#276: Is Tesla’s Stock Still a Buy?

0:00Tesla's retention rate fell from 73 % in June 2024 to 57 % in May of 2025. ouch that's that's big numbers when tesla is the leading eevee seller by a mile and like yeah it does come back to politics as well we're not going to dwell on that fact but like eevee enthusiasts and trump fans like that's not a very close venn diagram there and and elon musk has gone a long way to piss off an awful lot of people not only is he pissed off those people he's also pissed off trump and the rest as well with his antics i'm saying all of this before they get rid of the seven and a half grand ev tax credit

0:44damn it how we doing good to see you mike it's the afternoon we usually don't record a tot after 10 a.m you you and me we're early guys but it's actually tuesday afternoon and i kind of miss the fact that when we usually hit the mic the day lies ahead of us full of dreams and hopes and aspirations but then we're after we're just not afternoon chatter so i hope this we can really pull this podcast off yeah i wonder now will people notice the drop in performance the difference between half nine and half half three um before we get into a liter of coffee that always helps uh before we get into it do you have a little something to say about profit yeah for sure i mean one of the things i've learned as a co-founder of a business that brings cutting-edge products to market is that the minute you bring something to market the market does a downturn i was in such a huff after we launched profit uh kind of a soft launch in january because there was a slight downtick and i emailed our head of data uh who lives in Vermont and also his team are in Massachusetts and up around the tri-state area and he wrote to me an email that I reread often because despite the fact that they that I espouse the principles of long-term investing like as I said I was in a huff that we launched profit and it dropped a little and we have been tracking and building and measuring this since time began well 16 years and he wrote and I'm going to read his email directly which was never meant to be something that's an outward communication but he said emmet as you know six months of performance in the quant world and in the world of any investment strategy is very close to 100 noise and zero percent signal meaning that you cannot draw any conclusions on a strategy after a half year if we go to the long term data as you already know we see outstanding performance with profit when we look at the sharp ratios profit has the best return with slightly less volatility than all the other 19 models we've been tracking and managing for 16 years and that was nice because i needed somebody to tell me to shut up now thankfully profit turned that corner is going up and up and up and right now um it's five-year performance as of this millisecond is it's up 171 percent on the nose it's 10-year performances the strategy is up 382 percent and its performance since inception is it's up 1535.89 percent and i guess the point i'm making is that we have built what i absolutely absolutely sincerely believe will prove to be the greatest individual investor's tool of all time.

3:43What we need to do now is make it far, far better. And better doesn't mean changing the formula, it just means super understandable, super low friction, extraordinarily beautiful to use. But the same product that we've got today is the one that we are going to drive into that market with a hammer and wedge over the next couple of years. And it is, I think my Wall Street future future is predicated on the last 16 years of work so what i am saying to our loyal listeners is if you want to get seven days free go to useprofit.com backslash mws7 think of my wall street so useprofit.com backslash mws7 have a look at it for seven days free of charge and then its next rebalance is going to occur in about 10 days from now nine days eight days when the podcast goes live so have a look before the rebalance and then the rebalance will kick in and you're on your way folks just trust me that of all the products we've built this is the one that we are going to hang our hat on that doesn't mean this podcast is going anywhere fast in fact we're going to keep nattering about the stock market as the years go by you and me mike um and on that note what should we talk about today well we're talking about tesla today and i feel tesla is a weird one because i feel like we talk about elon musk almost every week we don't actually talk about tesla the stock that much so it's good to check in and kind of i know gauge where it is because there's so many things going on with tesla it's always been seen as beyond the car company and all the rest so i'm going to take the car side of things you're going to take the the hotty toddy hoi all the rest all the fancy stuff um so yeah i think you just get into it uh talk about car sales in europe car sales in the us the ev tax subsidy and kind of where tesla is compared to this time last year um so yeah so i'm gonna start with europe because a bunch of data was just published this week from reuters um yeah and things things aren't great so uh we saw in q2 this year that sales were down 16 year over year in the auto section um but in europe it's much worse than that so uh in july across entire across the entire region so europe norway and the uk i I think sales fell 40 % year over year.

6:14And I think there's two main things causing this. Obviously, and I don't really want to dwell on the Elon Musk part, I think, but we can't understate the brand damage that Elon Musk has done in the last year, we'll say. So a survey done recently where 94 % of German consumers said they would not consider buying a Tesla, which is pretty damning, especially considering they have a gigafactory there in Germany. and now in fairness Germany he did particularly damage there in that he he came out in favor of far-right party there he was advocating for them and all the rest so that that's going to be an extreme reaction but I do believe that the sentiment is shared in pretty much most of the countries across Europe there are exceptions but France uh in August Tesla sales fell 47 47 percent year over year while the overall car market grew 2.2 percent Tesla sales fell 84 percent in Sweden despite the EV market being flat there.

