There is an update to this. He recently gave the presentation again:
This is a must-watch, as it explains huge disruptions that are happening. According Tony Seba, people will buy solar and electric cars, not to be green for the environment, but to get more green into their wallets, because solar will soon be cheaper than the grid and electric cars are already cheaper than gas cars (it’s just that most people don’t know this yet).
This is a technology, not green, disruption. Many companies related to gas cars and oil are doing to be destroyed. On the other side, millions of people will benefit greatly. According to Tony Seba, there will be:
1.2 million fewer deaths from car accidents around the world
20-40 million fewer injuries or hospitalizations
Millions of hours freed up from commuting
$1 trillion of savings for U.S. households
$1 trillion of increased productivity
Cities will free up huge amounts of land, which can increase the number of parks and homes, which can reduce the cost of housing. There will be increased mobility for elderly, disabled, young and poor. New businesses, enabled by autonomous electric vehicles, will be spawned.
He explained that the cost of batteries and solar have been dropping for many years. If they keep dropping, there are going to be major disruptions. Tesla Energy can possibly disrupt the entire grid. They are starting with possibly replacing “peaker power plants”. Tesla showed that they can replace Australia’s utility company’s peaker power plant. It is not a success because it is green. It is a success because it will save the utility company a lot of money.
One benefit that Tony Seba did not mention is the reduced demand for Middle East oil, which has geo-political implications. This means fewer wars. It also means that Saudi Arabia will have less money to fund and push their ideology to the rest of the world, which they have done for many years.
From an investment perspective, it also means that you should be cautious about investing in any country that makes a significant percentage of their revenue from oil. This includes Canada, Norway and to a lessor degree, the U.S.
You can make a lot of money if you know something that others do not.
Tesla makes the best car in the world, but the world does not know it yet. Over the next 10 to 15 years, there is going to be a lot of blood on the streets, and it is not going to be Tesla’s blood.
Here are the top reasons that Tesla will crush or bankrupt many companies:
1. Best Car in the World
I started researching Tesla in early 2019 and determined that it makes the best car in the world. Hence I bought the stock in early June 2019. On August 2019, Jack Rickard stated: “Tesla makes the BEST automotive vehicle on the planet, barring none, in all respects, including SAFETY. It is just the best car ever built. And I would challenge anyone to demonstrate even partially that this is not so.”
This is corroborated by:
Model 3 won:
Detroit News Magazines 2018 Car of the Year award
Car of the year by Popular Mechanics March 2018 Automotive Excellence awards
AutoExpress Car of the Year 2019
Automobile Magazine 2018 Design of the Year
Model S won:
2013: Motor Trend’s Car of the Year
2019: Motor Trend’s Ultimate Car of the Year – the top Car of the Year in seven decades of publication and naming a car of the year every year since 1949.
As Jack Rickard pointed out, Motor Trend makes its money from advertising, largely from car and parts makers. Tesla does not spend any money on advertising.
2. Fastest Car on the Road
Tesla’s Model S can beat the Lamborghini Aventador in a quarter mile. This is embarrassing…for the Lamborghini.
Tesla’s price is a fraction of Lamborghini’s price.
Scheduled to be released in 2020, the Tesla Roadster is the fastest production car based on several metrics. It can go 0 to 97 km/h or 60 mph in a blistering 1.9 seconds. Yet, its price of US$200,000 is a fraction of Bugatti’s price of US$3,000,000.
For most of my life, my dream car was a Lamborghini or Ferrari. Now, I think they are obsolete. I would never buy one. Supercar owners are now facing a real risk that their cars will devalue after the Roadster comes out. If you know a supercar owner, you should warn them of the risk of keeping their cars.
According to CleanTechnica : “Previously, the top two cars ever tested were the Tesla Model X and Model S. So, with the newly announced data, Tesla owns the top 3 spots.”
There are multiple factors that make the Tesla car safer. One of them is that the centre of gravity is lower because the battery is at the bottom of the car. Consequently, it is much harder for the Tesla to roll over. Due to its structure, the frame collapses less.
Electricity is far cheaper than gasoline. You no longer need to spend time and money every week to go to a gas station. You simply plug it in when it is parked in your garage.
According to Tesla, there are 20 moving parts in a Tesla, versus 10,000 moving parts in a gas car. Even if a gas car has only 1,000 moving parts, that makes the gas car much more prone to failures, maintenance and repairs. With an electric vehicle (EV), there is no more need to replace the radiator fluid, spark plugs, engine and transmission oil, gaskets, filters, etc. Even Tesla’s brakes last longer because most of the time, the braking is done by the motors’ regenerative braking.
