Hey, I’m Steven and this is Solving The
Money Problem.
If you’re new, welcome.
If you’re not, welcome back.
This week, Tesla stock tumbled around 40%
and in the past month, it slid almost 60%
although it’s since rebounded a little.
And while a tiny percent of you still believe
this is the end of the word
--thanks by the way; your comments will feature
in a future video about panic--
I do NOT believe this is the end of the world.
Far from it.
In fact, I’ve been buying more Tesla stock
while it’s on sale.
In today’s video, I just want to remind
you of a few facts you may have missed.
Facts that MATTER.
Before we dive in, I can’t say the actual
name of this health thing because YouTube
will demonetize this video.
Instead, I will call it a donut.
Don’t read into this ok.
It’s a replacement word.
It’s arbitrary.
What it means is not important.
I’m not downplaying anything.
If you’re looking for something to get butthurt
over, this is not it.
And once again, I am a long term investor.
Everything I say is through this lens.
With that out of the way, it’s time to remind
you of a few things that matter.
Tesla Is Production Constrained
Since it’s very first vehicle, the 2008
Roadster, Tesla has NEVER been able to produce
enough vehicles to meet demand.
This is such an important point, I would like
you to gently but firmly slap yourself in
the face as I say it one more time.
Ready?
Tesla has NEVER been able to produce enough
vehicles to meet demand.
If you’re production constrained, like Tesla,
you have a buffer--a safety net.
Imagine there’s 25% MORE demand than Tesla
can currently meet.
If demand falls by 25%, Tesla will still sell
every vehicle it makes.
Tesla is coy on sharing exact order backlog
numbers, so I have no idea if demand is 1%
above production, 10% or 100%.
But the point is this:
Tesla is one of the few companies who currently
has more demand than it can meet.
And this has been the case for over a decade.
If demand falls but remains in excess of production,
this is literally a non-issue.
Imagine however, if you’re an established
automaker already meeting demand.
In this case, if demand falls, it will have
direct financial impact on the company.
I really, really want you guys to get this,
ok.
Tesla has a demand buffer.
How big, I don’t know.
It could be tiny.
It could be huge.
The point is, few other automakers have a
buffer at all.
This matters.
Model Y Was Just Released
As I’ve mentioned, Model Y Will Make Tesla
Billions and sell more combined units than
the S, 3 and X combined.
Having just commenced delivery (well ahead
of schedule), Tesla continues to ramp Model
Y production at its Fremont factory.
Once again, actual demand is unknown but if
we put out thinking caps on for a moment and
fire up our neurons, we can deduce that since
Model Y has JUST been released and production
is still ramping up, there’s probably a
lot more Model Y orders than there’s been
Model Ys built.
And the more Model Ys on roads, the more people
will be exposed to a Tesla and the more orders
will roll in.
This too is a buffer.
Even if Tesla was to lose a large percent
of its Model Y buyers, there’s pent up demand
that will ensure Tesla remains production
constrained on Model Y for some time.
China
This week, China reported its first day of
0 new donut cases.
THIS is our reference point.
THIS is where donuts first began appearing.
Today, things are under control.
During the mayhem, Tesla’s Gigafactory Shanghai
remained in operation almost without a break,
save for an extension of the Lunar New Year
holiday.
It’s pretty easy to overlook this given
the United States is obviously the center
of the universe but Tesla China has been full-steam
ahead almost this entire time.
Admittedly, the US has ****ed up this donut
situation so expect more pain to come but
there’s light at the end of the tunnel and
we can look to China for an idea of how quickly
things can begin returning to normal.
The United States
Despite all the chaos and panic, Tesla US
hasn’t been terribly disrupted until now.
At end of day Monday 23rd of March, production
at its Fremont and Buffalo factories will
be temporarily halted.
For how long is anyone’s guess.
My suspicion is that we’re looking at a
few weeks, maybe a month or two max.
In the big picture, this is nothing.
Meanwhile, Tesla is doing touchless deliveries
and because they don’t have dealerships,
customers can continue buying Tesla’s online
while automakers with dealer networks are
screwed.
As this happens China rolls on.
Relative to other automakers, Tesla has barely
missed a beat.
