Another Day Another fun story about Tesla And that's what we're going to talk about today. Not just are we going to talk about the fun story and The Intercept leaked footage on Tesla, but we're also going to talk production numbers because there's a big change and I don't know why my accent is changing, but I do know that it's another day, which means you need another reminder to check out the programs on building your wealth down below because nobody else does the fundamental analysis live streams that we do on YouTube at least nobody that I know. Anyway, let's get started with the video. So the first fun story of the day regarding Tesla has to do with the following surveillance footage obtained by The Intercept of a Tesla abruptly stopping on the Bay Bridge resulting in an eight vehicle crash that injured nine people, including a two-year-old child.

Just hours after Elon Musk announced the new Full self-driving wide release for the beta. There's the Tesla You can actually see that lane change and then the first rear end and then then the second one stops and then a pile up occurs right here. We'll go ahead and play that again just so you can see it here. It looks like we get the Tesla coming in lane change right here and all of a sudden a Slowdown uh and and a stop here and then of course uh, a pile of wreckage thereafter which quite interesting you could see the driver is is clearly not incapacitated because well, he's getting out of the vehicle.

This is a 77 year old uh driver who indicated that he had the vehicle set to full self-driving We don't actually have any kind of data dump from Tesla yet on whether or not that was true, but let's talk about Phantom breaking because I can finally say I have Tesla full self-driving and I too have experienced the Tesla breaking at odd times, especially in, uh, like, near edges. I've noticed like when you're near sort of a curb to a plaza or maybe like a wall or a boundary. and usually if you're paying attention, what you do is a Tesla driver is you hit the gas. you're supposed to be paying attention at least.

And anytime I've seen this happen I've reacted before the Tesla has slowed down any more than like two or three miles an hour. It's not like it Slams on the brakes. it's usually just it. It's more of like a Tesla foot off the gas thing that happens and then the regen breaking kind of slows you down and that's the moment where you're supposed to hit the gas and kind of accelerate which clearly doesn't happen in this video.

So there are two potential scenarios here in my opinion. Uh, number one. either full self-driving wasn't active and I don't know, maybe the guy made a mistake here. Clearly okay, that's that would be scenario number one if autopilot was active and this accident occurred.

Obviously, we're gonna get the crazy fud stories all over about how unsafe it is and how the government needs to regulate these vehicles despite the fact that Teslas are some of the safest vehicles on the road even as measured by The Institute for Highway Safety which you know generally government bodies and government Associated bodies aren't too fond of Teslas Anyway, yeah, Teslas are still ranking in some of the highest safety levels in the world for crash tests. On top of that, you have a four-time fewer accident rate for vehicles with autopilot enabled. But you do get people with autopilot on and autopilot sometimes does some funny things and you got to pay attention. I just pulled out of a super charging spot enabled autopilot and it may have you know.

kind of cut the corner a little sharp and ridden over the curb and I'm like damn, I should have known better. You know, like I'm not blaming the car, it's it's a beta, it's it's not perfect right now. I'm not just trying to fully defend Tesla here. I think Phantom breaking is really weird I I don't know why it happens I think uh, the Algos obviously still have learning to do and this is why they're on a Beta release.

But I also realized that the Tesla can do some funny things and so I'm ready uh to to accelerate when it does those funny things. so that clearly did not happen in this case. Instead, the driver allowed the vehicle to come to a complete stop which is insane in my opinion. I I have driven a Tesla and driven autopilot in Tesla since Uh.

2017 and I've never let the vehicle on essentially a Motorway you know, 55 mile an hour Motorway here I've never let the vehicle just come to a complete stop. It's just a little odd Lane change and just completes I I Don't know personally I don't get it. Uh, but whatever. So that's the Tesla fudge story that's getting a lot of views right now Tesla Haters are having a field day about it, but at the same time we're getting news that finally Tesla might actually be looking at increasing production the way I projected Tesla wood in 2022..

Unfortunately, I made the projections in about April of 2022 and I suggested and indicated that Tesla's probably going to figure out their manufacturing model with Berlin and Texas and then unlock what we call copy and paste. Now that overly simplifies what Tesla would actually do. But basically the copy and paste idea is you take all of the experience you have of building these new grand gigafactories Berlin and Austin and you multiply that around the world. We recently heard that Tesla is considering their expansion into to North East Mexico just a few hours away from Giga Texas and could be the site of a new low-cost a Tesla vehicle that could be produced by Tesla especially since the average hourly wage in Northeast Mexico is only about three dollars and forty cents per hour now.

