If you’re interested in understanding the bull thesis and justification of Tesla stock price (currently $1836), watch the above video as it does an excellent job summarizing the key reasons Tesla is dominating the EV market and will continue to do so. Their R&D has paid off to give Tesla the lead in vehicle range (402 miles for the model S) by improving power train efficiencies, shedding weight (i.e. less wiring than competitors), octovalve heat pump (increases the Model Y range to be basically the same as the smaller Model 3), and increased battery energy density relative to competitors (already in all Tesla vehicles, with further improvements to be announced on Battery Day on Sept. 22). Tesla is also going to make its own batteries (will be confirmed on Battery Day) in addition to sourcing batteries from other vendors (Panasonic, CATL).

Competitors in the U.S. and Europe are not taking Tesla seriously enough yet, despite each announcing some plans for delivering EVs, and are likely to continue to lag. Tesla is highly vertically integrated, whereas traditional auto makers are not. Tesla does not advertise, and has the largest share of the EV market. That alone should tell you that there is something very special about this brand.

Another key factor in the bull thesis is Tesla’s lead (by far) in collecting real world driving data to continuously improve their autopilot functionality to reach level 5 autonomy.

Tesla continues to make solid progress on this front, reporting that its vehicles had logged a total of 3 billion miles on Autopilot as of April 2020, up from a cumulative 1 billion miles it reported in late 2018. This is well ahead of its nearest rival – Waymo (backed by Alphabet) which reported that its test vehicles had logged 20 million miles on public roads as of January.

Though they only use cameras and radar, they have the best autopilot system on the road. A few well known figures (Anthony Levandowski) in the autonomous vehicle space have pointed out that LIDAR will not work (Waymo, Cruise).

traditional self-driving stacks attempt to compensate for their software’s predictive shortcomings through increasingly complex hardware. Lidar and HD maps provide amazing sensing and localization of the present moment but this precision comes at great cost (with respect to safety, scalability and robustness) while yielding limited gains in predictive ability.

Put simply, the self-driving industry has gotten two key things wrong: it’s been focused on achieving the dream of fully-autonomous driving straight from manual vehicle operation, and it has chased this false dream with crutch technologies.

Elon Musk said this about LIDAR.

 LIDAR is a fool’s errand. Anyone relying on LIDAR is doomed. Doomed! [They are] expensive sensors that are unnecessary

Tesla’s approach of only using cameras is going to work better (both economically and in terms of building a general solution to self-driving) and will win the race to full autonomy, if anyone. Elon is already testing out the rewrite of the software which incorporates time into the neural net.

The FSD upgrade adds about $7,000-$8,000 to the purchase price of a Tesla, and is planned to increase as FSD continues to improve. The extra margin on vehicle sales is something that cannot be matched by competitors, who must rely on third party systems, and it is unclear how that would exactly work. Would all cars have to have ugly and expensive LIDAR sensors added on somehow? It just doesn’t make any sense.

If or when Tesla reaches full autonomy, it will truly be a game changer. They will be able to rapidly improve the reliability of FSD, and in theory, every Tesla with FSD will be eligible to be part of a robo-taxi fleet that makes money for you when you don’t need to use your car. Understandably, you may not want your expensive vehicle to be part of the fleet. Just like that, it would eat Uber and Lyft’s lunch. At which point, should the market cap of Uber or Lyft (maybe both?) be added to Tesla’s market cap?

I look forward to that day!

Tesla is simultaneously growing its energy storage business, which is growing quickly and expected to grow as fast as its EV growth or faster (~50% YoY). It also has the lowest cost solar panel solution in the US. These businesses are early in their long term trajectory.

There are so many more reasons why Tesla is crushing it and will continue to do so, but I will have to come back to that some other time. It’s amazing how much information exists about Tesla that gives retail investors as much more more information than institutions, many of which do not do as in depth analysis as Youtube channels such as Tesla Daily, Hyperchange and the Limiting Factor. Watching their content has increased my understanding of the company and confidence as a shareholder.

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