Tesla’s valuation is so high that once you break down its individual business components, you start to realize that none of it makes sense. All this and more in The morning shift by August 25, 2021.
1st gear: none of this makes sense
The Tesla share price is overinflated. We all know this stuff in general, but it’s hard to pinpoint exactly how perception doesn’t match reality, however. this new report from The Financiall the time aid. He focuses on Morgan Stanley’s recent ‘bullish missive’ from Adam Jonas on Tesla’s assessment after AI Day, the time Elon brought someone in a morph costume on stage and claimed he was going to make robots to colonize Mars. Elon, surprisingly, didn’t laugh at the city.
Here is Jonas’ assessment:
Our $ 900 PT is made up of 6 components: (1) $ 375 / share for Tesla Auto core business on 5.6mm units in 2030, WACC of 8%, Exit EBITDA multiple of 14 x 2030, exit EBITDA margin of 20%. (2) Tesla Mobility at $ 75 on DCF with 500,000 cars at $ 1.7 / mile by 2030. (3) Tesla as a third-party powertrain supplier at $ 88 / share. 4) Energy at $ 78 / share. 5) Insurance at $ 30 / share. & 6) Network services at $ 255, connected fleet of 17mm, $ 100 ARPU by 2030, 20% reduction
And here’s what the FT has to say about it:
Ignoring the fact that two of these lines of business literally don’t exist, we were drawn to the insurance segment. While it seems relatively insignificant at just 3.3% of the $ 900 price target, you might be surprised to learn that 3.3% of $ 700 billion is actually a big change.
As a reminder, Tesla’s own internal insurance is currently only offered in California. And the automaker does not guarantee the risk itself. Instead, he simply acts as a broker for the State National Insurance Corporation, a subsidiary of insurance giant Markel. So, in all likelihood, the business segment is probably a rather low margin brokerage business for an automotive brand that currently holds a 2% market share in the United States. We say “probably” because the disclosure around the insurance business is thin: it was only mentioned four times in the recent 10-Q filing.
So let’s go back to Jonas’ Tesla Insurance assessment. Take Tesla’s outstanding shares – 990,015,158 – and multiply it by $ 30, and what do you get? $ 29.7 billion.
If that sounds like a lot, that’s because it is. In fact, it would make Tesla’s insurance business the 21st most valuable insurance company in the world. Worth more than Aviva, Arthur J Gallagher and Hannover Rück, the third largest reinsurer in the world. Indeed, at that valuation, Tesla Insurance would be worth about two-thirds of AIG, a company with an asset base of $ 395 billion.
Again, we kind of understand that there’s no real way Tesla could be worth more than established auto giants like Ford or Volkswagen, but it’s interesting to see a more granular view of how whose valuation makes no sense. It’s so over-inflated in general that there’s no way the individual parts of Tesla’s business can support it.
2nd gear: there are still a lot of Killer Takata airbags there
This Bloomberg Report is interesting in that it can’t really determine exactly how many explosive, recalled Takata airbags are available around the world, in part because other countries don’t really track this data:
From the beginning of July, over 14 million had still not been repaired in the United States alone, in addition to an unknown but probably substantial number in the rest of the world. This means that millions of car owners like Drisaldi, especially in countries with weak consumer protection, may be unaware that the propellant used in their cars’ airbags could degrade due to heat and air. humidity, turning their vehicles into potential explosion hazards.
At least 37 fatalities and 450 injuries allegedly related to defective parts around the world have been reported to U.S. auto safety regulators. Of the deaths, 19 have been in the United States, while others have been reported around the world, including French Guiana, Nigeria, Brazil, Australia and China.
[A]Automotive safety recalls, even for fatal defects, can go unnoticed in parts of the world with weak regulatory regimes. In the United States, the National Highway Traffic Safety Administration (NHTSA) has taken unprecedented action to not only oversee but also coordinate the industry’s campaign to replace the tens of millions of inflators. An independent observer also urged companies to adopt more effective outreach techniques beyond what is required by law. Nothing similar is happening in Mexico, where companies say there isn’t even an effective registration system through which they can locate used car owners.