5. Smartest Car
Tesla cars can park themselves. That alone makes it smarter than other cars.
However, Tesla’s cars can drive itself on the highway.
Smart Summon is not elegant but is making improvements in each software update.
You can control most aspects of your car, including summoning it, on your smartphone app.
On a regular basis, the software in the car is updated over the air with additional features. Recent updates enabled the car to recognize stop signs and traffic lights. A prior update added Netflix, YouTube and some games.
It is hard or impossible to think of another car that improves after you buy it.
This can be a separate reason on its own. However, due to the difficulty of achieving full self-driving, this is a “maybe” and “nice to have”.
This video from Tesla shows self driving, but it is not released to their customers’ cars and it is not capable of city driving.
This is a complex topic and would require several articles to explain. In summary, several companies are racing to build the first self-driving cars. Waymo is the first company to have robotaxis but they are not truly self-driving because they are geo-fenced to a certain district in Phoenix. Some claim that Tesla is in the lead because its fleet of 400,000 cars are sending back videos of billions of miles of driving to feed the neural network, whereas Waymo has millions of miles.
Whoever achieves self-driving will be able to make robotaxis. Whoever makes robotaxis will make billions of dollars and seriously disrupt the world.
6. Governments are an Existential Threat to Gas Cars
Governments around the world are planning to ban gas cars. Here is the list:
China: Ban announced on 2017 but no date set yet.
Costa Rica: 2050
Sri Lanka: 2040
United Kingdom: 2035
China is the world’s largest market for new car sales. It is also the world’s largest EV market.
This is a huge threat to gas car makers and one of the reasons for the very cheap valuations of GM’s, Fiat Chrysler’s and Ford’s stocks.
Governments will force consumers to buy EVs. The leader in EVs is Tesla. Therefore, governments are forcing consumers to buy Tesla.
Tesla’s lead against competitors are in several areas:
Most people drive approximately 30 miles per day, which means that their EV’s range is more than enough, because they can charge their cars each night in their garage. Despite this, most new buyers have range anxiety with EVs. They want to know that they can charge their cars on the road. Tesla has a worldwide network of destination chargers and super chargers, that are years ahead of competitors and are still growing.
Sandy Munro is an industry and car expert, as he is paid to take apart cars to provide insights to car and parts makers. He praises the Tesla car on several aspects and explains why the Tesla motor is superior to other EV motors.
Most car makers spend billions of dollars on advertising. Because Tesla makes a superior product and Elon Musk’s huge social media following, Tesla does not spend any money on advertising. Despite zero advertising, Tesla’s bigger problem is with production (supply), not demand. According to this news report:
54% of Canadians are willing to go electric. 10% of Canadians are certain to go electric. Yet, only 3.5% of cars sold in Canada are electric. Why? “there’s not enough supply to [meet] demand”
Provinces are starting to coerce car makers to sell EVs. There is a LONG runway before all gas cars are replaced. In fact, EVs are still in the “early adopter” stage of the S curve.
Hydrogen versus Electric
Some companies are trying to make hydrogen fuel cell vehicles (HFCV). Tony Seba provides reasons why HFCVs will not be able to compete against EVs:
EVs are three times more energy efficient than HFCV
You need to build a multi-trillion dollar hydrogen delivery infrastructure.
Hydrogen is not renewable.
Friends do not let friends buy gas cars.
Friends do not let friends start careers in declining industries. Read my article about the industries that Tesla will hurt or destroy.
This article explains why I think Tesla is a great business with the potential to seriously disrupt many companies and industries.
This is not a recommendation to buy the stock, especially given that the stock has already had a huge rally in the past eight months. On a short term basis, I have no idea where the stock is going. It can continue rallying or it can drop 50%.
In 2018, my neighbour asked for a stock recommendation. I mentioned Enphase when it was trading at approximately $6. Shortly afterwards, it dropped approximately 33% to ~$4.
I recommended Roku to my neighbour when it was trading at approximately $44. Shortly afterwards, it dropped 38% to ~$27.
In the long run, the stock usually correlates to the business metrics. Enphase is now trading at ~$32. Roku is now trading at ~$130. But there is no guarantee of this, especially in the short term.
After this, there were difficult years, with some that were negative. 2019 was a stellar year. 2020 is starting off with a bang as well.
Thanks to these, my annual average ROI is back to approximately 20%. This is for the period from July 2008 to January 2020.
But I hesitate to mention this because, as I’ve written in “FOLLOW BUSINESS METRICS, NOT STOCK PRICES“, the most important thing to follow are the business metrics of the companies, not the stock movement. But after 11 years, it should be okay to look at the stock movement.
Going forward, this CAGR will change. There will be more negative, flat and positive years in the future.