The Big AI Idea Episode 2: The Tesla Report

Hi, AI Futurists!

Welcome to the second episode of the BIG AI Idea, where we delve deep into the most promising AI companies, projects, or technologies once a week.

Tesla has been a love story for innovation and excitement ever since the launch of the Model S in 2012.

After 20 years and the sale of 6 million Teslas, reaching a peak valuation of $1.2 trillion with a 743% rise in its stock at the height of the pandemic, we find ourselves in 2024 with a valuation of $535 billion, representing 44% of its peak value.

The expectations placed on the company and Elon Musk himself are exceedingly high, making it challenging to impress investors enough to encourage further investment.

However, this situation is poised to change for several reasons.

Let's delve deeper into what lies ahead for Tesla, examining the numbers and exploring potential launches that could drive an increase in stock value.

• Understanding Tesla. The EV Company. Gigafactories. The First Principle Method. Charging Stations. Model 2. Numbers

• Understanding Tesla. The AI Company. Optimus. FSD. X AI.

• Understanding Tesla. The Underrated Stock. The Future Ahead for the Visionary Company

Tesla’s production mirrors Elon Musk’s innovative mindset. Embracing the First Principles Method, Musk eschews traditional approaches, preferring to break down processes to determine what’s physically feasible.

Gigapress and Lean Production

Tesla eliminates unnecessary steps, evident in the minimalist design of its interiors. Moreover, electric vehicles (EVs) boast fewer components compared to their internal combustion engine counterparts. Notably, a Model 3 requires three times less production time than a similar competitor's EV.

Thanks to Gigapress, the Model Y's rear underbody, previously composed of 70 individual metal parts in the Model 3, has been streamlined into just two large components.

Production Profits. 

Tesla outshines competitors by a large margin in profits. In 2023, Tesla's average profit margin per car was $9,574, surpassing BYD ($1,550), Toyota ($1,197), and VW ($973). Arguably, Tesla stands as one of the most productive and efficient companies globally.

Charging Stations and Battery Production Business 

Tesla boasts over 6,500 supercharging stations worldwide, totaling over 50,000 superchargers. Projected to generate $8-12 billion annually from non-Tesla vehicles by 2030, in addition to the $4 billion yearly revenue from Teslas, the charging station business exhibits a remarkable 33% year-over-year growth. Its potential to become a standalone S&P 500 enterprise is evident.

Maintenance & Repair

With 6.5 million vehicles on the roads, each Tesla incurs an average annual maintenance cost of $300, amounting to approximately $2 billion in annual revenue from maintenance alone. Tesla repairs can be costly, ranging from $4,000 to $20,000, depending on the issue.

Production Numbers 

In 2023, Tesla manufactured 1.35 million cars, a significant increase from the 509,000 produced in 2020, coinciding with the peak of the company's stock value. Projections indicate a production of 2 million cars in 2024, with a projected year-over-year growth rate of 50% until 2030, aiming for an ultimate goal of 20 million cars.

Achieving this target would necessitate the introduction of a $25,000 car, referred to as the Model 2. With a $10,000 profit margin per car, this would result in an annual revenue of $200 billion solely from production.

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AI undeniably occupies a central role in Tesla's culture of innovation. For more than a decade, Tesla has been at the forefront of developing Full Self-Driving (FSD) technology, pioneering efforts in this field long before others dared to venture. At the helm of this AI revolution stands Elon Musk, whose visionary leadership propelled humanity into the AI Age.

It was Musk's bold initiative to launch OpenAI that catalyzed a pivotal moment in history, laying the foundation for transformative advancements like ChatGPT and beyond. Without his foresight and determination, the landscape of AI innovation would undoubtedly be starkly different. Musk's vision not only shaped the trajectory of Tesla but also ushered in a new era of AI-driven progress that continues to redefine our world today.

Elon Musk wanted to invest $1 billion a year and integrate OpenAI into Tesla. That's why he parted ways with OpenAI.