Speaking of other automerks, it was only yesterday
that Ford announced it would draw down more
than $15 billion dollars in lines of credit
to weather this storm.
That doesn’t sound too bad until you realise
Ford’s entire market capitalization is only
a fraction more than $15 billion dollars.
This is very concerning for the future of
Ford.
The “Typical” Tesla Customer
Not everyone can afford a Tesla.
Actually, most people can’t afford a Tesla.
It’s a good thing that the global automotive
market is about 90 million vehicles per year
and Tesla is not yet even 1 percent of that.
Plenty of people CAN afford a Tesla.
Broadly speaking, in difficult economic times,
people in lower socioeconomic groups struggle
more.
They’re more likely to be casual workers.
They’re more likely to be on low incomes.
They’re more likely to be living paycheck
to paycheck.
They’re more likely to have bad credit and
no savings.
This is not a typical Tesla customer.
Those who are willing to drop $40 to $80 thousand
dollars on a new vehicle can usually afford
to do so.
Broadly speaking, this demographic is more
likely to have valuable skills and full time
employment.
More likely to have high income and substantial
savings.
More likely to have good credit and more likely
to value quality over price.
Of course, less people will buy vehicles during
this time but those will disproportionately
be people in lower-socioeconomic groups who
today, aren’t Tesla’s primary market.
And it must be said, dollar-for-dollar, you
cannot buy a better value vehicle than a Tesla.
When you weigh up everything.
You know, like Tesla making the 3 safest vehicles
in the world.
Having far and away the best performance of
anything even CLOSE in price.
Having the best infotainment.
Having the ONLY over-the-air-updates which
make your car even better after you buy it.
Having the most efficient battery and powertrain
meaning incredibly low running costs and countless
other standouts… you just can’t get an
equivalent vehicle for even CLOSE to the price.
I believe those who do begin to pinch pennies
but still want a great quality product will
invariably find themselves comparing BMW,
Mercedes and Audi to a Model 3 and realising
there’s no contest.
I’m calling it now.
Tesla will GAIN considerable market share
within its respective automotive categories
in the next few years.
Luxury automakers should be concerned.
Their products are inferior on a dollar-for-dollar
basis.
That is NOT a good place to be.
And then there’s Cybertruck.
If you haven’t already, check out my Cybertruck
Is Engineering Genius video for a run down
on this incredibly disruptive product.
Rumor has it that there’s well in excess
of half a million Cybertruck reservations.
Once again we find ourselves at the “Tesla
has never, in its history, been able to produce
enough vehicles to meet demand” point.
Play along for a moment.
Just imagine that HALF--yes, HALF--of all
Cybertruck reservations vanished overnight.
That still leaves Tesla with over 250,000
reservations.
How long, realistically, do you suspect it
would take for Tesla to make 250,000 Cybertrucks
starting today?
[Great question Steven.]
[I don’t know.
2 years give or take?]
Great.
That means Tesla has a gigantic demand buffer.
I hate to harp on about this buffer but it’s
SO important.
Tesla has JUST released Model Y.
It will surely be months if not a year or
more before Tesla can make enough Model Ys
to meet demand.
That means INCREASING SALES.
Even if TOTAL demand has fallen, Tesla will
STILL sell more vehicles in 2020 than in 2019.
And more in 2021 than 2020.
Why?
Because Tesla STILL cannot produce enough
vehicles to meet existing demand even as they
massively expand capacity.
Nevermind the fact that the underlying EV
market itself is growing.
Add Cybertruck into the mix and we can see
Tesla has a huge safety net.
Even with the possibility of GREATLY decreased
demand, Tesla is likely to sell every vehicle
it makes for some time.
I could be wrong on this.
But it doesn’t weaken my case.
Relative to other automakers, Tesla has a
huge buffer that the likes of Ford, GM and
VW do not.
A decline in demand is only a problem when
you are already able to meet demand.
As I said earlier this week, the inevitable
transition to EVs is still happening.
Tesla’s stupendous lead in battery and powertrain
technology still remains.
So too their unassailable full self-driving
data lead.
And their engineering talent lead.
In my opinion, the recent tumble in Tesla’s
stock price is an absurd overreaction based
on panic and fear, not reason and logic.
