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Comment by legitster | Hacker News Reader

I'm not sure where you are getting those numbers from. Ford had $37b in revenue Q4. Tesla had $16b.

Tesla is an impressive company that's managed to finally be profitable. But currently their market cap is higher than all other auto manufacturers combined.

> Everyone else is losing money on their EVs and can't make them in volume production, can't find the batteries for them, you do the math.

That's the thing, this space is getting incredibly crowded this year. Kia/Hyundai, Ford, and VW are all putting out very impressive mass-market EVs that are selling like hotcakes.

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> I'm not sure where you are getting those numbers from. Ford had $37b in revenue Q4. Tesla had $16b.

Tesla makes a 27.4% gross margin on that revenue though, while Ford has a gross margin of 4.8%.

> Tesla is an impressive company that's managed to finally be profitable.

Although technically true, this is a little misleading as it implies that Tesla is barely profitable - in reality they have moved from 'finally becoming profitable' to now being the most profitable automaker (in terms of total profit).

They still need to 10x their profit to make their current PE of 130 to make sense.

I'm not saying they are worth their valuation, I'm just saying you can't exactly claim/imply that they aren't very profitable compared to others in the market they are operating in.

Also remember that they almost tripled profit in the last year, so that PE ratio will be 1/3 if they manage to do that again. Again, I'm not claiming that it is possible, or that that would be a sensible P/E ratio, or that they aren't overvalued, but P/E can change quickly.

I would be shocked if they were able to maintain those margins.

They’ve faced relatively little competition in the EV space until this point and benefited from a shortage juicing prices. As demand eases and more entrants come into the EV space, they will have to lose margin, market share, or both.

> I would be shocked if they were able to maintain those margins.

I wouldn't be. They have fundamental and very broad patents on important things like:

* Pre-heating the battery on the way to a charging stop (enables the battery to accept faster charging without damage on road trips)

* Using motor waste heat for battery heating (increases range while use the above strategy)

* Dynamically adjusting charge rates due to real-time battery conditions (enables charging faster)

Those patents don't expire until the mid/late 2030's. That allows Tesla to force competitors to either pay a licensing fee or use more-expensive workarounds, like different battery chemistries, to match the battery range and charging rate. Either way, it means Tesla is likely to have larger margins than competitors.

I’m not intimately familiar with teslas patent strategy, but to my knowledge they aren’t enforcing any of those patents at all. Every single one of those features are present on competitor vehicles already.

https://www.tesla.com/blog/all-our-patent-are-belong-you

Good. The fact that very specific mechanisms that anyone could have thought of for something everyone understands is beneficial (keeping your battery warm) is patentable to begin with is... not great.

I feel like that’s not unreasonable over a decently long period of time?

tesla does not need to advertise, does not need dealerships

this also why Elon wants to buy twitter, besides the issue of free speech. it means PR for his companies.

> tesla does not need to advertise

What do you think Elon's shenanigans are exactly?

Tesla pulls all sorts of accounting tricks to make gross margin appear higher than it actually is. Warranty repairs are apparently done by pixies for free, so is R&D, factory amortization, or service centers

A like-to-like comparison would have Tesla's gross margin at ~18%, which is decent, bu not all that unusual for a premium car brand. Ford and GM tend to have much lower gross margins than VW or Toyota. The latter two are usually in the mid-to-high-teens, while competing in a cutthroat mass-market

Tesla as a product is a status symbol though. It's naturally going to be a high margin product but the cost means that the market is smaller. For example, the cheapest Tesla currently sells for $61,980 before tax in Canada. The number of people who can drop $62,000 on a car are a lot fewer than those than can spend $30,000.

Agreed.

I for one am very happy with the wider EV push, because I will never need to buy a Tesla. I am sure many other people have similar sentiments. Obviously they are valued for their batteries and solar as well, but their business model and product offerings there are far from a fit for everybody either. It all does not add up to current value, although it is hard to see where the mad dash to buy "the future^TM" runs out of cash to throw at it.

Solar is race to bottom, very low margin competition with Chinese manufactures. Batteries will follow as well. And if that was really going great why did SolarCity get bailed out by Tesla money? I would have expected it to be a massive company as well.

Also, I never really understood robotaxis as something magical high margin business. It is also race to bottom operating with very thing margins. And probably only after huge waste of VC capital.

The way i can see robotaxis getting out of the thin-margin category is to ensure they have proprietary AI etc for the nagivation and safety.

This way, there would be a huge barrier for entry to any competition, and they can keep the price high.

And thus, i would want to see the gov't set legislation to prevent this from happening - the AI and navigation software must be made open (ostensibly for audit purposes...but it would be something that is hard to prove you've copied it?). After all, the thin margins of such a business means benefits to society at large.

Don't confuse market cap and enterprise value, the amount of debt on non tesla manufacturers' books is staggering and strangling the business in other ways

Earnings, not revenue

What is your definition of earnings? Because Toyota's net income far exceeds Tesla's

Earnings are profit (i.e. revenue less costs).

https://www.investopedia.com/terms/e/earnings.asp

Yes, correct. Aka net income. I was asking because the original commenter was claiming Tesla earnings were higher than Toyota which is far from true.

Net income is profits, also known as earnings.

Gross income is just an intermediate-step in the way towards the bottom line (net and/or profits).

Its strange that the earlier poster wants to talk about gross instead of net on this point. You can almost always tell that someone is being a bit shady with their arguments when they say "income" or "profits" and then backtrack it to say "Oh, I meant gross income".

When you say "income" or "profits", everyone rightfully assumes you mean "net income", the bottom line. The most important number.

Back tracking or showing a total lack of understanding of the difference.

My bad, not earnings, it was operating income: https://twitter.com/SawyerMerritt/status/1524254013025357824

No worries, but I'm not sure what notion you're trying to craft with that stat. Toyota had far more revenue and profit. Operating income was lower... so what? Tells me Toyota has been spending money to carve a huge chunk out of the EV sector. Maybe they are late. Maybe Tesla will show that it's current valuation holds. I doubt it.

> Toyota's net income far exceeds Tesla's

Far exceeds? It is only 5% higher so that's a bit of a stretch ($22.4bn vs $21.4bn).

Plus Toyota had shrunk it's net income from 20/21 to 21/22, while it was a 116.86% increase for Tesla, so it would need an optimistic person to think that Tesla hasn't already overtaken in the last few months since 21/22 year end.

I was responding to a comment which was referencing Q1 2022. Not sure if you missed that or intentionally chose annual figures to shift the goalposts, but either way I agree Tesla is trending toward sector domination and has the potential to prove its valuation as valid. Alas, that has not happened yet, and the market is more complex than net income trajectories. If you firmly believe Tesla will be the EV king in 10 years then so be it, but don't hold your breath.

> I was responding to a comment which was referencing Q1 2022.

There is nothing referencing Q1 2022 on this thread.

> Alas, that has not happened yet, and the market is more complex than net income trajectories

The comment you replied to didn't state that the market is simply net income trajectories.

profit != revenue

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