Why I am not "all-in" on Tesla stock, and only carry a 5 year investment time horizon on it for now.

Updated: Apr 23


KEY POINTS:


🔑 Majority of Tesla's revenue comes from vehicle sales, and global passenger vehicle sales are on a sharp decreasing trend.


🔑 It is unrealistic to assume that Tesla (or any single car brand) will acquire more than 11%of the auto market share, due to the nature of auto buyers' behaviour.


🔑 Competition in the EV space is fierce as it will ever be, and will continue to intensify.


 

Main limiting factor of Tesla's future growth.


Majority of Tesla's revenue comes from their vehicle sales.





Global passenger vehicle sales are on a sharp decreasing trend (reducing the market size available).



  • Reducing at a rate of 7% since 2017 to 2020.

  • for further reading.

  • And the declining trend is expected to persist due to inevitable factors like improved:

  • Public transportation services

  • Ride hailing services



Tesla is projected to own 10% of the global passenger vehicle market share by 2035.

  • According to this financial model I created, click here to view.




Past that, it is unrealistic to assume that a single car brand can take up to more than 10% of the auto market share.


  • Cars being symbol status products,

  • owners will want to have differentiation element.

  • It is unlikely that most people are ok with driving the same car models as their neighbours'.


  • To put things into perspectives, Toyota currently owns 10.5% of the global auto market share


  • It is not improbable for Tesla to obtain more than 10.5% of the auto market share in the future,

  • but it is not realistic.




Cannot deny that competition in the EV space is fierce as it will ever be.

  • Not only by upstarts like Lucid and Rivian.


  • But by the likes of legacy automakers too.


  • Although Tesla is better positioned from

  • Engineering perspectives

  • Ability to scale their production compared to their peers


  • I believe that human beings are not completely rationale when it comes to purchase decisions,

  • especially when it comes to something like cars.


  • Factors such as aesthetics and branding power

  • may have the same weightage (or more) over car buyers' decisions

  • over more important functions such as:

  • Car safety

  • Mileage per charge/ gallon



 


For whom it will make more sense to do an "all-in" strategy for Tesla stocks?


  • There are no shortages of Tesla bulls out there

Tesla bulls community Chicken Genius, Solving the money problem, mark tilbury, all in on tesla stock
Tesla bulls community

  • Influential & knowledgable youtubers out there like:

  • Chicken Genius Singapore

  • Solving The Money Problem

  • Mark Tilbury

  • already have considerably larger sum of capital compared to most retail investors out there (myself included)

  • gaining 30% returns over the next 5 years is enough to multiply their net-worth significantly.


  • Hence for someone who has lower capital in their portfolio

  • and are focusing on dollar cost averaging method

  • Going "all-in" on Tesla stock without an adequate diversification strategy in place

  • may not be a wise strategy

  • considering the various risks present at the stock.



 

What does it take for Tesla to remove their growth ceiling (after commanding a significant market share in the auto industry)?



  • 2 key main drivers for Tesla to sustain their high revenue growth rate in the coming decades will be their:

  • Energy segment

  • which is still at infancy stage at this point


  • Tesla Bot (Optimus)

  • still a concept at this stage.

Tesla’s most important product in development is its Optimus humanoid robot
Tesla’s most important product in development is its Optimus humanoid robot

What is my strategy for Tesla stock?


  • As of the point of writing, Tesla is about 1/5 of my portfolio.

  • My investment time horizon for this stock will be 5 years time.


  • I shall continue to monitor the development of Tesla's expansion for

  • their energy segment

  • and development of Tesla bot.

  • until I decide to increase my investment time horizon for it again later.



 

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