I Know initially a lot of people think oh my gosh, that's terrible Tesla's going to take advantage of cheap labor When the reality is, if Tesla moves into this Automotive area where existing Legacy auto manufacturers like Mercedes BMW 4gm are already using that labor. When Tesla comes to the area, you'll actually probably see wages increase to the benefit of locals in that area. But generally people who complain on the internet don't have economic backgrounds and they don't like to think that way. But anyway, this is a good thing.

But on top of that, now we have reports that Tesla is considering not only multiple different expansions, but is also potentially looking at a new plant in Indonesia. Now, this is actually phenomenal. Tesla is seeking to is close to sealing a preliminary deal to set up a factory in Indonesia. Now remember, a lot of people are moving.

they're manufacturing out of China not only because of the uh, unclear sort of political regime that you can often have as we've realized around covet policies and forced lockdown policies, but also, let's be real here: labor is cheaper now in places like Indonesia and India How Wild is that you think labor is cheap in China wait until you go to some of these other countries is actually quite remarkable. and again, that is to the benefit of locals In that country, you're ways raising wages across the world. But anyway. Uh, this this area is great for key battery materials and the plant could potentially produce one million vehicles per year in line with Tesla's Ambitions Really to to exceed their Global uh capacity in my opinion? This, by the way, we start getting talks about new plants Indonesia Mexico or whatever.

It's a sign that Tesla's looking past the near-term flood demand dynamics of of being in a recession, right? which has actually been hurting a lot of people's wealth right? Stocks, down, real estate falling. Uh, the the disaster of a depression that's probably happening in China You've got a huge decline in wealth across the world. and unfortunately that is. That is not just hitting uh, poorer individuals, but it's also hitting wealthier people.

And interestingly, it might actually be hurting wealthier people more because where we're seeing the biggest pay bumps or in Blue Collar work right now where you're seeing the most layoffs in White Collar work pretty wild. Uh, and that could affect Tesla Demand Right now those We Believe are short-term catalysts, right? Like for example, in Singapore, we have reports that Tesla is continuing to uh, offer discounts. Five thousand dollar discounts for people who trade in an existing ice vehicle. Uh, which is interesting because I wonder what Tesla's going to do with a used inventory which is like, in my opinion, catching a falling knife because used vehicle prices are plummeting.

Also offering a five thousand dollar credit to help people cover the cost of the certificate needed to operate a vehicle in Singapore They're also now offering free wall connectors to free uh or to batteries. These are all things that you know unless input costs really start plummeting. Yeah, Tesla's margins going to get squeezed and uh, you know Tesla is thinking about expanding at the same time which then potentially reduces free cash flow. But it's interesting because if Tesla really is double and tripling down on these capacity expansions, it makes you think that Tesla must clearly have a path for so much demand in the future or new pricing strategies that are going to induce that new demand in the future in order to keep these factories busy.

especially if a lower cost Tesla comes out and that cyber truck finally comes. which who knows when that's coming. Although the Giga press was just delivered to Uh Giga Austin where the Cyber truck is expected to be built. but anyway, the discussions include plans around multiple facilities in the country serving different functions across the production and supply chain.

A deal hasn't been signed and the agreement could fall through the people I said not asking not to be identified Indonesia has long courted Tesla last year striking a 5 billion dollar nickel Supply agreement with the car maker in an interview in August with Bloomberg News Uh, someone an individual here said that the country wants Tesla to make electric cars there not just batteries and is willing to take the time to convince Mr Musk to see Indonesia as More Than Just A supplier of resources. That's a fancy way of saying. we will give you incentives I Don't know what's with the German accent today? I'm sorry. But anyway.

Uh, musk. Representatives didn't immediately respond to requests for comments. An Indonesian Factory would be Tesla's third outside its Home Market in the U.S joining Shanghai and Berlin Indonesia offers a gateway to the Southeast's 675 million customers. It's a tough market for Global automakers given affordable cars usually priced below 20 000 making up the bulk of sales.

And this is the thing where you've got a fight between Tesla and Byd right now. right? Byd? Look I I people get mad at me when I say this. but it's just. it's just the truth.