That’s why I’ve been buying Tesla stock
this week.
With my long term view, it’s just too good
to ignore.
And speaking of stocks, until the end of this
month, WeBull are offering 2 free stocks valued
up to $1,400 dollars for new users in the
US who open an account and deposit any amount.
So if you’d like to help out the channel
AND get 2 free stocks
--I mean, hello, free stocks--
check out the link in the description.
During tough times, innovative and disruptive
companies fare best.
Tesla fits the bill and in my not-so-humble-opinion,
I suspect we’ll see Tesla gain even more
market share in the donut fallout.
Let me be clear.
There will be pain across the globe but it’s
NOT the end of the world.
Far from it.
The social and economic impact will be felt
everywhere.
I’m not downplaying either.
But I am here to give you some perspective.
And to provide some balance to the garbage
being pumped into homes on the Crisis News
Network.
I’m confident enough to claim very publicly
that Tesla will fare far better than almost
every other automaker during these times.
Additionally, Tesla WILL gain market share
not just of EVs, but of vehicles in general.
And when we look back at this with a long
term perspective, it’s just going to be
another blip on the radar.
The numbers that matter MOST are not total
vehicles sales.
What matters most is Tesla’s market share.
I’m saying this now so that you guys know
how to interpret the data moving forward.
Don’t look at Tesla versus Tesla.
Look at Tesla versus “everyone else”.
In the wake of the global financial crisis,
Tesla picked up its first factory for pennies
on the dollar and transitioned from tiny startup
to serious company.
Today, its opportunity is to seize a disproportionately
large share of the new vehicle market.
As consumers tighten their purse strings,
many will inevitably shop around only to discover
the incredible value and compelling economics
of a Tesla.
Note I said “value” of a Tesla, not “cost”.
The price you pay is less important than the
value you receive.
Although not all consumers get this.
There’s still people who buy cheap knives.
Before I wrap up, I just want to say that
this video isn’t investment advice.
I’m sharing my thinking and my reasoning.
I personally believe the panic around these
donuts has done far more damage than the donuts
themselves.
To see Tesla stock shed 60% in a month, to
me, is absurd.
A total overreaction driven by panic, fear
and uncertainty.
How on EARTH Tesla stock took the same hit
as most airlines defies belief.
While planes were grounded and forward bookings
cancelled en-masse, as countries went into
lockdown and travel bans came into effect,
Tesla barely missed a beat.
Production continued humming along in China
and in the US with minimal delay.
And that is why I chose to buy up big while
the opportunity presented itself.
Are we past the worst of it?
I don’t know.
How the market reacts is irrelevant to me.
What’s actually HAPPENING is what I care
about.
In my opinion, the reaction has not matched
the reality.
For me, this has been a great buying opportunity
for Tesla stock.
I have more limit orders in place but if I’m
being honest, I doubt they’ll ever execute.
It would take another surprise of a similar
magnitude to get there.
Am I calling the bottom for Tesla stock?
No.
Anything could happen tomorrow.
But my money is where my mouth is.
Remember, with uncertainty, comes opportunity.
Regardless of whether you’re in the stock
market or a curious observer, this period
will teach you more about investing and human
psychology than just about anything else.
Take notes.
Pay attention to sentiment.
To what people are saying.
To the media.
Watch how people behave.
Watch the market move and react.
Watch the people saying this is worse than
a world war.
The people stockpiling toilet paper.
The people who panicked and sold stocks on
the way down for a loss.
And as you do, pay equal attention to the
other side.
Those who don’t think this is the end of
the world.
Listen to what they say, and watch what they
do.
When the dust settles, compare notes.
Was it “different this time”?
Or was it just another “one of those”.
This may be your most valuable stock market
lesson of all time.
Don’t sleep through it.
I’m Steven Mark Ryan, this is Solving The
Money Problem and I love you all.
Thanks so much for watching.
Let me know your thoughts in the comments
below.
Do you agree or disagree?
Did you buy or sell any stocks this month?
Do you believe Tesla will gain market share
in these tough times?
And of course, if you have any ideas for future
videos, let me know.
I read ALL your comments.
p.s.
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