Scale of Future Tesla Dominance Tricks You Into Thinking It Is Hype

The scale of Tesla’s near term and future dominance tricks you into thinking it is hype. You think that people who are trying to tell you about it are Elon Musk fans or people who have drunk the Tesla Koolaid.

Tesla rise as a stock is similar to when Apple was reborn and went on to crush industry after industry. It is similar to the multi-decade rise of Amazon. Most people did not load up on Apple or Amazon stock during those legendary runs. If they did most did not buy and hold for two decades or more. Tesla is only a decade into its historic rise. You can see the decade long rise. Tesla came out at $17 per share at IPO. It is up over 100 times to $2050. I missed the first 10X and caught most of the second 10X. I will tell you now it is not too late. There is another 10X in the company and as difficult as it is to believe there could another 10X after that.

The Tesla model 3 utterly dominates the luxury mid size car market in the USA. Tesla has very few subsidies in the USA because they used up the federal electric vehicle tax credits. Tesla is beating gas luxury cars. BMW, Lexus, Mercedes, Audi are all getting crushed. Tesla even has broken out of the luxury segment and is outselling Honda and Toyota models in California.

What are some similarities and differences about this Tesla domination? Tesla is making batteries that are cheaper and cheaper. They are making them cheaper by 10-15% every year. Pick your favorite non-Tesla luxury brand. In the USA, let say it was BMW, Lexus or Mercedes. Let us imagine it was 2000 before Tesla. This model and brand are number one in luxury. They have 40-50% market shares. They develop a key technology which enables the engine and drivetrain to get cheaper by 10-15% every year. They can also increase acceleration every year. Instead of 4-5 seconds on the mid-luxury it goes to 3.2 seconds. Other features keep improving. They have the best driver assistance and this keeps improving. It is so good 25% of the car customers will pay $8000 per year for it. This “car company” has $1 billion per year in Artificial Intelligence software sales.

The company lowers the price on the car by 5-10% every year. They initially used the cost reductions to grow margins and to make up for losing $6000 in initial tax credits. The tax credits are gone and they have grown margin from money losing to 26% gross profit per car.

The cars started at $40,000 to 60,000 but have dropped to a starting price of $31,600 with three years. These top selling cars in their class also run on special fuel that is three times cheaper than gasoline and the car has fewer parts and lower maintenance costs.

In five years, they could have a starting price of $26,000. They can introduce a lower range version at $20,000. They can spread to all other categories of cars. They can make trucks, SUVs and other vehicles. They are not limited by size.

Would you say that a better version of a luxury car maker with proven technological advantages could not succeed in the mass market?

The denial response is that other car makers will be able step up and compete. Interesting. How long were BMW and Mercedes the dominant luxury car makers? How long do any of the car makers dominate a category? Top luxury carmakers are there for decades. BMW and Mercedes were there for decades and got joined by Lexus. They pushed out the top end American models (Lincoln or Cadillac) in the 1980s and 1990s and then stayed there until Tesla. Where was the ultra-competitive response from the big American makers?

Toyota rose up and dominated at the cheap and then the mass markets and then the lower part of the luxury class. Where was the response from the other might auto makers to stop their rise? Where was the Prius hybrid killer?

If Tesla builds factory capacity at $4000 per car like they did in Shanghai, then it will cost $2 billion per 500,000 car per year factory.

Tesla has over $8 billion in cash which is enough for 4 factories. This would be 2 million cars per year in additional capacity.

There is a seven seat Model Y that will be made soon and the Cybertruck. An SUV frame can be placed on top of the Cybertruck skateboard of batteries and engines. It is just different seats and a different top shell.

Most of the car makers in the world make only the frame and body of the automobile in their own factories. Almost all other parts, from the steering wheel to the radiator to the seats are produced by contract manufacturers. The car manufacturer’s factory assembles the outsourced parts into the frame and body.

On battery day (Sept 22, 2020), Tesla could announce $100 per kwh batteries. This has long been the level where the US Department of Energy and academics have said would be where electric vehicles become cheaper than gas cars without subsidies. Tesla and its major battery suppliers have already been talking about $80 per kwh batteries. Tesla batteries and drive train technology is ahead of other car makers. Tesla is extending its lead. The other car makers already pay Tesla a hundred dollars for each of Tesla’s cars to avoid penalties.

