07/02/2023
What The Bears Have Wrong about Tesla stock
One of the bear cases for Tesla is all the competition that is slated to come online. Although this is certainly true, Tesla has a significant lead and is producing vehicles at dramatically higher margins than its competitors. In the last quarterly earnings conference call, Elon made the following important point (emphasis added):
Yeah. And it goes back to the point, I was making. I said, it several years ago, I think Tesla's really the competitive strength that will be, by far, the hardest for other companies to replicate is Tesla being just damn good at manufacturing and having the most advanced manufacturing technology in the world. And if you've got that sort of advanced manufacturing toolbox, you can apply it to many things and we're applying it now to battery cells.
True Vine Letter readers are also aware that significant amounts of new battery grade lithium capacity are not going to come easily. Moreover, Tesla has developed its own lithium-ion battery cell as its latest 10-K report mentions:
We maintain extensive testing and R&D capabilities for battery cells, packs and systems, and have built an expansive body of knowledge on lithium-ion cell chemistry types and performance characteristics. In order to enable a greater supply of cells for our products with higher energy density at lower costs, we have developed a new proprietary lithium-ion battery cell and improved manufacturing processes.
If Tesla can apply its manufacturing expertise to battery cell production, then this could provide a further cost advantage.
With the advent of Tesla, we are witnessing creative destruction in the automobile industry, at least when it comes to electric vehicles.
Tesla's entrepreneurial culture and tendency toward innovation is critical because it remains to be seen how well EVs can really compete with internal combustion engine ("ICE") or hybrid vehicles when it comes to mass market adoption. If anyone can make this happen it will be Tesla.