Okay, Byd brings 1.45 of their revenue down to net. Okay, think about that. You make a hundred dollars of Revenue at Byd. How much do you bring down to the net? 1.45 How much does Tesla bring down to the net without U.S Electric Vehicle credits.

They bring fourteen dollars and fifty cents to the bottom one. That's 10x Byd. It's remarkable. It's absolutely remarkable now.

of course, A lot of talk about Byd. In fact, let's go ahead and take a look at this Bloomberg opinion piece. you can get these at Bloomberg.com by the way. in case you're wondering where they're from, just Bloomberg.com All electric vehicles are not the same, nor other companies that make them the favorite pair these days is Tesla versus Byd.

So let's actually compare a little bit. Let's start with the basics in December Byd sold 235 000 vehicles in China of those. Basically half of them were plug-in hybrids and the rest were battery electric vehicles. Hybrids, by the way.

Very expensive, right? Low margin. You've got two basically power trains going into the vehicle. It's pricey, it's expensive, and this is probably why their margin just isn't that great. Which, going into a recessionary Time Now wonderful.

Uh, Byd sold over 900 000 of each type of vehicle in 2022. Tesla Made a 55k in China last month with a total of 700k for the year. Essentially, they compete in what, uh, investors would call product segment, a slice of what the company does. Here's the thing: Hybrids and Byds run on fundamentally different Technologies And Powertrains.

The cost of the car manufacturing and owning it changes, as does the choice between efficiency raise, and performance. Hybrids can be as much as half the price as well, but that's where the problem comes right. Think about that: Hybrids More expensive to maintain than all electric vehicles. Yes, hybrids might be half the price, but that also means a disastrous margin story for Byd, Which all you have to do is go to the investor relations page of Byd, and you'll see it.

Very simple: This is public information, the merits of One Versus The other offer an entirely or is another an entirely separate debate. Many critics say plugins aren't even Green Tea Green cards. They're more like a wolf in sheep's clothing. However, then you do have Toyota that absolutely loves hybrids.

And basically they make this argument that hey, well, hybrid is still better than no electricity usage at all right now. You also have very different business models between Byd and Tesla goes on. Uh to say this opinion article. Byd started out as a battery company that now makes cars, which is the opposite about Elon Musk And Byd has a firm grip on their supply chain and has moved more towards a vertically integrated supply chain much like Tesla like securing heaps of raw materials.

Elon Musk does talk about owning lithium mines, but Tesla is still reliant on its long and deep network of suppliers in China Now so far, this doesn't sound like the best piece for Tesla versus Buid, But there's an interesting point here. They argue that Byd is basically going from less expensive cars to more expensive and Tesla is going for more expensive to less expensive, right? You're seeing price raises of Byd price cuts at Tesla. The margins are terribly different. We've already talked about that, and that you could actually see margin compression on both sides, right? Realistically, Tesla's margin could come down and Byds could grow.

Maybe to depends how the recession goes. But here's an interesting piece that I really like I'll hide my self for it so you can see this full paragraph here: Tesla seems to have taken advantage of the weakness in prices for some raw materials. this is good and components that have been Sky High in recent months in China it does not have Supply locked up the way Bydu does. Now that might sound like a weakness, but it could actually be a positive thing.

Why could it be a positive? Well, if Tesla doesn't have Supply locked away, what does it mean? It means that Tesla If a market price is for components and commodities comes down potentially and and these specific products aren't locked away because we know some of them are locked away, it means Market or Tesla can take advantage of market prices today rather than waiting for contracts to roll off every six months or whatever. Meaning, there's a lag in when they'll actually be able to pass through lower costs to lower prices. If they don't have Supply locked away, they're actually taking away or taking advantage of these lowering prices. You could actually see margin preserve the Tesla Now maybe that's just hopium, but it's an interesting comment.

Lowering vehicle prices potentially indicates an intent to tap the rising demand for electric vehicles tapped below 300 000 Yuan and D stock sales are expected to grow 50 in tier 3 and tier 4 Chinese cities where incomes are lower. Now, it's important to compare 300 000 to a U.S level. It works out to about forty four thousand dollars, which is basically suggesting that we want to simplify the costs for the model 3 and get to a more mass Market approach while Byd tries to focus on higher end. Now that'll be really interesting because you wonder how much of a selling pitch is FSD going to be well with fun stories like the one we started with I Don't know, but anybody who's actually using FSD looks at this and goes man, how could you ever buy a car again without full self-driving My wife is somebody who's never wanted a Tesla but after she saw FSD she's like wow, this kind of makes me want a Tesla I was a blown away when she said that.