7:1042 % in Denmark and 50 % in Netherlands all in the last month. So it's pretty bleak. There are some exceptions. Portugal, Norway, which is a leader in EV sales. Basically, every new car there is electric. So that is a turn up for the books. And then Spain, which introduced some very favorable EV subsidies. So Tesla sales were up 161 % year over year in Spain. Wow. Power of subsidies. There you go. Well, we're going to get into that as well, which is a silver lining. But then when you look at that, BYD sales were up 400 % year over year, obviously coming from a lower base. For sure. For sure. But, you know, before you push on, just one comment and observation is that it is of no surprise to me that the Germans would vote against a non-German brand.

7:57It is the, Germany is the Detroit or the Motown of Europe and the Motown of some of the world's best performance brands, whether it's mercedes or bmw or some of the higher brands and then the everyday brands certainly of europe whether it's volkswagen or and all the groups that that they own so it doesn't strike me as strange and especially when a couple of weeks ago the ceo of um mercedes came out and said that if the ev market or sorry if the electric uh party keeps continuing that their business is dead so i'm not a bit surprised we look we don't want to double click down on the worst performing market but if you had to straw poll a bunch of pedestrian voters i still think uh they'd say germany would be least in favor of an american electric giant because of its heritage and its history yeah yeah that's fair enough and it's a good point but i want to touch on byd there because that seems to be the kind of bet noir here for tesla especially in europe um so their european extensions it's kind of only really starting in the last like two years maybe uh but really really eating into tesla's market share recently so tesla sales are falling 40 year over year in that same time period byd's market share has tripled obviously it is from a lower base but the company is producing vehicles for cheaper and that's the main difference like and i think this has always been a blind spot for tesla and not just in europe but in the u.s as well of not providing that lower priced car and they got away with it for so long they had this premium positioning that worked i think because there wasn't many viable uh viable competitors and and but i mean by viable competitors is competitors that can offer a similar level of performance so the byd ato three that offers a 260 mile range for about 35 000 bucks uh whatever that is in euro i think around 30 grand or less.

9:58That's 15 grand less than the Tesla Model Y, which is the most popular model by far. So the fact that Tesla lacks that low-cost model, I think really restricts it now when there is a competitor to come in and fill that void. So that would be the main critique I think Tesla has been dealing with when it comes to auto sales. Obviously, there are so many more factors involved. There's the Elon Musk thing, there's the politics thing, there's brand damage. but this is something the company has always been aware of do you know what i mean and it's and it's always been kind of pointed out by investors and it's always been where if we're looking at tesla as a car company why isn't the focus going there and i think we can get into why later the prioritization of everything else kind of has come first and obviously elon musk is running three companies and all the rest but but that really that really is coming back to buy it now and and it's happening in the us as well so in the us the downturn isn't as dramatic as europe uh q2 sales were down 13 uh q2 delivery sorry we're down 13 it's not 40 it's not like 84 in sweden but it is the largest decline the company has seen in its history and there there are you know similar factors here but as well as that the upgraded model y underperformed didn't really spur new sales as they were expecting and and it's this lack of innovation from this assembly line is kind of apart from the cyber truck we haven't really seen anything new come out of the company for quite some time it's all upgrades and it's like test the way like the model y performance which is coming out now in september that that's just a like extension of an existing line we haven't really seen anything yeah and like the cyber truck is a whole nother conversation i don't think we even need to get into that because they're just they're not able to produce them they're not able to sell them um so that that is what it is and i think a lot of the focus is going into the uh cyber is it robo robo trucks or cyber taxis whichever whichever they're uh whichever they're going but like i think a lot of the production line is going to there yeah yeah um so yeah could you put this lack of innovation down to most distractions maybe or maybe it's that all the focus is now beyond cars to ai to robotics to robo taxis and like it's always this conversation with tesla because because that is maybe where this company ends up do you know what i mean it's true very much so i mean i totally agree when i first saw the model s uh my friend bill bill mann i met him in alexandria in virginia and he just bought them it's the first time i recall certainly the first time i sat in one and that was probably 12 to 15 years ago and i thought it was the most beautiful thing i'd ever seen on four wheels i felt its design values were paralleled that of an aston martin i happen to think that they have the nicest um bodywork engineering and um but since then it's amazing how tastes augment change and move forward you expect designs to be upgraded beyond just a tweak in the lights or tweak in the trunk the model 3 came out uh in ireland i think the first set of deliveries was around 2019 here we are six years later there's been a modest upgrade but then they made some huge design missteps along the way i was with somebody who was considering buying a model 3 and i went with them and they had at that moment anyway gotten rid of the indicator stock for the sake of clean design I think the objective was to have either no or just one stock sticking out from beside the steering wheel which I suppose if you're sitting in a design studio with in a post-Apple world sounds good but when you're in Ireland specifically where the left and right hand turn is very often dictated by a thing called a roundabout where you have to indicate to go into the roundabout and indicate to come off the roundabout when your steering wheel is upside down those buttons on the steering wheel to indicate left and right are also upside down and the wrong way around and very confusing and it was the biggest design mess I had ever observed in a car because it's not unreasonable for somebody when they're on a roundabout to just flick this that's the way we behave you flick the indicator stalk but suddenly you're you're second guessing to indicate left i have to press the right hand button so anyway i'm over emphasizing a point i'm sure i think they've reintroduced the indicator stalk whatever but the point is that the cars are a little i think bland is too strong a word but uninspiring and um there's a there's a tesla parked probably 20 feet from where i'm sitting but what i will tell you is when i walk out into the driveway of my home faced with a choice of two cars i will 100 of the time happen to tesla because it's great fun to drive yeah no no and i'm not i'm not saying that but but i think you're touching on kind of what is happening with tesla as well is that there is almost a stagnancy to it do you know what i mean where obviously we've seen what this company can do if their goal was to produce that$30 ,000 car with similar performance metrics, but everything downgraded or whatever else, they could easily do that.

