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April 28, 2019 by Michael Barnard
Recently, Elon Musk was interviewed by an MIT Artificial Intelligence researcher, Lex Fridman, and made a statement he made earlier.
"Buying a car today is essentially an investment in the future … the most profound thing is that, if you buy a Tesla today, I think you're buying an asset that appreciates, not an asset that depreciates.
A few weeks later, at an investor-only event, Musk went further and said that Tesla owners could make a gross profit of $ 30,000 a year on their cars. This has been termed with a life span of 1,000,000 and 11 year old vehicles, but it's not as if Musk had shown his calculations at the same time.
We decided to examine this question in different ways to evaluate this statement. What is the background for this? What Teslas does it apply to? And has the occasional car market picked up the signal?
Context
This is not news, Musk is talking about it now. The projection of the creation of an Uber competitor under the control of Teslas as the owner himself stayed on Musk's radar for a long time. In the last quarter, Tesla also repaid $ 920 million of debt, started shipping to other continents (which resulted in a late delivery that had a negative impact on its revenues) and spent a lot of money for the construction of its next Gigafactory in Shanghai for the Chinese and Asian markets. (leading to a loss in the first quarter and expected losses in the second quarter), it is highly likely that a positive rating was needed.
A relevant announcement from October 2016 indicated that all Teslas were now manufactured with all hardware, including sensors, neural networks and actuators, so that they can operate autonomously once the software component is finalized, and that upgrade to full autonomy be a live update. Since then, they have fine-tuned their processor, but Musk has ensured owners who purchase full-fledged autonomous driving capabilities that the processors will be replaced for free. And the new vehicles come with the new processors.
~ 6 months before it's in all new production cars. No changes to the sensors. This is a simple replacement of the autopilot computer. Will be done for free for those who ordered the complete self-driving.
– Elon Musk (@elonmusk) October 16, 2018
"Ordered" vs. "order new" may mean additional upgrade fees for those who have not pre-committed, but we'll see how that happens. In any case, this is not very relevant for the rest of the analysis.
Demand assessment
When full autonomy is available, customers will be able to choose to use their car for carpooling when they will not drive it. As the average car rolls 5% of the year, it's a lot of time to make money.
Suppose 50% of the price Uber because they do not have to pay the driver. It's about $ 1 a mile. Suppose a limited number of 10 tickets per day, averaging 3 miles each, and one operation five days a week. That's $ 30 a day, $ 150 a week, about $ 600 a month and $ 7,200 a year.
30 miles consume about 10 kWh of electricity for an average of US $ 0.12 in the US, which accounts for US $ 3.60 per day in extra expenses at worst (most EVs will bill during billing periods with little time of use in the middle of the night or free chargers available). It's $ 18 a week, about $ 72 a month and $ 864 a year.
With 30 extra miles a day, you almost double the average daily driving in the United States, resulting in additional costs of wear, cleaning and tires. Call it another expense of $ 1,000 a year.
$ 7,200 – $ 1,100 – $ 864 = $ 5,336 in annual gross profit for one thing you do not have to think about. Double the trips to 60 miles a day, that's $ 10,000 a year. Triple them at 90 miles a day, $ 15,000. Etc.
New York taxis travel on average 180 miles per 12 hours, or 360 km per day. Most of the time, they travel to preferential rates, not with paying customers. So suppose that 60% of the miles are lower than the fare, leaving 216 miles per day of paid travel. Delete the 5% personal use and this is close enough to 200 miles per day with the fare. That could bring in more than $ 30,000 a year, assuming that Tesla does not take a significant cut from the top. Even that would be manageable with a reasonable upward adjustment in rates.
The Tesla Model 3 comes with all the standalone hardware in the $ 35,000 version. Let's call it $ 45,000 with Autonomy turned on. The second-hand vehicles of the Tesla models S 60 and 70 built after October 2016 are around $ 50,000.
Most cars depreciate by as much as 30% when you have them delivered. Suppose your Tesla lost $ 15,000 in the first year and probably another 10% per year thereafter. Let us work a few numbers to see if you can write off the depreciation.
Yes, we could very quickly anticipate depreciation through moderate car sharing. And, of course, these are depreciation rates that seem reasonable, but these would be affected by greater utility.
If I could buy a one-year-old Tesla Model 3 for $ 30,000 and bring me $ 30,000 a year, it's an incredible offer. It can be argued that people would pay a premium for this. Even a model used S 60 or 70 at this price would be very interesting.
Does the used car market show signs in this respect?
One of the places we expected to see evidence that smart people see this opportunity is in the used car markets.
Early January, CleanTechnica has published two articles on the used car market and the value of Tesla Model 3. The first revealed that the Tesla Model 3 were barely present in the used car market: via a test analysis. Autotrader, we compared the Model 3 to its competitors Audi and BMW and we compared it to cheaper cars with equivalent volume.