Let’s look into 3 large businesses that Tesla will most probably be launching within a year: FSD (Full Self-Driving, Optimus, and X AI).

FSD

Tesla's pursuit of full self-driving (FSD) technology spans nearly a decade, leveraging the first principles method and visionary camera-based approaches instead of the more conventional Lidar technology. FSD-enabled vehicles have been a staple offering for Tesla, now priced at $10,000.

However, it's the recent neural network AI overhaul, witnessed in Version 12.3 of Tesla's FSD beta, that truly showcases the company's strides. By replacing hundreds of thousands of lines of code with a neural network AI capable of self-learning, Tesla has catapulted its FSD capabilities, hinting at the possibility of reaching Level 5 autonomy by year's end.

Optimus

According to Elon Musk, Tesla's humanoid robot project may one day become a larger business than Tesla's vehicles. From its humble beginnings just a year ago, where it struggled to walk, Optimus has undergone transformative updates every six months. Today, it's capable of intricate physical tasks and even dancing, signaling promising strides towards commercialization in the near future.

X AI

Meanwhile, X AI emerges as a strategic response to the closed-source AI development prevalent in industry giants like OpenAI. X AI's elite team swiftly crafted Grok, a GPT 3.5-level chatbot, in a mere four months. Their ambitious goal? Creating a super app (the everything app) similar to WeChat (but better), boasting multifunctional capabilities encompassing communication, news consumption, financial transactions, and more.

While Tesla may not immediately register as an AI powerhouse, its decade-long history coupled with ventures like Optimus, X AI, and FSD solidify its position as a formidable player in the AI realm. With these projects on the cusp of realization, it's evident that Tesla's influence extends far beyond the realm of automotive engineering, firmly establishing itself as a leading force in technological innovation.

In 2020, Tesla became a large company, with its stock soaring by 743% at the peak of the pandemic. The company reached its zenith in January 2022, boasting a valuation of $1.2 trillion.

Despite the company's dramatic production, revenue, and technological growth since January 2022, Tesla's stock has fallen by 56% from its peak, currently settling at $535 billion.

Key Highlights About the Tesla Valuation and Stock

• Profitability. Production has quadrupled in number, and the profit per car has also quadrupled. As a result, the profit margin has increased by 16-fold compared to when the stock was valued 150% higher.

• FSD. Version 12.3 of the Full Self-Driving update has seen dramatic improvement, leading analysts to believe that the upgrade to FSD Level 5 may come as soon as December 2024.

• Model 2. The introduction of the most basic $25k Tesla, expected to be announced in 2024, could pave the way for achieving the goal of 20 million car sales by 2030.

• Optimus. Tesla is likely to make significant updates to its humanoid robot in 2024, setting the stage for its commercialization, starting with repetitive tasks.

• Battery Technology and Charging Stations. Batteries have become the new oil industry for vehicles, and charging stations are the new gas stations. Tesla's battery technology and cost are far ahead of its competitors, currently priced at $150/kW with a target of $50/kW. With 55,000 charging station connections worldwide and major car manufacturers agreeing to use the Tesla charging network, it's projected to generate $10 billion per year. The charging network is growing at a rate of 33% annually, making it a potential S&P 500 business in its own right.

Tesla is achieving a 20% profit margin per car on average, while its rivals, especially Ford, are experiencing losses. Faraday went bankrupt. Lucid and Rivian are losing big. In 2023, EV sales surged by 35% to reach 14.5 million cars, out of a total of approximately 60 million cars sold.

Moreover, Tesla is not just an automotive company but also an AI and technology powerhouse. The company has the potential to diversify its offerings, including the possibility of developing its smartphone and integrating it with X AI. The possibilities are virtually limitless.

In conclusion, Tesla stands as arguably the most advanced technological company of our time, and its trajectory is undeniably upward.

Anticipate significant announcements by December 2024 that could disrupt the status quo and lead to a sustained period of rapid growth.

And yes, we believe it is a great investment considering all the above. 

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