TSLA: Only Computer on the Road

New Street Research analyst Pierre Ferragu upgraded shares of Tesla from Hold to Buy and his price target is now $578, up from $400. He foresees Tesla generating $100B+ sales and $16 E/P by 2026. Based on the assumptions and forward P/E ratio of 75, he estimates Tesla could trade for $1,200 per share by 2025.

Tesla now trades for 116.28 times 2021 earnings estimate. For comparison, GM has a forward P/E ratio of 6.93 and Toyota’s forward P/E is 16.16. In 2019, Toyota sold more than 6.5 million vehicles, compared to about 0.37 million for Tesla. Yet, Tesla’s market value, at $362B, is almost double of Toyota’s market capitalisation of $185B.

Is this justifiable? If so, how? Maybe no one has a clear answer. While we can make any wild assumptions on the economic value, the penetration rate of EV and Tesla’s market share to justify any given valuation, one thing seems to be warranted. It is wrong to compare Tesla and other automakers. And, indeed, Tesla is very different from other vehicles on the road now in one essential aspect. Tesla is a computer while other cars are not, just like smartphones are computers while feature phones were not.

In Tesla, all the peripherals (e.g. sensors, motors, batteries, steering and so on) are directly connected to a powerful central SOC (system-on-a-chip) that comprises of neural processing units, GPU, CPU, ISP, DRAM controllers and so on, and are directly controlled by the SOC. On the other hand, other vehicles are still mainly highly skillfully assembled metals and wires, with fragmented electrical components (that, though, sometimes are computerised ECUs) scattered and embedded (and sometimes connected each other) all over the chassis. Most manufacturers are trying to consolidate and integrate these fragmented ECUs into an integrated ECU (like one in Tesla), but it will be years away. Thatis why many manufacturers are struggling with things like OTA strategies, “connected cars” and so on. On the other hand, Tesla, as a native computer, can handle anything that computers can handle without complex tricks.

Some time ago, Mercedes-Benz announced the alliance with NVIDIA for “Software-Defined Computing Architecture for Automated Driving”. This seems to be a right move, and the new architecture will be rolled out starting from … 2024. Other major manufacturers have similar timelines for their own integrated ECUs. One needs to note that this has been already implemented and rolled out across the fleet of Tesla. Tesla actually was using NVIDIA for the previous generation architecture and is currently on the third generation, which they claim 7 times more powerful than NVDIA’s chip. All the more importantly, Tesla can achieve those innovations by themselves while other manufacturers sourly lack these essential hardware/software skills.

More than 10 years ago, some people turned computers into telephones and feature phone industry perished and digital camera industry plummeted. We are not sure what will happen when computers are turned into automobiles. It might not be such a big thing, as most of the traditional car makers now seem to assume (maybe correctly). In this case, Tesla share might be in the huge bubble territory. Or, it might change the whole industry. In this case, the opportunity will go far beyond just automated driving and Tesla seems to be one of the best-positioned companies to leap forward in this uncharted market.

At the least, Tesla cars are now only computers running on the road, learning how to drive by themselves, with the trainers (called owners) who are willing to pay to train Tesla’s software. And several years worth of lead in these areas might not be easily reversible.

The downside for Tesla is big and clear, and the upside is elusive but huge. I will hold on to the existing long position for now.

Journal de deuil

In his “Lover’s Discourse“, Roland Barthes wrote “The necessity for this book is to be found in the following consideration: that the lover’s discourse is today of an extreme solitude. This discourse is spoken, perhaps, by thousands of subjects (who knows?), but warranted by no one; it is completely forsaken by the surrounding languages: ignored, disparaged, or derided by them, severed not only from authority but also from the mechanisms of authority (sciences, techniques, arts). Once a discourse is thus driven by its own momentum into the backwater of the “unreal,” exiled from all gregarity, it has no recourse but to become the site, however exiguous, of an affirmation. That affirmation is, in short, the subject of the book which begins here . . .” Almost the same things can be said about “Mourner’s Discourse”. Although the psychological aspects of bereavement are studied comparatively more intensively than those of love, the mourner’s discourse is, in most cases, distilled and reduced into abstract psychiatric samples.

Barthes’s “Journal de deuil” is exactly the “Mourner’s Discourse“, though, unlike “Lover’s Discourse“, all the fragments in this book are spoken by only one subject (Barthes himself) and the book lacks structures as apparently this was not written for publication. The diary starts on October 26 1977 – the day after his mother’s death and ends on September 15 1979. Shortly after, in February 1980, Roland Barthes was knocked down by a laundry van and died on March 26 1980. It was about two and a half years after his mother’s death. Barthes’s depth of grief is painfully obvious from reading just two or three fragments.

I re-read this book just recently. My own mother died, and about two and a half years later, I was involved in a serious accident which almost killed me. I came back home after spending several months in hospitals, then re-discovered the book. There I found the pool of language that must have had been spoken by millions (including myself), the words that needed to be heard by, but never reached an already non-existing audience. Some fragments were polished and sometimes even elegant (well, these were written by Barthes), but in many cases felt like stereotypical, ordinary and sometimes even cliched expression of grief. Still, these words felt unique, poignant and my own. I sometimes was dissolved in tears reading these fragments, just like Barthes burst into tears listening to Souzay singing “J’ai Dans le cœur Une tristesse affreuse” (In his “Mythologies“, Barthes complained that Souzay invested particular words with superfluous emotion through an exaggerated phonetic dramatisation). These were words that needed to be spoken and still needed to be heard, and I did hear these words spoken in this book.

Louis Jean Calvet, in his “Roland Barthes”, wrote about the subconscious of the driver of that laundry van. It is mystery that Calvet did not write about the subconscious of Barthes. Why did he not notice the van? Did he not see it approaching him, or his eyes did see, but he himself did not notice? I myself was involved in the accident after two and a half years of serious grief after the death of my mother. It was 100% not suicide and purely an accident. But looking back, I am now 100% sure that I somehow invited the accident. I did not die, miraculously (as my doctor said), but I think I must have had died by an accident or illness soon or later if there was not the accident (if I was superstitious, I would have said my mother saved me by that accident). The accident took me away from my mercy seat and threw me into a rehabilitation hospital for some months and it did some trick.

My mother passed away in November 2016, I was almost dead in May 2019.