We have just updated this assessment, three months later, to look only at the other model year 2019 model vehicles and to see if people were not selling their model 3 in part because of the potential loss. their tax refund prior to 2019. sale. By further comparing apples to apples, Tesla Model 3 is still largely underrepresented in the used car market. This data point might suggest that homeowners think about the utility value of the car, especially since many Model 3 buyers are likely to buy the most desirable car. The hundreds of thousands of Model 3 pre-orders attest to its opportunity at Tesla's price levels, as well as its status as the sixth-best-selling car in the US over the past three quarters combined.
then CleanTechnica pointed out the puzzle Kelley Blue Book take on the resale value of the model 3. Kelley Blue Book has qualified as the best of any electric car in terms of expected resale value, but their own published figures have clearly shown model 3 would retain its value better than any other car, period, but was not titled like that. The second best electric car was the X model in this evaluation. According to the thesis, this might indicate that KBB members understood the value of autonomy, but when you read KBB's comments, you can not find any indication. It does not appear that resale analysts value this phenomenon in the same way that Musk claims it should be, or that previous digital work suggests it should, at least not yet.
Another data point to evaluate is iSeeCars.com's recent analysis of Tesla Model S resales compared to other cars. They found that the Model S was the best-selling second-hand car in its class by a substantial margin, almost 10% faster than the much cheaper Audi Audi and A8 and with nearly half the time of the Maserati Quattroporte on the market. The BMW 7 Series, of the same value, needs two more weeks to move, while the less expensive 6 Series is in the same boat. It is clear from this analysis that Tesla used cars are also of great value in the market, but does this still indicate that buyers value them on the basis of an autonomous taxi service?
Courtesy table iSeeCars.com
We asked iSeeCars for clarification on a number of issues to determine if searching the data would not reveal anything of interest.
The iSeeCars team pointed out in its report that the Model S was the most heavily reduced car, but it was unclear how it came to this statement according to the very text of the report. What they did was look at the average of all used cars in this model to look for the farthest values. The Tesla Model S had the largest price variance used.
But this seemed potentially self-evident, as the Tesla Model S is offered in a wide range of new price levels for different configurations, ranging from the initial Model S 60 at $ 60,000 to the P100D at $ 135,000. It is a much wider range of MSRP than its competitors, which have much more closely segmented product lines and therefore multiple offerings covering the same range. Could this have been the cause of the variance observed by iSeeCars? They looked deeper and provided this interesting idea:
"P100d has the lowest percentage of all versions, 10% or more below market value. The 60D had the highest percentage of entries less than or equal to 10%. "
This seems to imply that the 60D had the largest number of less desirable cars. This could have been an age problem for future owners, but the interest of the P100D seems to go against this idea. In the opportunity market, buyers want as much Tesla as possible.
Finally, there was the question of whether the underlying data showed something about the value of the vehicle with complete self-driving features. If that were the case, car statistics would change visibly between 2016 and 2017. Once again, we asked the specific question of iSeeCars.
"Our analysis shows a breakdown of the model year or year of manufacture in the case of Tesla. 2016 and 2017 are almost identical for the days on the market: 2016 is 35.8 days, while 2017 is 35.9 days. 2018, it is 29.0 days.
Again, the used car market does not show that buyers clearly value the potential for autonomous driving, but simply that they want the best, the newest, Teslas.
Where does this leave us?
Musk's statement seems right. It would be possible to have a Tesla with full autonomous driving and a Tesla robotaxi autonomous ride sharing service bring in a lot of money every year to Tesla owners. However, the underlying market for second-hand cars does not make it clear that nobody cares for them at the moment.
Will everyone sign up for carpooling? Of course not. But will everyone have a family vehicle that can transport every family member where they want without mom or dad driving all the time? Yes, and it's worth a lot too. In fact, it is quite possible that many families of two cars with children can have a single autonomous car and have the same utility. As the US government estimates at $ 9,576 the annual cost of a car, Musk should perhaps boast families to a car instead of Tesla Taxi!
Teslas are highly sought-after used vehicles, which sell faster than their competitors and non-competitors, and which retain their resale value for longer in many cases, but this does not seem to be a way of winning money. the money thanks to the future capacity of Tesla Taxi. Of course, this sounds like Henry Ford in the early 20th century: "If I had asked people what they wanted, they would have said faster horses."
Most people have not yet imagined that their Teslas will become a spinning money rather than a cost. When this begins to sink, the data may change. But by that time, other cars will probably have all the capabilities of self-driving and companies like Uber will use them at competitive prices, which will give the same assessment in the used car market. . May be.
About the author
Michael Barnard is Chief Strategist at TFIE Strategy Inc. He works with startups, existing companies and investors to identify opportunities for significant growth in bottom line and cost reduction in our fast-changing world. He is editor of The Future is Electric, a publication of Medium. He regularly publishes low-carbon technology and policy analyzes at sites such as Newsweek, Slate, Forbes, Huffington Post, Quartz, CleanTechnica and RenewEconomy, and his work is routinely included in manuals. Third party articles on his analyzes and interviews have been published in dozens of news sites around the world and have reached the top spot on Reddit Science. Much of his work comes from Quora.com, where Mike is a leading writer every year since 2012. He is available for consulting assignments, speaking engagements and positions on the board of directors.
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