Tesla with dominant Maxwell dry cell batteries and drive trains could sell other car makers the batteries and drivetrain. The other car makers are already buying almost all of their parts from other parts makers. Tesla could make $10,000 in profit from all the car makers that contract with them. If we want to be more conservative let us assume that it is $5,000 for the mass production cars and only $10,000 on the highend.

If Tesla does this for half of the cars produced in the world, this would be 50 million cars per year. This would be $250 billion per year in profit. This would be about 5 times the profit of Apple. This would be pretty good for only the car business.

Tesla’s newest car batteries and drivetrain are 15-40% more efficient than competitors. The Hyundai Kona at 6.7 efficiency ratio is 15% more than the best Model 3 and Model Y. The Audi e-tron is 40% less efficient than the best Model Y and Model 3. The Model S has not had a major upgrade and redesign since it was introduced in 2012. The Model S is still 3% more energy efficient with its batteries and drivetrain than other competitors. It is 27% better than the Audi e-tron. Eight years… But do not worry any year now… real competition. Make a car that can compete on efficiency, performance and price. Initially, it will likely be at loss for every vehicle that is made. The real competitor will then have to scale and grow profitability.

The alternative is for the CEO’s of the other auto companies milk profits from SUVs and Trucks for two more years while they collect about $30 million per year. The CEO then retires rich while they allowed their companies to fail. The CEO knows that trying to come up with capital and research spending of $10-30 billion in an attempt to catch up had a low chance of working. They have to keep their dealer network happy. The dealers make money by overcharging to service and maintain vehicles. Tesla has the upper hand in technology, volume of sales for the new vehicles, and now they have more financial resources. If I were a regular car CEO, who’s claim to fame was being handed a successful SUV or pickup truck line and then not blowing it for the 12th or 13th iteration then I would know that creating and launching new technology is beyond me and my company.

Tesla Technology

Many people say that Tesla is only a car company.

They make their own custom AI chip and they have over $1 billion in AI software-hardware sales. This is the $8000 per car full self driving package.

They have a data driven insurance product. They take the driver data and price their insurance using individual driver data.

Batteries and drivetrains are technologies. They have made hundreds of millions in battery storage sales to utilities.

Battery day could announce battery production breakthroughs or business breakthroughs to radically increase battery supplies. Tesla has to keep producing more and more batteries. Ten times the batteries would mean ten times the car units sold or five times the car units sold and the rest in battery storage for homes or utilities.

Tesla has introduced software to let Tesla car buyers act as their own utility. Electricity pricing is variable in many locations. This means a 100 kwh battery could charge up at $10 cents per kwh and sell back to the grid at $25 cents per kwh. The 15 cent per kwh price difference would be $15 per charge. A million mile range car would have 4000 charges. 1000 charges used for electricity trading would be $15,000. 2000 charges used for electricity trading would be $30,000.

SOURCES- Ford, Wikipedia, Tesla, Tesla Daily, Solving the Money Problem
Written By Brian Wang, Brian owns shares of Tesla

55 thoughts on “Scale of Future Tesla Dominance Tricks You Into Thinking It Is Hype”

  1. I was wrong on the 2020 Tesla annual production number prediction. I did not predict COVID-19 in 2019. I did call for draconian quarantining in late January 2020 based upon the Hong Kong Hospital report. Some people in the comments asked why I was writing so many coronavirus article in Jan, Feb, March, April. Other media was saying it was less important than the regular flu. Was I a "fan" of Coronavirus? Was I scare mongering about it? Was I clickbaiting about it ? Was I emotional about it? I researched the heck out of it, just like I have researched the heck out of the future of energy and transportation and factory production. I researched space and internet and cloud. I can say Bezos is killing it on cloud, internet and fulfillment. I can also say that Blue Origin is a joke compared to SpaceX. No orbital launches vs 80+. I can say that ULA are not just a joke but corrupt. Taking $1-4b per year for 30 years and delivering no super heavy launch. Regular stock investment wisdom is you cannot consistently pick winners and losers. We are now in a time where big long term winners are obvious and many losers are obvious.

