Tesla Battery Day
Elon Musk said Tesla is aiming to create a $25,000 electric vehicle "in about three years." Tesla's stock price is down 6.8% after hours. I think the market is giving long term investors a great opportunity.

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The average price of a regular, gas-burning vehicle today is about $36,600. The cheapest Tesla, the model 3 starts at $37,990. The market didn't like the news from Tesla's battery day because the new cheaper car isn't ready right now.


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I think this is a classic example of institutional investors being too short-term minded. Yes, right now you can't go buy a $25k Tesla. But if the price of a Tesla drops meaningfully below that of an internal combustion engine car in the next three years, that is a huge inflection point. It would mark the beginning of the end of the internal combustion engine.

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More importantly, it means that all other auto manufacturers need to become electric vehicle manufacturers. If they can't create comparable batteries to Tesla within three years, they will struggle to stay in business.

‌‌‌‌‌‌ If all else is equal between a normal car and an electric vehicle, but the EV is less money, demand will shift to EVs all at once.

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A couple of other reasons why the stock likely dropped is because many people were expecting to hear about a "Million Mile Battery" as well as faster charging times for batteries. While these features were alluded to at battery day, it doesn't sound like they will be ready until 2023.

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The thing about these features, and about the pace of innovation of Tesla, is that it can fall prey to the "Osborne Effect" which is when exciting new products that are right around the corner cause consumers to hold off on buying right now in order to wait for the new exciting version. This is a perennial concern for new iPhone releases.

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Elon always has to dance around describing when the new product will come out because if the date is too concrete, too soon, or too much better than the current product, it will dry up all demand for buyers right now.



‌‌‌‌‌‌I think Elon is starting to learn how to rein in his over-promising and under-delivering. 2015 Elon would have repeatedly said "million mile battery" in todays presentation. But 2020 Elon doesn't have to make as big of a promise just to get buy-in. He can ease off a little bit more and focus on the technicals of the batteries they are engineering, which is exactly what we want him to be focusing on.
Josh Worden's avatar
Interesting thoughts! Made me interested in buying Tesla at perhaps a low point... so I did! Only about a half share, but we'll see how it does!
Nathan Worden's avatar
I bought some more this morning too:

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