15:23But that's not really where the priorities are. And this would be a problem if Tesla was another car company. But the whole point is Tesla is not another car company. It's a trillion dollar behemoth. It's worth, I don't know, trading at 200 times its profits. And it's seeing and its perception is something completely different. So it's kind of weird to critique what it does with its auto operations when the perception of it as a stock is so much more than that. Do you know what I mean? Yeah, very much so. But we are seeing that deprioritization come back and bite it because it's losing market share.

16:04It's lost that lower price gap in the market is being filled by competitors. I read a piece just yesterday that General Motors Cadillac, GM has become the number two EV seller in the US. But, so, sorry, I get this stat here now. So it's doubled its EV sales in the first seven months of 2025. Tesla's have fell 11%, obviously coming from a much lower base. But the big thing that stuck out from the article was that one in 10 of new Cadillac buyers previously owned a Tesla. Do you know what I mean? And it's this brand loyalty. Wow. that is that has really become an issue where tesla had the biggest brand advocates ever for one for a while and now maybe that's not the case roy just published an article uh this summer so it said that tesla's retention rate fell from 73 in june 2024 to 50 57 in may of 2025.

17:02ouch that's that's big numbers when tesla is the leading eb seller by a mile and like yeah it does come back to politics as well do you know what i mean we're not going to dwell on the fact but like ev enthusiasts and trump fans like that's not a very close venn diagram there do you know what i mean and elon musk has gone a long way to piss off an awful lot of people not only is he pissed off those people he's also pissed off trump and the rest as well with his antics uh since then and with doge and all the rest like as in we're gonna feel like this is all and i'm saying all of this before they get rid of the seven and a half grand ev tax credit so that's gone at the end of this month 30th september oh right across the whole of america yes and so the projections are showing that potential ev registrations could drop by 27 without this subsidy so you have to imagine okay maybe q3 this year which would be july august september that'll see a short-term person sales people are getting in while they still have the chance but after that i don't know what do you know what i mean like coming into coming into this um coming coming up to this obstacle with such a weak positioning already i it it looks a bit grim like so you're you're at a premium pricing point which worked when there wasn't a lot of legitimate competition that's not the case anymore both in your core market you're becoming even more affordable but then on top of that your international markets are getting eaten up by cheaper chinese vehicles you you never got around to plugging that more affordable car market which you could have but obviously priorities were elsewhere and and it's it's all just it's all looking a bit bleak to be honest i haven't i haven't even scratched the surface of what musk has done in terms of brand damage and all the rest but but yeah i don't know and and and this is the thing where if you drill too far down into what tesla is i suppose as a stock and as a car manufacturer maybe you get a bit lost in in how it's perceived more widely am i making sense there where yeah i mean one thing that just kind of comes to mind for me is that you know the america sorry the buying public not the american public the global buying public generally has a short memory so while trump and musk were doing three-legged beer pub crawls together and were besties for about a year or half year whatever it was and then they had a big spat and fallout I I have a feeling that people like their memory of these things are quite short-lived because because when it comes to the end when you're parting with multiples of tens of thousands of dollars for your next vehicle you're going to buy the one you most want now I agree there's a dotted line between what you want and the behavior of the leaders of a company and there should be but as soon as he went quiet I kind of thought the half life of pretty much that kind of carry-on is quite short like I do not know I don't have the data as to whether the average buyer has forgotten about Elon Musk's behavior or still has a noise level of resentment that needs some therapy so what's like I mean are people still a bit annoyed with him yeah and there's also just the fact of maybe this isn't true because we've been you know dated with them for a decade now but there's an overexposure of him do you know what i mean oh yeah like between his his twitter stuff and everything else it's like when people even like beyond the trump stuff it's just too much like he's in he was this like smartest man the world yada yada yada and that's slowly being eroded by each tweet he puts out there do you know what i mean he's he's kind of he's kind of uh he's taking away the veil of of adulation of sorts you know there is a certainly it's a it's it's quite interesting to watch because the man was clearly he is sorry there's no past tense he's he's clearly extraordinarily talented he's an extraordinary visionary and he was extraordinary lucky i mean lucky is when preparation makes that opportunity so he was the right person at the right place at the right time with the right brain and