So fascinating. But it's not the last story of today. We've got a lot of information. In fact, take a look at this.

Tesla considering a 775 million dollar Texas Factory expansion. Now, what's crazy about this is Elon Musk has said previously and this is great. Uh, that they plan to open 10 to 12 new factories to increase production. That's what I predicted a year ago I was just about six months early in that prediction before Elon Musk actually said it.

Now that's great. Uh, in the long term, not so great in the short term. If you make predictions too early. uh, because you could read allocate Capital inappropriately.

But that's okay. everybody ends up making mistakes. But let's get the details of this: Factory expansion. Take a look at the details which electric broke down? Well, the electric hasn't been the most bullish on Tesla lately.

I will be telling you. But anyway, four projects include: Ace almost 700 000 square foot facility called Cell One that would be built outside of the Austin Gigafactory. Folks, this right here is like a turn on to me. Okay, construction is expected to start January 23rd.

Wasting no time, let's go I Love that That is what I'm talking about. The project with the next largest footprint is the Drive Unit 400 almost 20 000 square foot facility. Construction is expected to begin Feb Six, a cathode facility expected to start production Jan 30th Completing this year, most of these completing within a year actually Feb 12 2024, Jan 15, 2024, December 18-23 and then another smaller sort of cell test lab. really just the size of a house here, completing in about August These are based on permits, right? This is really exciting I Mean to me, this is a suggestion that regardless of the short-term nonsense that's going on with Tesla Tesla's saying look, we are so confident we are doubling down and we're going for that copy and paste model.

Imagine Now Tesla goes forward and within six months you have the Mexico facility announced the Indonesia facility announced. although maybe those are the same rumor right? Like maybe Tesla's picking between the two TBD uh and then potentially you have what it already looks like. you have the permits for this uh Texas expansion while they're still ramping. Giga Texas Oh boy, like the numbers for Tesla are just getting so gorgeous even if margin.

Falls This is a company that as long as it could sell Tesla's cheaper which I think it can especially as as they are by far and away three to five years ahead of the competition and self-driving nobody's got self-driving like this. I mean you even look at like some of the Mercedes Eqs Drive trains Uh, really, really great. Vehicles Powerful vehicles, well-designed vehicles, quality vehicles. but you're talking about nominal amounts of roads that are mapped nominal access to actual self-driving technology.

It's a problem. and so this is where what I like to do is: I just look at. hey, you know if what? what if we reduce prices and reduce margins at Tesla and I've done this before I've done sort of, uh, these worse, worser case scenarios where maybe we produce 4.2 million Vehicles by 2025. I dropped the revenue per vehicle by five thousand dollars on top of dropping the revenue per vehicle by five thousand dollars.

I also dropped the margin to 20 seven percent down from thirty percent. And then what I do is I include zero percent for FSD here. Okay, no FSD upgrades I'm still sitting at a price target of 515 uh in 2025. Now I know as soon as people see a 50p ratio, they're like oh my gosh, that's so ridiculous.

This is calculated based on at least a 30 growth rate at Tesla uh and then basically a PEG ratio of about 1.6 1.7 which is pretty reasonable. Basically, what you do is 50 divided by the growth rate. It's about a 1.67 x PEG ratio. That's how you do this.

As long as you're growing by 30, 1.67 times Peg is totally reasonable. Now if that growth rate Falls then obviously the future P E rate will fall right. If the growth rate for a company goes down to 20 and you go to a 1.7 or 1.6 times Peg Sure, the P E ratio should only be 32.. You know the P E ratio right now for Uh for the S P is is 18, which actually implies about a 10.7 percent growth rate for all the companies in the S P 500.

That's a rip-off We could actually be in an S P 500 price bubble right now because I expect EPS to grow maybe three percent for the S P. Broadly, maybe we'll see what happens obviously through this recessionary environment. But anyway, these are some of my thoughts on the latest on Tesla. Thank you so very much for watching and we will see you in the next one.

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