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Tesla Passes Ford by Market Value

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Re: Tesla Passes Ford by Market Value

#551
post #530

Totally relevant news to 99% of us readers who wont be driving a Tesla anytime soon :)

even years ago, a model s was as expensive to own, all costs accounted for over the span of seven to ten years, as a honda odyssey minivan. they are about to release a car that costs 35000 dollars.

There's literally a sh*t ton of assumptions, and caveats to the comparison you're referring to: https://www.teslacost.com/model

Also, the "winner" of his comparison was a RAV4 EV (by about $20K) The Tesla finish mid-pack (behind the Ody)

Re: Tesla Passes Ford by Market Value

#552
post #520

Earlier quoted context omitted.

Market cap tells you the value of everything: both the business and its money (cash & debt). Enterprise value is the value of the business (the thing actually generating value) separate from the cash & debt it's holding. For example, if I have a banana stand worth $250K, but inside the banana stand is a briefcase with $245K, then the $250K is not really the value of the banana stand - it's mostly the value of the cas…

There's always money in the banana stand.

Except during the sub-prime banana stand crisis.

Re: Tesla Passes Ford by Market Value

#553

Earlier quoted context omitted.

I find it shocking that something as simple as personal belongings would be a "lock in" to existing technology. It's like saying "I prefer my horse, I can feed it grass off the side of the road, but you have to find some fancy petro-chemical station for your auto-mobile? Insane! My gas grows next to the road!" I get it, but try to put yourself in the place of someone younger who doesn't make decisions like "I would n…

It's not "personal belongings," it's "personal space." Hot-sheeting happens where sleeping space is extremely limited, like oil drilling camps, but it hasn't taken off among the general population, despite the fact that you only use your bed for around 1/3 of the day. People are willing to pay for their own beds and, frequently, their own apartments or houses, despite the fact that most of that space goes unused most…

The problem with this is that there are multiple competing needs and desires here. People may have a desire for that personal space, but many will sacrifice those when it helps them meet other needs.

Yes, it's great to have personal space. But you know what? People sacrifice personal space for spending less money all the time. And for convenience.

Consider e.g. London - a city awash with money, where a lot of even people who could afford to be driven around by a personal chaffeur will opt for public transport for convenience.

As another example for London: People will opt to smell someones armpit on the train in the regular train carriages rather than pay a few pounds extra for a seat in the First Class carriages all the time. The value of personal space when travelling, as it turns out, is deemed by large parts of the public to be very low.

People tend to opt for personal space mainly when the public transit options are unusably bad compared to driving.

Places like London are perhaps the areas where this transition is most likely to start: Places where those who even own cars often own cars as a "contingency" for those times when the bus doesn't arrive or you're going somewhere odd that just doesn't work well with public transport currently.

In those cases, for a lot of people, it'd be very attractive to e.g. pay a membership fee to guarantee a certain level of "contention" for cars to be able to just press a button and have one arrive "fast enough". Even more so with the ability to do that on either end of a train ride. For a lot of people this will make a car pointless.

And in environments like this "personal space" is moot, as almost everyone are already used to using public transport some or most of the time.

At the same time, it is somewhere where local authorities are clamouring for ways to reduce parking and make car ownership less desirable. Expect housing units to start coming without parking spaces or with very few parking spaces in high density areas as cost saving measures, or because they'll sell some of those parking spaces to ride share companies, or make residents who want them buy them separately.

Expect planning rules to start reducing the maximum allowable number of parking spaces.

Places with plenty of space, sprawl and a strong culture of cars as independence will certainly experience this change last.

But consider e.g. the impact of a generation of youth who will eventually grow up with a situation where they may be able to rent a self-driving car on demand from before they are able to (afford to) buy one, and where e.g. parents may opt to just order a journey rather than driving them somewhere once old enough, and who will grow up increasingly likely to get used to some car taking them somewhere without needing to take the step to car ownership to get that freedom from parents driving them around. The "liberation" may become to be able to sign up for your own account so your parents can't see your every journey.

I think that the whole culture where car ownership is seen as a rite of passage and signifier of liberation from your parents could change far faster than you think.

