Goldman's Trip to Tesla Takes Investors to Imagination Land

Motley Fool analyst Blake Bos gives his take on some of the media comments regarding the Goldman Sachs Group's  (NYSE: GS  ) recent trip to California to visit with Tesla Motors  (NASDAQ: TSLA  ) . 

In the video below, Tesla sales projections for North American vehicles for 2017 and beyond are compared with the 2012 sales volume of  BMW's and Audi's entire vehicle lineup. Do these sales goals support the current Tesla market valuation? 

Blake discusses the scientific consensus estimate of a 7% average decrease per year for the cost of battery technology. He also shares the main reason why the decrease from 2011 to 2012 was double that estimate.

Lastly, Blake talks about alternative fuels and also gives an example of how Berkshire Hathaway (NYSE: BRK-A  ) has chosen to invest in battery technology.

Tesla's plan to disrupt the global auto business has yielded spectacular results. But giant competitors are already moving to disrupt Tesla. Will the company be able to fend them off? The Motley Fool answers this question and more in our most in-depth Tesla research available. Get instant access by clicking here now.

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  • Report this Comment On May 30, 2013, at 5:56 AM, TurbulentTime wrote:

    Sign.... if there are people who will listen and watch this type of video comments....

  • Report this Comment On May 30, 2013, at 9:29 AM, SteveTG3 wrote:

    7% improvement annually, for ten years is consistant with 75% improvement (even better if the improvement is compounded), not 48%.

    for whatever reason, all of your other comments seemed equally off the mark... items well doable and encouraging for a several fold increase in Tesla's market cap in the next decade, yet characterized in the video as unlikely and "already baked in' the stock price. if you guys gave me a 3 minute video rebuttal I could make this quite clear, but I'll leave it at this for my post.

  • Report this Comment On May 30, 2013, at 10:58 AM, TMFBos wrote:

    @Steve TG3

    I agree with you that the items are discussed aren't impossible, but I'd argue that they are highly improbable.

    As for the 7% decrease in price per year, I think you did it backwards. It would be over 75% improvement if you look at as a growth rate, but prices decreases every year by 7%. You compound by a smaller base every year, which makes the overall move smaller than if you were compounding an increase. That's because your base each year gets bigger with positive rates of growth.

  • Report this Comment On May 31, 2013, at 11:01 AM, SteveTG3 wrote:

    Blake, thanks for the response, and I see what you are saying about the 7% decreases. I think you are correct. Tesla must be forseeing a step increase in there somewhere.

    I have to ask though, "highly improbable" re Tesla achieving 500k vehicles per year Goldman talked about, why highly improbable?

  • Report this Comment On May 31, 2013, at 12:43 PM, TMFBos wrote:

    Hey Steve,

    Well it's always easy to poke holes in any estimate/prediction and it mostly boils down to simply a personal opinion. My reasoning for the low probability of Tesla reaching 500k vehicles with it's GEN3 production is largely due to a lack of time and a viewpoint the company isn't acting in isolation. I'll start with time.

    The company hasn't said exactly when they'd like to reach that target, but it seems to be expected in that gen 3 line which will take place after 2017, so we'll just say by 2020. In my opinion the probability of developing and rolling out 3 new models and having them all sell extremely well in 7 years is daunting at best. Given a longer time frame and continued top notch products, I think the odds of achieving 500k is much greater, but 7 years seems awfully quick.

    On the point of Isolation, it seems wallstreet and mainstreet have forgotten that Tesla doesn't operate in a vacuum and those 500k vehicles will have to be obtained in either new markets or from existing car owners. Considering the price points, I think it's safe to assume most Tesla buyers aren't 1st time auto owners. That being said, the company will have to compete for the customers with all of the industry stalwarts and any newcomers as well (not to mention other technology). Along the way, any huge design breakthroughs will surely be noticed by the competition and incorporated in their line ups as well.

    Obviously a company as young an nimble as Tesla has the capability to overcome the odds stacked against, and it would be a really great American success story to see them compete with the big OEM's. I just think investors are paying too high a price for that possibility at today's prices and need to keep a ear to the ground on the auto industry at large.



  • Report this Comment On May 31, 2013, at 9:58 PM, SteveTG3 wrote:

    fair enough Blake, I give those outcomes greater than a 50% probability.

    I agree to roughly 2020 as the date. I see it far more as dependent on one successful outcome, Gen III. I see S/X as one phase they are far along in executing. if they can come within 80% as successful an execution on Gen III as S, they will sell those cars worldwide handily in my opinion (80% of CR's best vehicle tested ever is still quite good, and they'll have the public hungering for 4 years. who knows, they could also nail it as well as they did the S). They get there and going from Gen III car to Gen III small SUV is not rocket science (pun intended).

    perhaps in 5 years we start to see cars from other automakers in the same league as Tesla. perhaps. then they'll be competing 0 track record against Tesla 5 year track record.

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