Tesla is a really nice car to drive. But Tesla is even the finest software & services company in the automobile sector. The fact is this: Tesla does not need to be overly valued just on the number of cars it has sold, just as we are not counting how many iPhones Apple has sold recently. Apple has moved into the services era, well beyond a life tethered on hardware.
I see Tesla as the only current “automobile” company in the world that has a clear playbook to make, possibly, more money on software and services than actually on sales of metals packaged as cars. First, the company is piling tons of money from regulatory credits: “In their most recent shareholder update, Fiat Chrysler Auto disclosed that as of March 31, 2020, its agreements represent total commitments of €1.1 billion”. Yes, that was how much Tesla made from FCA for selling credits which could have expired!
In some European nations, automakers must sell a certain amount of electric, hybrid electric or other zero emission vehicles (or ZEVs) to meet regulatory targets. Those not meeting must buy credits from someone to be in compliance. Tesla sells only ZEVs, and certainly doesn’t need to keep the credits that it earns; it resells them before they expire.
So, if you focus on volume x price as you value Tesla, you will get many things wrong. The regulatory credits, subscription on software updates and services are turning this “car” company into another software juggernaut. If you own Tesla, there is no year you would not be sending more money to Tesla!
By 2022, I expect Tesla to introduce a metric: ARPU, average revenue per user, just as people do in telecoms because Tesla owners need to be paying new recharge “service” fees to the firm. Look deeper, this is the future of automobile business, a closer model to software business. Tesla is pioneering it at scale.
This is not only from 2022 onward… if you buy a used Tesla some software which the previous owner had in his Tesla and paid for it you need to buy again from Tesla if you want to use it. If you buy a used Tesla, pay only what the steel parts are worth. The rest you need to buy again from Tesla. If you buy a new Tesla and drove it once arround the block, its value shrinks to the scrap level…. except you find a dummy who does not know that as soon as Tesla know the ownership has changed he need to buy all the software again…..
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