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  2. BTW: When my predictions are right. I tend to come back to remind people that I made the prediction and I was right. Thus I can say from last year and multiple times. I was right about Tesla. I was right 10X from last year and 5X from early this year. If Tesla Q3 car numbers come in at 140K and Q4 at 190+K and Q3 net income is $850+M and Q4 at $2B+, I will come back to say. I was right and it was probably a good idea to have listened. Based upon those things happening I would be surprised if the company value was not $700B+ Jan-Feb 2021. But there is always the chance of surprises. Big second wave of COVID, some other global business shock. Take your time. I would be curious to know if my quite specific predictions happen.. if that changes your mind about any of it.

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  3. You seem fairly enlightened. Not like the CNBC talking heads. At what point do traditional investors looking at the old economy and old companies say it is not a dot.com repeat? The thesis is that pretty much only new tech is winning. Just as Walmart killed the mom and pop stores and Barnes and Noble killed the old bookstores. Walmart killed Sears and KMart. There was no reversal of those changes. Amazon is killing Walmart and other retailers and expanded beyond that retail in to cloud and fulfilment. 50% of the US stock market are the big tech companies in market value. I say not a bubble but a tech lead that are also monopolies in major segments. For Tesla, I am not focusing on the FSD and slightly longer termfor the next 8 months. I am looking at car production execution, factory build execution, balance sheet and cashflow and near term cost efficiency improvements. 26% auto margin and then project the cars per quarter out 6 quarters. What is your calc for net income each quarter? If it is $2 billion net income in Q4 then what is the share price?

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  4. I am not out convince everyone, but I am trying to help my readers who are willing to listen. Those who did listen and consider the data and acted upon it are up about 8X to 10X from last year. I am fine that there are a lot of doubters. If there were not mostly doubters and shorters then there would not be the large opportunity. Amazon and Apple also had massive 20 year stock epic stock rises that people who used regular stock analysis could not understand. If my Tesla information is correct then the various predicted events will reveal themselves over the 25-200 days. Starting with Sept 22 battery day, Oct 1 Q3 production-delivery numbers, end of Oct earnings, etc…

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  5. I am not emotional about it. I am basing it upon the auto margin (26% and increasing) and the production numbers for Q3 and Q4 that I am using for a simple pro-forma income statement. I do recognize the technological lead in what Tesla is doing. The Octovalve for superior heat management and on the magnets in their batteries where they double the field (Halbach array). Tesla stock is fluctuating all over. There is stock manipulations happening with it. Hedge funds buying in advance of index funds.

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  6. One more thing. I've NEVER advocated shorting TSLA nor have I. I've NEVER said I would not buy TSLA. I use momentum investment strategies as a significant part of my investments. You can guess which kind of stocks that puts me into. I've made money on TSLA. But I understand the difference between the company and it's stock. I don't like Apple products for multiple reasons, but I've made money on AAPL. Musk making billions has NOTHING to do with you nor your love for him. I don't like him and I let that be known. It's a sign of immaturity when a person can't separate emotions and what is going on in front of them. It's like those who got out of the Market because they hated Obama or Trump. In both cases they were wrong.

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  7. I remember in the 90s how it didn't matter if a dotCOM had any sales, it was about eyeballs. Robotaxi may or may not appear. Batteries may or may not come down to a point in the next few years to make them truly economic. Musk said it was the factory that needed improving, and he ended up building Teslas under a tent in a parking lot. The Tesla plants went backwards to more manual work and less robotics. Some day these things may happen, they just aren't there yet.

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  8. Seems like there are a lot of 'tricks' that all the dumb people can't see about Tesla. Wish I were so enlightened. Some day, just not today.