in a movement just like steve jobs will say you know it's not coincidental that he actually rang up uh it was either hewlett or packard i can't remember which one of them say hey can i work for you and he worked for hewlett or packard in their in hewlett packard's garage or first kind of place and that's just the fact that so job is in the right place at the right time and he's the right visionary the right entrepreneur to bring that vision forward and i think elon musk is is a um a reflection of that uh of that storyboard but um what was my point oh yeah but the thing is that he uh his he has hit a terminal velocity i think in efficiency and what i mean by that is he's bought x he's the founder and ceo of tesla he's the founder and ceo of spacex he is the founder and ceo of neuralink i don't know if he's the ceo but he's certainly the founder of neuralink he was a founder of uh open ai as far as i know he was um not anymore he's now suing them what oh yeah you know those two are at each other's necks but i i've forgotten something i know paypal of course which was he initially wanted to call it x.com i mean his role called boring company oh yeah just a boring company tunnel uh thing in vegas that's i don't think that yeah that's still there for sure and and yet he still has time to voice an opinion on how the uk is going to rack and ruin and i saw him on twitter last night saying or an ex last night saying well if it's if it's heresy to raise a flag it's heresy to like it was a kind of it was right-wing chit chat if you like are super right wing and i wonder has he just like are all his businesses running themselves and is he now just this kind of uh social commentator or is he actually still sleeping under the desk in the tesla factory and you know changing the way things are are being done 100 i'm gonna i'm gonna do i shouldn't be doing this live i'm gonna do a side project and count the amount of tweets he's made in the last 24 hours you just mentioned how busy he is i'm going to count the amount of tweets he's made in the last 24 hours you can talk you can talk about the ai the robotics the uh self-driving right now but i need to i need to do this because you just described the busiest man in the world do you know yes correct i mean to be the ceo as a hands-on thinking ceo of any one of those human changing endeavors is such an incredibly all-immersive job and even if you've got the world's best team if you are actually the CEO that team reports to you the CFO the CTO the CIA they report to you and you are the orchestrator so I just wonder who is the CEO by proxy of each of those businesses because if he can tweet the number of times you're just about to say in 24 hours the guy has more time than he needs when i'm told to tweet by our cmo once a day i'm like oh i'm too busy for that are you kidding me and that's the truth you know one tweet because you gotta i mean you gotta create value you just don't as a oh i just had eggs for breakfast you know if you if you're gonna create something of value to stop and ponder it and try and make it original how on earth is this guy doing it so what has he done mike i'm still i'm only at 21 hours ago and he's at 22.

24:53What? Now maybe he has a team, a bit like Picasso had a team drawing, you know, mother and child and the dove and whatever, and then he just signed it at the bottom. It's like, here lads, here's my thoughts, here's my beliefs. I want you to sit there and tweet all day. Okay, I'm at 45, that was 10 hours ago. Ah, come on. See, that doesn't make sense. There's nobody in a normal job, one job, an average everyday job. There isn't a barista in Starbucks who could do 45 tweets a day. There isn't a chocolate maker in Cadbury's who could do it. There isn't a CEO of a civil service business in Ireland who could do 45 tweets in a day.

25:34Everyone is too busy for that. Well, look, now you can question my maths, but I think it's 62 tweets in the last 24 hours. Busiest, richest man in the world. so like 62 tweets i don't even see tweets is a book but you know what i mean we're talking about like you know we're talking about where tesla's dropped the ball and it's like your ceo is tweeting 62 times in the space 24 hours take that phone off him and tell him to get back to the drawing board we want another tesla a rah rah rah bang desk we want a nicer one better lights and a cooler dashboard yeah so yeah there you go there is yeah one of the major issues you can you're pretty evident pretty quickly he's the david copperfielder who's more relevant nowadays he's the david blaine of investing or sorry of of ceo leaders how did he do that how did he lock himself in a block of ice for 17 days how did he run all those businesses and tweet 68 times in 24 hours the man is a miracle all hail elon i don't know about that but uh no i'll be cancelled for that false gods before me and all that no way all right but let's all right we've discussed we've discussed elon and we've discussed the auto side of things but let's let's get into the i suppose what so much of tesla's valuation is based on which is the the the kind of potential yeah and that's the thing we we invest in a business based on what we can see now but also what we anticipate coming down the line and there isn't a single person of our age and i'm not saying you and i are the same age but of our generation if you like who didn't notice the ipod and then see the iphone and then say well this is a product that's got sex appeal and is going to last for generations.

