Tesla Q1 2022 – Unbelievable robotics.

Hubris mars credibility.

• Tesla reported great results but then marred its improving credibility by making unrealistic predictions about robotaxis that it has no real hope of fulfilling.
• Q1 2022 revenues / EPS were $18.8bn / $3.22 nicely ahead of forecasts of $17.9bn / $3.22.
• Profitability was driven by a shift in the sales mix towards more expensive vehicles and a one-time jump in the regulatory credits that it sells to other carmakers to $679m.
• Like other carmakers who are component constrained, Telsa is prioritising more expensive vehicles which carry higher margins which will correct itself when the supply constraints ease.
• Tesla also expects that it will be able to deliver 1.5m vehicles this year compared to the 936,000 that it delivered in 2021.
• Although I think that Tesla still has a lot to learn about making vehicles with luxury interiors, it has climbed the steep learning curve of mass vehicle manufacture well and will clearly be around for the long term.
• This good news was met with a 5% rally in the shares in after-hours trading, indicating just how expensive the shares of this company already are.
• Tesla is trading at approximately 10x 2022 EV / sales compared to the established OEMs who are currently languishing on less than 1x 2022 EV / sales.
• Investors are prepared to pay this outlandish multiple because they seem to believe that Tesla will get over 40% market share of the entire vehicle market globally and because they think that Tesla will dominate the market for robotaxis.
• Here, Elon Musk did not disappoint his fans stating that Tesla intends to mass-produce robotaxis without steering wheels or pedals by 2024.
• He went on to say that he thought that robotaxis would be a “massive driver of Tesla’s growth” which is what underpins Ark Invest’s $4,000+ price target for Tesla.
• However, it is here that I think that both Ark Invest and Tesla are being unrealistic.
• This is for two reasons:
  • First, AI where Tesla’s philosophy is actually handicapping its development in my opinion.
  • Tesla believes that machines should be able to drive cars using just cameras because humans can (using just their eyes).
  • However, what the AI is missing is the grey bit that sits behind the eyes that interprets the light that they capture and here it is going to take a very long time to get this bit right.
  • This is why all of the mistakes that Tesla vehicles (and everyone else’s) make are due to the machine not interpreting its surroundings correctly.
  • Tesla claims that it has solved the machine vision problem but all of the available data (there is not much) and the anecdotal videos of Tesla vehicles making awful mistakes suggest that this is very far from the truth.
  • This is why Lidar helps because it serves as an aid to the other sensors that the vehicle uses and improves the accuracy with which surroundings are interpreted.
  • Mr Musk is correct when he refers to Lidar as a crutch but what he has not realised is that his cars also need this crutch.
  • Tesla’s refusal to use this technology is going to ensure that it does not win the autonomous driving race which I think will not see vehicles on the streets in a commercial fashion before 2028.
  • Hence, Tesla won’t make the 2024 target and when it finally does mass manufacture robotaxis, there will be plenty of others already on the road.
  • Second: Economics: Not being first will also ensure that Tesla’s overly ambitious expectations for robotaxi economics will fall far short of the mark.
  • Tesla correctly (in my opinion) expects that the cost to provide a robotaxi will be around $0.30 per mile but incorrectly thinks that the price will be $1 per mile.
  • This is how it thinks that it will be hugely profitable in robotaxis and is where its long term growth expectations come from.
  • However, I think that robotaxis, like food delivery and ride-hailing, will be a commoditised hotbed of brutal competition because everyone will be addressing this market and Tesla will not be first.
  • This means that the $1 per mile price will rapidly collapse to something more like $0.4 per mile or less meaning that this will descend into a fight to the death where only the biggest and most efficient survive.
• This is why I think that Tesla’s long-term outlook is not even close to as rosy as the bulls think it is meaning at some point the Teflon veneer will crack and the fundamentals will begin to matter.
• I have long since given up trying to predict when this is going to occur and instead avoid all positions in this company both long and short.
• There are much better places to look to invest in electrification and autonomous driving like nuclear power and overly sold Lidar companies.