the global electric vehicle market sales). However, Chinese official organizations have explicitly banned the purchase of Tesla cars. Since the second quarter of this year, China has begun to pay attention to the issue of personal data storage of all large companies. Official media, including Xinhua News Agency, have repeatedly supported many rights protection cases, so that Tesla, which was arrogant foreign businessmen, had to bow their heads and admit their mistakes.
Coupled with the fact that China is now starting to fully antitrust and crack down on major technology companies, it is impossible for Tesla to stay out of the matter. Finally, China itself also has major electric vehicles such as NIO (ticker: NIO), Xpeng (ticker: XPEV), Li Auto (ticker: LI), SAIC Motor, BYD (ticker: BYDDF), etc. For now, although Tesla still has a leading edge, it has already gotten closer. In the long run, China no longer needs Tesla; instead, Tesla needs China, the offense and defense have been transposed.
All this is also reflected in the stock price movements of the four companies (four lines from bottom to bottom) of Volkswagen (green line), Ford (green line), General Motors (purple line), and Tesla (orange line). The following is the chart of the four companies so far this year, Tesla is the obvious loser, and the reasons are clear:
It now appears that there is no clear leader in the market, and it will begin to enter the era of coexistence. Please note that as of today, no company can make money purely by making electric cars. Yes, everyone is burning money. This is what I have said before that the best days of Tesla are in the past tense. The moat caused by scarcity has disappeared, and the stock price boosted by scarcity will not come back again, and it is unlikely shown in the stock price.
There will be no company that can replicate its capital history. As with the development of laptops and mobile phones, Tesla will still be in the leading group, and its best ending will be like the Samsung (ticker: SSNLF) mobile phone, which is now the number one in the mobile phone market and is of good quality but difficult to make a lot of money (the global shipment market accounts for the first does not mean making the most money.
For this part, please refer to my detailed explanation on section 3-2 of my book “The Rules of Super Growth Stocks Investing”), it is unlikely that there will be huge profits (this is actually not bad) , Indicating that Tesla will be one of the few surviving, marketable, and likely to be profitable in the long run). When investors and consumers have different choices, investors will begin to question where is the profit? This has never changed on Wall Street, and it will not change in the future.
The electric vehicle industry is more likely to be a “poor” industry. In the long run, electric vehicles will be like the traditional automobile industry. A bunch of manufacturers will enter (hasn’t it happened now?), but it is difficult for anyone to win a considerable market and at the same time. It’s hard to make a lot of money and have big profits at the same time.
Those who want to have huge profits have to develop into high-end specific customers at the top of a few pyramids, such as sports cars or double BMW and Mercedes-Benz. This is also the only possibility for Apple’s (ticker: AAPL) electric cars way out. Although electric cars lack the troublesome engine and are more like electronic devices, after all, electric cars are still cars. Don’t forget this. EV is not a new things (but the Internet, computers, and mobile phones are new things). Therefore, its industrial development trajectory is not difficult to grasp.
Finally, “it is not difficult to build an electric car. The hard part is to profit from electric vehicles.”
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