27:30And most people who saw the white cable and an iPod go, I knew I should have bought Apple then. Well, when you take that kind of effect and look today and go, well, what do we see in Tesla now that we can go, that is just going to get bigger, even despite the warts and the malfunctions that you've just explained and discussed. Well, the business today, specifically the automotive business today, accounts for about 80 to 85 percent of the revenue energy generation and storage something between six and ten percent of revenue and then services and other stuff is the balance so that's kind of when you look at the contribution the revenue chart of tesla today 85 cars and then a whole bunch of other stuff makes up the other 15 percent if you look five years down the track and that's quite a long way away in a business that innovates and at least tries to bring products to market as fast as Tesla does and succeeds, but very often not to the speed that Elon Musk has said.

28:31When you look five years down the track, we are being promised an entirely different business. It could be unrecognizable. And sure, that doesn't mean the automotive will still be there, energy generation storage will be there but it's the autonomy the ai self-driving and robotics where we can see a new chapter is being written and certainly being promised so those two things have been promised so effectively very operative word i think when it comes to tesla there's been so many promises yeah promises made by elon from what i can see generally are delivered but not to the time he promised yeah so like he promised an entry-level car and we had to wait longer than we expected um and by the way i'm thinking the model three um so those promises they they're out there but i think there's ambitious timelines which i are perhaps being used to clobber the the proxy ceos in the various uh business wings but for two decades tesla has been synonymous with evs and um we can't argue that it has upended the global auto industry and now everyone else is rushing in so the ice was broken uh by tesla and then all the penguins came in and jumped in so uh really bad analogy there but hey work with me but it has forced legacy automakers to accelerate their own ev roadmaps and um musk has long insisted that tesla is not just a car company He's always saying that and his mantra is Tesla is an AI and robotics company.

30:17And those two elements are now coming into clear focus. So as we probably discussed on this podcast, I'm getting old and gray and very forgetful. In halfway through this year, a couple of months ago, they launched our first robo taxi service in Austin, Texas, and also ramped up development of Optimus, which is the humanoid robot designed to handle repetitive labor. um and the first thing i'll say to our listeners is hop onto youtube to see these uh robots cook and fold clothes and those kind of mundane domestic duties i mean if it worked all the time and never decided to kill its master i would absolutely post tesla on my wallet and go here give me one of those robots uh take this there's my wallet and send me my new housemate i love him He's great.

31:05I mean, the promise of this robotic thing in your house, it's just brilliant. Who put out the bins or the garbage as they say in America? Robot did. What? Ah, he's great. I'm going to the pub with him. Best thing ever. I hope you give him a name. Oh, yeah, of course. I'm going to give it a name when I have one. I'm definitely going to buy one if it does have the stuff we've been promised. Haven't gone there yet, Mike, to be honest, but it'll probably be something to do with Queen, the band, maybe Freddie. i don't know we'll see but anyway call it john john after your co-founder yeah john uh good old john so anyway these early moves are what musk believes will be the most the company's most transformative business lines over the next five years and even kathy wood well i shouldn't say even kathy wood but especially kathy wood of arc uh arc invest has been pinning the future of the business valuation on on these products and if their successful autonomy and robotics could represent the majority of tesla's valuation by the end of this decade which is only 10 minutes away really when you consider that 2026 is kind of nearly on our lap now so as i alluded to in tesla began operating its first robo robo taxi service in austin and uh when i say quietly there was no i mean there was no brass band or fireworks that night but from a media perspective it was not a quiet launch even newsletters in schools on the aran islands off the west coast of ireland where i had little flyers about tesla's launch to say like every news outlet was talking about this quiet launch of the robo taxi service in austin preposterous how people could say it's a quiet launch um so it wasn't really that quiet you know it was everywhere it's quiet launch in terms of its scale do you know oh yeah yeah that's true well if that's the very limited number and very limited area do you know what i mean it's nothing on the abilities of waymo yet like you're on the money i mean there was only think 10 or 20 model wise and are fitted with tesla's latest full self-driving software um and chargers were I mean say riders were charged a symbolic flat fare of $4.20 per trip which is typical of Musk.

33:31I don't understand what this $4.20 thing is. He's always on about$4.20 He has something to do with drugs. Yeah, it's like a weed culture thing from way back when $4.20 is when you go smoke doobies. In the afternoon. Dad goes smoking doobies. In the afternoon, well for you. Apparently, yeah. And then like the 20th of April is the big kind of national holiday for for cannabis there you go every day is a school day but anyway he was charging 420 uh very clever yelan good nice one um but either way every car had a had a safety monitors aka aka person seated behind the wheel so in other words the robotox taxis were not fully driverless just yet but they represented the first time tesla allowed paying customers to experience this system as a ride hailing service um but having a stranger up there behind the wheel certainly removes a layer of the magic if you ask me it's like i was in a self-driving car with the driver who wasn't touching the wheels get out of town we don't want him or her that's not a driver i mean that's not self-driving that's a dream anyway but for regulators and all the rest it was clearly a cautious first step and uh it's it's definitely impressive don't get me wrong but it's still a long way away from this thing that you just said there the level four autonomy uh from alphabets waymo which is out there driving people around driverless right now as we chat on this podcast you know but anyway on on our last podcast last week i gave a fleeting explanation of why technically Tesla's approach is definitely unique.