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  9. Never said I was laughing at anyone. We are talking about the vehicle, not the stock. I said buy the Accord and INVEST in the TSLA. And yes, Tesla is full of fanboys. Average car gets driven around 12k miles/yr not 20k. Others have looked at TCO and there is not a savings vs a comparable car like an Accord, because you have to pay so much up front. What about time? Wait times on chargers and sometimes just getting to a charger are huge investments of time. What about that? Convenience is not a big selling point for Ts. Many cars today go 10k miles between oil changes, not exactly a huge cost there, maybe $50. You can fanboy your Tesla ownership all you want. I have 2 Model 3s in the family and 5 model S's with friends. I've seen the issues up close and personal. These owners wave off the hassle, because they are believers. That's fine for them, I'm not a believer in EVs yet. They are a drag on the economy because of the subsidies and require a huge change in lifestyle due to charging and the need to plan out longer trips due to the lack of stations. Not something I want to do. I think they'll be there in 10-15 years, just not today.

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  10. Tesla's are having major problems and tons of repairs. Horrible quality issues. They are under warranty, but you have a massive wait time to get them fixed. So, if that's your plan, have at it.

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  11. Tesla is priced as if it will be the only car company in the country (and a lot more) . One big limiting factor that I don’t see people talking about is the fact that few people want the same car as everyone else, especially luxury car buyers. As more people own the car, it will become common and lose any cool factor associated with it.

    Nobody is going to charge/discharge their battery for a few dollars of profit based on arbitrage of local electricity prices. Until someone can concretely describe how Tesla is going to make all this services/software money, the valuation is outrageous, and people buying into the bubble will be crushed.

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  12. its not about guessing the future, its about gauging people’s values by introducing extreme scenarios that emphasize the different positions: World Win (EVs > 50% of all cars by 2040) -or- Tesla Win (Tesla has > 50% of all EVs by 2040). You can’t have both and you shouldn’t be rooting for the 50% Tesla scenario – because that means very low EV numbers – no other sane view of the way the auto industry works supports any other way.

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  13. They are not one in the same… they are not nor are they based in anything beyond pure guess work
    why not 100% EV and Tesla bankrupt or 20% EV saturation and Tesla all of it.. ?? any permeation is just guesswork
    Tesla have consistently said about the big picture of world EV saturation and it has also persistently said it will share its IP to achieve that.
    That is the important big picture no straying.

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  14. I compared the Model three to the BMW 3 prices. Never said anything about speed, and the roads all have limits anyway. Learn to read. I also called Porsche and Polestar PREMIUM cars that happen to be electric.

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  15. the problem with this analysis like pretty much all the analysis waiting for the down fall of tesla. Is they all assume they are just a car company. Not sure if a car company has ever had a legitimate energy business. or possibly a robo taxi business. I am on the fence about robo taxi… but I am pretty confident that if robotaxi will be built with deep learning tesla will be the one to do it. Since they are using google’s search engine improvement model, where the customers do the work.

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  16. this is an over exaggeration but it isnt false. VW is an exception because of diesel gate and the fact that the EU will be killing ICE cars through regulation. The catch 22 old OEM’s have is they need to canabalise sales from the thing they can make profitably for the thing they cannot make profitably. VW and GM made good first moves in signing deals to build dedicated battery factories for their cars. But look at the capacity planned. They are less than if not about what tesla has in nevada which has allowed them to do less than 400k cars a year.

    I see the attempts by automakers to build true competitors. Their problem is their scale in ICE will not buy them anything. They have to build an entirely new supply chain. One that is immature as the most mature implementation of that supply chain is vertically integrated into Tesla. It also doesnt help that OEM’s have to deal with their dealer network. If you build an electric car right there is no regular maintenance to make money off of. That eats a huge amount of the dealer profit.

    Then there are their investors. Dont get it twisted their stock owners are really just their for their dividends. What do you think happens if the OEM’s loose the ability to kick off dividends on their stock? The market doesnt care, they will just go find somewhere else to put their money.

    So the problem isnt can OEM’s catch tesla… its How much pain can they survive in order to catch Tesla. There are true real moats to compete with tesla.

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  17. The energy cost on electric is misdirection. Go with the Accord example. You are paying a ton for batteries and low cost electricity. I get a low cost gas tank and put relatively expensive gas in it. Take the opportunity cost of those dollars. Buy the Accord and put the rest in Tesla stock. My time has a value too, and the convenience of driving a gas car makes EV to onerous to drive. Someday EV will get there, just not today.