Re: Tesla Passes Ford by Market Value

#554

Earlier quoted context omitted.

Tesla is RISKY: it is a bigger gamble, higher volatility, higher upside if it works out, bigger chance of it going completely bust. Put Tesla in your portfolio if you want to add some risk to it. You want stability with a healthy dividend? Well, add some Ford to it. Shorting is the way you capitalize on a stock that you think is overvalued. It is an advanced maneuver but can be done for the long term as well. IBM...m…

If you're looking for other stable tech-sector companies (mostly supplying corporate infrastructure), FICO and PEGA are good examples; so is Microsoft, for that matter. But why look for them? (They're S&P 500 components with solid dividends, so maybe that's answer enough.)

I own Microsoft stock, it isn't exactly a growth one.

Re: Tesla Passes Ford by Market Value

#555

Earlier quoted context omitted.

> The automobile industry will contract as we move from individual ownership to mobility. What does this even mean? People like to leave stuff in their cars (e.g. mug, gym bag). They like them to be at their preferred level of cleanliness or disorder. Some even use them as a means of personal expression. If "mobility" were so desirable, ZipCar would have taken off 10 years ago. The "mobility" market will be about the…

This 'switch from ownership to mobility'-buzz is one of the most overvalued ideas recently. Much like the Kindle was supposed to kill the book. Why must some people see new inventions always as colossal destroyers of products they don't like instead of the more humble 'enriching ones freedom to choose'?

The kindle may not have killed the book, but it has made a massive dent in the paper-book market, despite substantial problems with e-books. It will likely continue to eat away at it.

If self-driving cars has as massive an impact on car ownership as e-books have had on the paper book market, that will be a dramatically noticeable change in most cities.

Re: Tesla Passes Ford by Market Value

#556
post #533

Earlier quoted context omitted.

[edit]: Current finance professional here. > When two companies have wildly different capital structures, you have to compare them on enterprise value, not the market cap of their equity. So while I give kudos to Tesla for building a valuable business, it still has a long way to go to catch up to Ford. That is not necessarily true. Market cap and enterprise value are two equally valid ways of measuring value or worth…

1: Debt + Equity = Enterprise Value. The value of the equity is determined by the stock markets - and that value can vary a lot. 2: Equity Value therefore represents the market's perspective of the Net Present Value of the future cash flows less the value of the debt. Those flows, calculated using a discounted cash flow spreadsheet, could be from profits, or could be from sale of assets. 3: The analysts will forecast…

> Going back the the original post - EV is the real value of the company

EV is one way of valuing a company. As is market cap.

> Ford could sell down their debt by issuing more equity

Absolutely. It's logical to say that a company with less debt is worth more than a company with debt. And the same applies in reverse.

Other ways that EV can be distorted, and market cap can be preferred, is whether the company choose to purchase capital assets financed via debt or lease them. For example, a company with big capital assets financed via debt could note that the company would be more profitable if they sold them and leased them back. The company is now more profitable, and its reasonable to say its 'better', but its EV has gone down.

Re: Tesla Passes Ford by Market Value

#557

Earlier quoted context omitted.

I think there are physical reasons why driverless cars will never be as good as trains: they're rubber-on-asphalt instead of steel-on-steel, and you need a lot more engines, space, and transportation of dead weight per unit of people moved -- and they'll probably still need parking, too. As near as I can tell, driverless cars are horseless-carriage thinking... but trains have no element of novelty to them.

Driverless cars can take you between train stations and destinations. No magical form of train will come to your house or go to your office. In fact, this is a perfect use case for driverless cars. The problem with trains everywhere is the wasted time not on the train and the million stops along the way.

Ultimately I think driverless technology can revolutionarise high density public transport too:

It gives us exactingly detailed information on what journeys people need. The dataset will be immensely valuable in allowing the companies that sit on them to first start doing quasi-bus services:

Order a bunch of minibuses. During peak hours, offer an option: Wait for the next dedicated car to be free, or ride share with quicker availability and a discount. Limit detours strictly - there'll be plenty of "Follow road X and pick up 6 people on the way to station Y" type stretches that will make people happy (little time lost; feels efficient if there's not lots of turning off).