35:14Most rivals, including Waymo, are using these LiDAR sensors, whereas Tesla is pursuing this vision-only strategy, which in fairness is the technology drivers have used since the invention of the car in the form of eyeballs. So Elon is basically, or Tesla, is using cameras combined with neural networks, aka eyes with brains um to process uh the driving environment and musk argues that this is the only scalable way to achieve autonomy since it does mimic human human vision uh rather than layers of expensive sensors on vehicles and the way most solution as we've seen or talked about in the past it's it's inelegant it's like it's like somebody emptied a kitchen sink onto the top of your car do you know yeah there's a colander up there there's a bit of wire hanging over like i mean they can't make it look good as far as i'm concerned looks like a little it is and it's the same argument it has been the same argument um for however long now like nearly 10 years where if tesla can pull off this strategy it is going to be you know maybe the greatest the the greatest pull that anyone's ever done in terms of the the difference in cost structure between say a waymo self-driving car and a Tesla self-driving car would be astronomical.

36:34And then the scalability of, of the entire network after that, whereas like Waymo is inherently unscalable right now. The cost it takes to build one Waymo car is, is astronomical. I think it's up, I think it's at 150 ,000 or something with all the, with all the gear on top. And now they're in fairness, they're using Jaguar, Jaguar X pace SUVs and stuff as well. So they're like, it's not meant to be profitable anytime soon, obviously. Yeah, yeah. But there is the economic reality of if, and it's a big if, if Tesla can pull it off at scale, that there's no competition in terms of unit economics.

37:18Yeah, there's no question about it. I mean, critics of the Tesla way that the cameras with neural networks include former engineers and safety regulators. And they say that vision only autonomy introduces higher risks of the edge case errors like phantom braking and lane misjudgments and erratic behavior in complex intersections. And I have a note to self that says insert joke here about driving with my wife. And then I've scratched it out. So I'm not doing that. But the earlier ports of Malston included praise for smooth rides, and it also documented instances of sudden stops and near misses.

38:00I'm saying nothing. Back to former joke. But anyway, regulators at the National Highway and Traffic Safety Administration are definitely watching very closely. So that's self-driving. And I would be of a mind, without getting in, we can debate LiDAR versus neural networks and cameras. and the state of one tech versus the other. But I'm of the mind that it wouldn't be this far if the end point wasn't nearly certain. Do you know what I mean? I believe that Tesla will get to that end point. Yeah, I'm actually not sure. I think they're going to have more hoops to jump through. Oh, they will. Safety-wise and regulation-wise.

38:48going down this route um and i think like that's why there was a fella up front uh in the in the front seat of the driverless car in austin do you know what i mean i think i think elon musk has has forced to do the soft launch in austin just based on the amount of promises he made but i don't think that's probably true yeah i agree with you there like that's not a true pilot no it's too small too few it's not data it's almost it's a it's a casual flex it's the kind of ticking of the box or maybe to save them from being red-faced yeah and so like i do think it's further behind than competitors but it can afford to be further behind if it pulls it off but again i'm talking about big big ifs so let me pause that for one minute let's click pause on autonomous cards for just a minute and then talk about this optimist the human humanoid robot this is something i know nothing about apart from watching that movie with will smith back in the day right well our great movie that the isaac asimov um uh book i robot which will smith starred in a movie version of about it's probably 10 years ago oh longer i'd say 20 i think it was a great movie did you like that one mike uh i can't really remember to be honest it was pretty dystopian i i thought it was superb anyway look let's not talk about the movie review podcast we'll do that next um but yeah optimus is tesla's humanoid robot and even in the tesla showroom here in ireland they have a mock-up i presume of the robot sitting there standing there i should say over in the corner and the business has already kind of shown off loads of prototypes with the latest version showing improved dexterity with the old hands and mobility and walking with stability and performing basic tasks like lifting and sorting and making a cup of tea for the master who he will never kill because master is kind um so it it is a pretty already it's an impressive promise uh as is the fully autonomous driving like it's the type of it's taking the banality out of life if you like your the banality of driving if you if you don't take pleasure from driving it would be lovely to sit in a car and it take you where you need to go and just as sitting in owning a home or occupying a home is a never-ending list to of to-dos that no one will do except you and they're boring but um I imagine the applications would be more industrial than, you know, having a robot butler.