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  18. And? My 911 can go fast too, but there is a thing called a speed limit. And, you can only go really fast for so long, then you juice out, wait in line for 30 minutes, plug in for 45, then head home.

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  19. This is unclear. With an H2 home-fueling system or having a system in a residential/ public parking garage has been debated for safety for years – probably a propane side effect – though, in Japan and a few other countries H2 as a home heating fuel is significant. My thoughts on H2 success lie in its ability to power heavy vehicles before batteries get up into that demographic. Not sure what the possibility of having success in H2 range-extenders/ extreme temp starters as something that can be bundled with a 400-mile battery. In theory, I agree in co-developing this tech.

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  20. Cool now do Taycan vs all of Tesla on a curvy road.

    I’m old enough to remember when American Muscle Car Fanbois would talk about nothing but the quarter mile timings as if that was the only metric. In terms of handling the Taycan beats everything Tesla has.

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  21. “The alternative is for the CEO’s of the other auto companies milk profits from SUVs and Trucks for two more years while they collect about $30 million per year. The CEO then retires rich while they allowed their companies to fail. The CEO knows that trying to come up with capital and research spending of $10-30 billion in an attempt to catch up had a low chance of working.”

    This is nonsense. The CEOs of Toyota, VW, Mercedes, BMW, Hyundai, Honda, Mazda (and charitably GM and Ford) aren’t going to go on an extended stay-cation and let Tesla eat their lunch. (Chrysler, Nissan sure). CEOs do what the board tells them to do and the board does what stockholders generally want. Stockholders do not want their stock to go to zero.

    VW for example has already sunk $10 billion in to electrification. I think you are reading far too much in to automaker silence when automakers are keenly aware of the Osborne effect.

    https://en.wikipedia.org/wiki/Osborne_effect

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  22. I’m not sure if i should smile slyly or disguise a pitying frown when the follow-up article to this one, in five years, shows that Tesla has only double the sales volume but 15% of the EV marketshare, with a market cap value increase of only 50%, but so does every other major luxury car-maker with a few EVs, which will then be a rant saying how people are i6iots for not buying Teslas when the specs are vastly superior. Mark my words: total non-SUV/p-Up Tesla sales: 2024 – 800,000. Tough take-away: Tesla will soon just be another EV maker, better specs or not. Life Lesson #201: Yes, People are I6iots and make decisions against their own best interest.

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  23. Didn’t know Accords could do 0-60 in 3.2 seconds. And it’s not just straight-line acceleration. Model 3s do well at the track too; in fact, a 3 recently beat a Porsche Taycan, which costs three times as much.

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  24. Some of it is hype. I don’t think the robo-taxi will work any time soon. Just focus on what Tesla is doing in the near term like three new factories which should double their sales. That is at least worth a 2x.

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  25. I think we may have strayed from the Important Big Picture. What is a better world in 2040? – 50% EV saturation with Tesla 5% of that -or- 20% EV saturation with Tesla 50% of that. One will have a larger market cap. One will have contributed an important first-start and accelerated a transformation of a stagnant tech and likely increased world GDP significantly. They are not one in the same.

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  26. Other countries governments would allow their companies to pirate/copy/appropriate the tech TESLA developed if the risk to their national well being was considered to great. We already see that to some extent in various fields, i.e. pirated content can be hosted with less to no risk form some countries depending on what it is, copyrights and patents are treated differently and have different times, etc.

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  27. Using the national average per kWh of $.12 is a bit misleading, what with the Tesla stronghold of “California of the rolling blackout fame” pricing in at $.187 per kWh average, tabulated before the grid issues presented.

    Does adding additional demand to that electric grid equal “Sky is the Limit” pricing? NG fueled turbines were local, versus imported as in the hydropower which became not available this year from the NW corner running dry. 

    Also, remember that every transit into and out of a battery/charger system extracts a 10% to 15% energy loss penalty from the electrical origin point, similar to pumped hydro losses. Keith Lofstrom open-sourced his kinetic storage system “PowerLoop” so anyone could build on it. Where is the peak-leveling technology?