Then you can see them partnering with bus providers to dynamically fill in during peak hours, or even bidding for bus franchises and proposing contract changes that would allow for more dynamic, demand-based scheduling.

Ultimately this can feed into planning train type services - companies offering these type of drive share will be able to e.g. let people order "end to end" journeys of the type "pick me up at address 1, get me to address 2" where they show journey options that include rail when it makes sense. The key beying that if they do so, they will know the entire desired journey, and would be able to offer insight into the most efficient interchange locations or other changes to train services would be most desirable.

Re: Tesla Passes Ford by Market Value

#558
post #535

Earlier quoted context omitted.

> Obviously both are worth the same amount: each company has an "enterprise value" (the value that all investors in all securities place on the underlying enterprise) of $1,000,000. The only difference is that company A has only one class of investor, while company B has investors that own a riskier asset (the equity) and a less risky asset (the debt). There's an important issue that you aren't taking into considerat…

> You're insisting that debt is another form of investment, and depending on what you're looking at that makes sense, but when talking about 'value' it doesn't always hold true. This sort of intuition is seductive, because we're generally told "debt bad, equity good!" But it's not correct, for the very simple reason that debt and equity are, in many ways, fungible: each type of financing can be utilized to replace th…

> This sort of intuition is seductive, because we're generally told "debt bad, equity good!" But it's not correct, for the very simple reason that debt and equity are, in many ways, fungible: each type of financing can be utilized to replace the other.

Debt can be viewed in many ways. I'm not saying that it's wrong to view debt as another form of financing - like you I studied Modigliani-Miller, just that there are other ways to view it.

My point is only that it's not right to disregard market cap entirely in preference to EV. EV is generally a "more comprehensive" measure of company value, but it doesn't supersede market cap.

EV, for example, is susceptible to distortion between leasing and buying capital assets. For example, a company with big capital assets financed via debt could note that the company would be more profitable if they sold them and leased them back. The company is now more profitable, and its reasonable to say its 'better', but its EV has gone down.

Re: Tesla Passes Ford by Market Value

#559
post #548

Earlier quoted context omitted.

But a self-driving car that can either find street parking or else drive to some suburban lot makes that incentive much weaker, not stronger?

A service will be able to keep cars near you, and will have sufficiently higher utilisation of their cars to be willing to pay more for parking spots. Your waiting time to get a taxi service will likely drop substantially at the same time as your waiting time to get picked up by a car you own is likely to go up. As someone who doesn't own a car, the only potential appeal to me of owning a car is shorter waits and pre…

As someone who doesn't own a car I don't think you have that much insight into the mindset of people who own a car.

Re: Tesla Passes Ford by Market Value

#560
post #399

Earlier quoted context omitted.

> The automobile industry will contract as we move from individual ownership to mobility. What does this even mean? People like to leave stuff in their cars (e.g. mug, gym bag). They like them to be at their preferred level of cleanliness or disorder. Some even use them as a means of personal expression. If "mobility" were so desirable, ZipCar would have taken off 10 years ago. The "mobility" market will be about the…

Exactly. Maybe poor people will take the robocab from hell, with sick on the floor. Most people will not.

Poor people might take "the robocab from hell", but just as I don't order "the humancab from hell" now, but order from the slightly more upscale "clean, air-conditioned high end sedan with blacked out windows and wifi" for just a slightly higher fee, people who earn more will still have alternatives, yet will still benefit from the cost reductions.

The difference being that poor people will have the "robocab from hell" alternative rather than have nothing they can afford, and that more people will afford said high end sedan when it's self-driving, and will be able to justify it more often, and more people will afford to trade up to even more luxurious services.

There is already a marked class difference in commuting in London: Low paid people take the bus four two hours+ for commutes that'd take less than half that if they could afford the train from the outer fare zones (bus-rides cost the same within the entire London fares area), so transport is already today segregated by income. A lot of the longer bus lines makes no apparent sense until you realise that low paid people often can't afford the train, or a car.

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