Tesla is 'scaling like crazy' Ark Invest on Q4 2020 Earnings

Image: Solving The Money Problem/YouTube

Tesla focuses on disruptive and revolutionary innovations, and is a leader in electric vehicles and autonomous technologies. Tasha Keeney from ARK Invest thinks that the manufacturer is at least 3-4 years ahead of all its competitors. Steven of Solving The Money Problem/YouTube invites you to dive into more detail of ARK research and their analysis of the Tesla Q4 2020 Earnings Report and Call.

The ARK's long-term study of electric vehicles shows that battery costs should decline over time. The firm uses Wright's Law, which says that, for every cumulative doubling of production, you receive a corresponding reduction in price. ARK expects costs to decrease, which should help Tesla's margins over time, Keeney said.

The cost of batteries—especially with Tesla's new designs—is steadily declining. Meanwwhile "gas-fired cars are only getting more expensive with emission standards; they're not riding that cost-decline curve that we see in electric vehicles," Keeney said.

Tesla expects production to grow by 50% in 2021. Today, the company is already the leader in the EV market. Tesla has achieved great success in the largest market in the world—China—although historically it has been difficult for a foreign company to succeed there. Keeney said ARK sees the company "scaling like crazy:” they are building up in Berlin, Austin, Shanghai, and recently there has even been talks of India. She urges all analysts to consider whether traditional automakers can catch up with Tesla.

Steven points out that we all know that Tesla has already won the decade, and the real question now is which, if any, of the legacy automotive manufacturers will actually survive the decade? The question is not even who will be in second, third, fourth place, the question is who will actually even survive? Steven truly believes that the majority of legacy automotive manufacturers will be bankrupt, will be acquired, or will merge with other companies before the decade is out.

Keeney said ARK believes EV is the way forward. They are "already lower on a total cost of ownership basis and given the cost of the line we see in batteries, we expect those sticker prices to come down." Therefore, the advantages of electric vehicles and Tesla are obvious.

In addition, Tesla has already made great strides in autonomous technology with its FSD Beta, and "we think that the opportunity to ride-hail could give them a recurring revenue stream with much higher margins than the traditional auto business," Keeney said. She draws analysts' attention to the fact that if they really think about margin, then Tesla's autonomous technology is something that really needs to be looked at.

Steven stresses the fact that Tesla is really very confident that it will soon deliver full autonomy, as evidenced by the updated Model S and X.

• Tesla has installed a new high definition center screen that is ideal for entertainment and gaming anywhere.
• Game from Anywhere: Up to 10 teraflops (equivalent to PS5 console) of processing power enables in-car gaming on-par with today’s newest consoles via Tesla Arcade. Wireless controller compatibility allows gaming from any seat.
• Yoke steering: The ultimate focus on driving: no stalks, no shifting.

The analyst emphasizes that, when evaluating Tesla, you definitely need to look at the long term, because the company creates disruptive technologies. Keeney said that, over time, "cost declines should enable better margins in the long term. So I think in terms of goals, we're looking at how quickly they can scale, what sort of advantages they get from these battery improvements that they're making over the next few years, and then I said autonomous technology is really an opportunity that's not well appreciated today." She said that ARK has done the work of evaluating this technology, and so they can say that Tesla could even launch a ride-hailing network with human drivers ahead of Robotaxi launch, and still get that recurring revenue line and a great profitability point.

© 2021, Eva Fox. All rights reserved.