41:25It's like factory line work and all that kind of stuff. Well, you're absolutely right. And that is where the, I guess, the big wins will first occur. So like Musk has already said that Tesla is using Optimus inside the factories to assist or to repetitive processes. But I'm not so sure. I don't doubt there's robotic function all over the place, robotic arms left, right and center. but I would love to actually see is that Optimus robot, which looks like, for those who've never seen the robot, but have seen Star Wars, it looks like C-3PO, kind of. You know the gold robot that looks like a human?

42:04It's like a silver version of C-3PO. So, like, I'd want to meet the shop steward in their union, in the robot's union. Take me to the head of your union, please. But either way, true to form, Tesla has set a really, really aggressive roadmap for the production of Optimus, considering nobody really owns one or has seen one. So they said that, or Elon has said that they are going to make 100 ,000 units per month in five years. So the factory will be turning out by that metric 1.2 million of these robotic humans per year in five years. And if that plays out, I suspect it's certain that with the variability being the timeline, we will and see and experience an optimist around us in the not too distant future.

43:01Like five years is not far away. And if that five years becomes six, seven or eight, God willing, we'll all still be here, but we'll have this robot. So the near term business impact of optimist is actually negligible. So back to that pie chart I spoke about where, you know, well over two thirds, sorry, I mean, say three quarters of it, probably 85 % of it is cars, EVs. There's nothing in that pie chart now, not even the tiniest sliver that's down to robots. because the development cost of one of these things today is absolutely astronomical did you see that thing a while ago I think it was a either a piece in the New Yorker or the economist or something about the cost of a chicken sandwich if you had to do it yourself did we have this chat on the podcast I don't think so no go on yeah so like if you had to make a chicken sandwich yourself from first principles where you have to grow the wheat to mill to make the bread and I buy a cow and raise it and milk it to get the butter and raise a chicken and bring it to its feathery end and so on the price of a chicken sandwich was something like like two thousand eight hundred dollars which makes even my local evocus 10 euro job look cheap i never thought my local sandwich place would look cheap but if i had to build it myself from first principles it actually looks like a great deal but anyway so the current economics of the optimist is a bit like the do-it-yourself chicken sandwich do you know it's like that do you know was the heaviest lifting throwaway question i've ever heard in my life i don't know what you're talking about but what i'm saying is if you have to make your own optimus robot it's going to be a hell of a lot more expensive and they're currently at that that's the stage they're at they're growing their own chicken sandwich but the intent is clear like tesla sees optimus as a labor substitute in both as you said industrial and domestic context so in factories optimus could handle the more dangerous tasks that exist and in most or all factories the monotonous tasks which absolutely exist in in every factory and then in homes and like elon musk is talks about it cooking and cleaning and even caring for the elderly which is lovely it's like you buy your aging grandma a robot and go there you go grandma yeah he's the best in the world if you need a cup of tea just say it's a robot there and so we don't sit down for a chat i'll leave it go now i can't hear you the robot will look after you but if such use cases materialized and you are buying a robot to work in your factory or to take out your garbage or empty your dishwasher etc the total addressable market could be measured in trillions of dollars not hundreds of dollars not millions of dollars of billions trillions and if that's true i think apple are going to unveil something into space and i would not be surprised if um they have an their annual event is in about a week i'm sure we're going to be talking about in a podcast and i saw them broadcasting something it's going to be an awe-dropping event now i wonder what that means they've tagged apple have tagged the the the release whatever they call the next releases they're all dropping instead of jaw dropping so I can't figure out what that is but certainly if robotics deliver the banality of life will will be reduced and I think Tesla is in certainly prime position to be seen as the solution and hopefully as a shareholder to be the solution but either way either way Mike looking five years ahead tesla's autonomous autonomous vehicles and robotics unit could not only uh reshape your laundry cupboard or whatever you call the place you keep sheets in the house but the company's financial profile like that that pie chart um will be radically changed and evs will of course remain tesla's backbone and that's where they began and that's where they will continue but elon musk sees a future where most of the company's value stems from services such as robotaxes such as ai subs uh subscription services such as humanoid robots who i presume not only you'll have to buy the yoke for 20 or 25 000 the robot but there's no doubt going to be an annual maintenance or software upgrades or if you want them to be able to or her to be able to sing spotify as as he or she's cleaning your house you're gonna have to pay for that but the so anyway the the robo taxi market alone is projected by our friends over in our confessed and several others to reach about one trillion dollars as a globally by 2029 so that's a huge opportunity and tesla certainly believes it's going to capture a significant share of it with its installed base of millions of vehicles installed base is another way of saying if you bought a tesla and it's in your driveway way they're counting it as part of their installed base and in theory any Tesla equipped with full self-driving could join the robo taxi fleet and the general idea is that your car boogers off and and basically makes you money when you're inside binging on Netflix it's off driving around and generating passive income for owners and recurring revenue for Tesla who would of course would take a slice of the pie but in practice and in reality scaling this is going to be really slow and it's going to be constrained by regulatory approval and public trust and we've half joked fully in earnest in the past that would take some time for that car to drive you down a borean in the west of ireland um but but still musk is saying that there's going to be hundreds of thousands of autonomous vehicles in the u.s roads by 2026 hundreds of thousands within circa 12 months so um he says after that it's going to expand to multiple countries after that and and that kind of feels exciting to me because it really is just a matter of months ago but i equally say this is you know he has over promised with timelines repeatedly um and then there's the rollout of these purpose-built vehicles on top of this which we most of us haven't seen the two-seat cyber cab and then there's this robo van uh which is expected next year which i suppose speaks to your point that we haven't seen um product innovation i don't paraphrasing what you said but we haven't seen new vehicles hit the road from the tesla uh workshop and and that's going to accelerate adoption um but as i said i really believe that the optimus opportunity is not only real but it's properly exciting when you look at those videos and and um a 25 000 investment in a robot today is alien to all of us you know people might have bought a roomba for 500 because it cleans the floor but when the value uh that is delivered from this machine that does all those things in the work in the factory or in the home that humans shouldn't do or wish not to do then you kind of start the 25 000 price tag will suddenly be look cheap the way a car look suddenly became well not cheap most people don't regard purchase of a car as cheap they see it as an absolute necessity um and i do believe we will see a day where having your own man servant in the house robot servant is actually going to arrive and you know they totally believe they can mass produce human humanoid robots and as you said uh i robot here we come so before i shut up because this i'm really going on about the point but i'm very interested in it like he he is talking about as i said millions of units annually within a decade and if if that's achieved it would dwarf today's robotic industry um but still it's it's a super speculative kind of uh event i mean if if if you if you could imagine like mayo county council which is like one of the counties one of 26 counties in republic of ireland like if tesla decided to drop 50 autonomous cars in castle bars a little thank Thank you for being such a great place.

