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What is driving the stratospheric rise of Tesla?

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People are perplexed by Tesla’s inexplicable rise. Many predicted his disappearance. The short sellers were exuding to kill once his stocks collapsed. Instead, its share price rose and the company gained a larger market capitalization than much larger car manufacturers in the United States and abroad.

Investors now firmly believe that it is worth far more than GM, Ford, even Daimler or VW, the latter that produces 10 million cars per year. It is speculated that Tesla could be worth up to $ 6 trillion in 4 years. What explains the inexplicable?

As recently reported in a February 06 article by Giles Parkinson in The Driven, “… some analysts believe that we haven’t seen anything yet, and if Tesla is able to master his full autonomous driving technology, the stock could worth up to $ 4 trillion in 2024. “

The Driven indicates the forecasts of major investors and analysts including Ron Baron, according to which Tesla’s revenues could exceed $ 1 trillion and Ark Investment Mgmt. LLC, which claims that its stocks could jump 10 times from the current $ 800 to $ 7,000 in 5 years.

In one piece on its website, Ark Investment Mgmt. speculate on a “bullish case” where stocks could rise to $ 15,000, or even $ 22,000 by 2024. The question is if and when Tesla is able to offer autonomous driving technology.

Once the driver is eliminated, Tesla can offer rides at a fraction of the current cost per mile of the likes of Uber and Lyft. According to Ark Invest, this would result in a market capitalization of $ 4 trillion. The last time we checked Tesla it was worth about $ 130 billion, with large daily fluctuations.

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Ark Invest speculation is not about how many Tesla cars can produce or trivial problems like that, but how long it can master science, art and overcome regulatory obstacles to introduce autonomous driving technology.

Of course, it is not a fact that Tesla will be the first or the only one, given the vast investments earmarked for the development of autonomous electric vehicles or light electric vehicles by artists such as Google’s Waymo, GM’s Cruise and countless others.

By now, everyone realizes that it is not an easy task.

Ark Invest isn’t convinced that Tesla can do it well or win that race, which explains why it offers Tesla a 30% chance. But he says if Tesla does it right, do it first and successfully launch an autonomous taxi service – Elon Musk, his CEO calls it robo-taxi business – then the added value could be enormous. This, of course, is a lot of itself. Ark Invest says:

“A fully autonomous taxi network could completely break the pattern of a traditional automotive manufacturer’s business model.”

What is fascinating about this scenario is its transformative nature.

“Tesla could move from a hardware-like single transaction model to a software-like margin recurring transaction model, charging passengers per mile and paying a commission.”

In the article posted on its website, Ark Invest speculates that Tesla could “set rates comparable to the $ 2.50 per mile that Uber and Lyft charge today, bringing them down to $ 1 per mile in 2023”.

In this case, “Tesla would get a 50% cut in gross revenue from autonomous taxi networks, higher than the 20-30% cut enjoyed by Uber and Lyft today.” It is assumed that the robo-taxi service can start as early as 2021, which is only one year from today. As always, the fine print should be read.

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Whether in 2021 or a few years later, this is the vision of futurists like Stanford University’s Tony Seba who are convinced that it is only a matter of time before it happens, and when he finally does, the cost of shared intercity travel will plummet to the where very few inhabitants would like to own personal cars. The date could be around 2030, or so they say.

Both oil and car companies are examining such scenarios and who will make and lose when and if it will happen. For oil companies, it suggests declining and declining demand as electric vehicles and electric vehicles begin to affect sales of gasoline cars over time.

This is more or less a given. For automakers, it suggests a huge shift not only to electric vehicles, but also electric vehicles and shared transportation models that replace automotive ownership for everyone except those living in remote, sparsely populated areas.

When and if it happens, few drivers – certainly in congested urban centers where more than half of the world’s population currently lives – will miss the long lines at the DMV, the hassle of parking, the stress of driving, the cost of licensing, insurance and car maintenance or bargaining over the price in car showrooms – not to mention the rapid depreciation of their investment once they leave the dealer’s parking lot.

Fereidoon Sioshansi is president of Menlo Energy Economics, a consulting firm based in San Francisco, California and editor / publisher of EEnergy Informer, a monthly newsletter with international circulation. Can be reached at [email protected]

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