“While the US recall system is flawed, in other countries we see systems that are virtually non-existent,” says Sean Kane, president of Safety Research and Strategies Inc., an advocacy and advisory organization in Rehoboth, in Massachusetts.
Again, it’s hard to know how much of a problem this is or not because we can’t really prove it one way or another.
3rd gear: the new problem of electric vehicles in Japan: too many chargers
The dense confines of Japan are a great place for an electric car, if you have a convenient public charging network that works for a highly urban population. At least that was the thought of the Japanese government a few years ago, when it flooded the country with charging stations to see EV adoption stagnate at 1% of the market. It is not ideal, because Bloomberg details:
Now, with EV penetration of only around 1%, the country has hundreds of aging charging stations that are not in use while others (they have an average lifespan of around eight years) are completely decommissioned.
The number of electric vehicle charging stations in Japan fell to around 29,200 in the 12 months ended in March, from more than 30,300 the year before, according to Cie Zenrin. This is the first drop since 2010, when the map publisher started collecting data.
“Next year or the year after will be a peak” for the replacement of electric vehicle charging stations, said Tsuyoshi Ito, head of the planning division at e-Mobility Power, a joint venture between Tepco Co. and Chubu Electric Co. In the future, it will be crucial to place chargers in convenient locations for users and to ensure that they don’t all expire at the same time to support the growth of electric vehicles, he said.
I can’t say I’m definitively predicting that Biden’s EV charging plan will have similar results, but I would say it’s something to watch out for.
4th gear: Mercedes F1 Boss just made a really lucky bet on Aston Stock, not insider trading, regulators say
I have no idea what it takes to be caught red-handed insider trading, at least according to this report from The Financial Times explaining how clean and clear Mercedes F1 boss Toto Wolff is and he was just in the right place at the right time:
Wolff bought a 0.95% stake in Aston Martin from a vehicle controlled by Laurent Balade, executive chairman of the British car manufacturer.
The following month, Aston Martin appointed Tobias Moers, the former head of Mercedes’ high-performance AMG business, as general manager. At the end of October, Daimler announced that it would increase its stake in Aston Martin to 20 percent, from less than 5 percent. Daimler has owned Aston Martin shares since 2013.
Mercedes F1 said Wolff was not aware of any of these plans when he acquired the shares and that “all relevant disclosures have been made to UK financial authorities at the appropriate time.” Wolff did not acquire or trade any Daimler stock or securities last year, Mercedes said.
The market watchdog who chose not to pursue Wolff is German, and I’m sure that has nothing to do with anything. Germany is notoriously uncorrupted.
5th gear: Biden administrator blames EPA for weak car regulations
I’m not sure what to make of this story, which claims that the Biden administration told the EPA that its upcoming auto emissions regulations were too low and that the EPA did nothing about it. Of Bloomberg:
The White House and other administration officials told the Environmental Protection Agency that its industry-backed plan to tighten auto emission limits was too lax, but the agency pushed back those warnings and released the proposal with provisions that could reduce its bite.
The discord was revealed in thousands of pages of correspondence, analyzes and recently published drafts from an interagency review of the extent that the EPA unveiled earlier this month and should be finalized by the end of the year. The correspondence highlights tensions within the administration over the aggressiveness with which to enforce regulations to tackle climate change, especially when efforts are opposed by industry.
“This clearly shows that many officials in the Biden administration believed the EPA should have come up with stricter clean car standards that are more effective in tackling climate change,” Amit Narang, a regulatory expert with Public citizen, said in an interview.
The hitch is that the EPA gives automakers more benefits for every electric or hybrid vehicle they make with healthy multipliers. Anonymous officials at Biden have reportedly warned that it may be too easy for automakers to meet their goals with relatively few electric vehicles, instead of forcing automakers to work harder to meet their environmental goals.
Reverse: defenders of the rail get a hymn
Neutral: how are you?
I was out of town for a week and when I left my cucumbers and eggplants were messy, withered and attacked by mealybugs. I sprayed them with neem oil before I left and when I returned they were back to full health, with strong leaves and new fruit. Care and attention: Iit works !