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  28. Acceleration and fun driving experience? Prius has trouble getting the power to go at full speed up moderate slopes. Tesla’s have best acceleration around. Many people have been paying for more horsepower and acceleration and handling.

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  29. Toyota Prius and Honda Civic have had lower TCO than every other car, and yet have not dominated the car market. People take multiple variables in to consideration.

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  30. Dominance rather than equilibrium is what some people, especially men are capable to absorb. A person like this who focuses Tesla, will not be able to perceive and properly judge the whole market of electric cars.

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  31. Do we think that the batteries will not continue the trend of getting cheaper? The vehicles may look the same on the outside. This is another trick. It is like comparing the steam engine trains vs the diesel trains. It is like seeing the light of kerosene lanterns against the light of electric light bulbs.

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  32. Do you drive the cars that you buy? Because it is not just the price driving it off the lot. It is the price and the cost of operating.

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  33. 1. So you could have made this same statement back in 2016 and 2017. Then you miss out on a 10X move. Now you remain in denial. So you will miss another 10X move. Laugh at the “fanboy” owners of Tesla shares,making pitiful 100k , millions or laugh at Elon up $70 billion.
    2. How much does a kwh cost ? 12 cents in the USA. Drive 20,000 miles per year. 26 kwh per 100 miles. $3.12 for 100 miles. $2.52 per gallon. 3 gallons for 100 miles for 33mpg. $7.56. $624 for 20,000 miles per year vs $1512. Tesla cars require no traditional oil changes, fuel filters, spark plug replacements or emission checks. … As electric cars, even brake pad replacements are rare because regenerative braking returns energy to the battery, significantly reducing wear on brakes. $1000-2000 per year savings. $24K for a Honda Accord. 4-6 years cheaper to own Model 3 vs Accord. https://www.google.com/search?client=firefox-b-1-d&q=average+kwh+cost+usa

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  34. Almost forgot about battery day. Put my cyber truck pre-order in this afternoon. Who knows, maybe I’ll even charge it with fusion power some day and not fossil fuels.

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  35. I would take a Model 3 over a BMW 3 series any day. I don’t like spending a ton at dealers for repairs. By 100k that BMW will likely cost you 5-10K in repairs and maintenance alone. I have driven in tons of BMWs and a few Tesla cars as well and the Tesla is better. Most of the bad talk about Tesla has mostly been about minor finishing details and very little about actual failures in major hardware. Reliability wise I have heard stories of Model S cars lasting 500 miles without issues. They had some minor stuff with the S for a year or two after they first released it and now it is probably the most reliable car in the world. That can be said of most major car makers, you really don’t want to be the first to buy any new model that is released, stuff always crops up. Recalls are common in the automotive industry.

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  36. Hype, I will go with hype. A Model 3 is a BMW 3 series price with a Honda Accord level car. Why would I pay a premium for that? Porche, Polestar are premium cars with premium prices that just happen to be electric. See the difference fanboys? I found this latest video of the Taycan beating the Model S in a few races. https://www.youtube.com/watch?v=ItCGU7BTBv8

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  37. Tesla is ELECTRIC cars, not battery cars. They are protected from H cars by simply changing over to H, if that becomes dominant. And they are cozy with a company that can get raw materials from Space. Sweet!

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  38. I don’t feel like disputing any of the numbers or the underlying assumptions for the extrapolations, but the car market is a very different animal than computers, personal consumables, and other high tech sectors. Apple is unique in that they are not first, best, or cheapest at what they sell, but they do it ‘right’ and have an insanely good supply chain/app store (good deals or good bullying??) AND…AND.. they command a bizarrely pseudo-religious following of consumers that seems to defy any kind of categorization – yet they still sprawl and spread in unending success – the cachet being almost supernatural. Tesla, on the other hand, likely deserves what is claimed – but ‘deserve’ has nothing to do with real life. The auto industry is an uncountably large phenomena that dips into organized crime, national subsidies, widespread union infection, bizarre consumer choice values, and inconceivable sales/ dealership dynamics. This is the rabbit-hole. There is no way to dominate it for the powers that be would defy such monopolization more than any other industry – except maybe construction. Look to Asian hyper-conglomeratized super-corps such as samsung – disintegrating

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