51:26It's vision only autonomy would get a kick in the arse from the county council. They'd be like, you can take those cars and you can bring them back where they came from because it's not there yet. It just is not there. You would not trust. No one in their right mind is ready for that. The technology is not there yet. And actually, I wouldn't be surprised if the optimist challenges are even worse. if the town of Castlebar was given 100 Optimus robots, should they have nothing doing it? Because the lad would keep, they'd keep falling over. They're not there yet. So this technology is so early. Like go onto YouTube and look at Boston Dynamics.

52:03They've been the leader in this space for ages. I remember looking at Boston Dynamic YouTube videos, honestly, I'd say 15 years ago where they'd built a robot that looked like a dog and behaved like a dog and balanced and ran like a dog. And then they've moved on to ones that look like something from RoboCop the movie, you know, properly solid, big, muscly lump of metal. And they are the leaders and they still haven't really put anything out to market. So I just think, you know, to try and bring a point on this, despite all these risks and regulations and strategic logic, you know, I think they're both going to happen.

52:40I absolutely believe autonomous vehicles, the Tesla way with cameras and neural networks, will happen the question is when and i'd be almost 100 certain home robots and factory robots will happen as well what form they'll take and when it will happen is not in any way proven but certainly the most crystallized view of that reality is tesla saying it's going to look like that it's going to cost 25 000 and it will cook you an omelet when you feel like one yeah okay there's a lot to take in but i think it's it's indicative of anytime we talk about tesla anyways because there's so much so much of that potential there mixed in with the kind of reality of the current business which is still predominantly a car company um oh yeah for sure i think i think that's a fair like i know we kind of went on a bit about everything and anything are you trying to give me a minute i didn't go on about anything i'm trying to paint both of us we're nearly talking an hour about one company but it is it is kind of true to the fact that that's how the stock has always been perceived and how it's always kind of looked at as as the now and the then yeah and they parlayed their promise fairly well yeah and there's always the big if but in fairness like as in if you're an early investor you're doing incredibly well so it has delivered for its investors even if it is still you know it's snowballing this potential to keep going and going and going so far it has worked and so far it's shown to have this potential to execute on that if that makes sense okay so here it is mike um your nephew your fictitious neck nephew asked you to invest a hundred dollars and they said to you i love tesla would you buy a hundred dollars worth of tesla for your nephew or would you invest it elsewhere i put it elsewhere would you yeah i'd actually go with the tesla i would but listen what our listeners love is tickers they want to hear what stocks are gonna grow big so just for fun will we pitch to each other i don't know if you're even ready for this but an other ev idea which is least worth looking at no you're going solo with this one but i am intrigued by the company you said to me yeah yeah sure and i i pinged derek riley who is mr ev in ireland and who's been on the podcast before and who i should get back on the podcast because he's brilliant and he's always got a really bleeding edge cutting edge view of the ev market he test drives virtually everything that rolls off uh the production line in the electric vehicle world he goes to every motor show he manages nevo and is generally a super nice guy who's a proper expert so i was looking through a whole bunch of there's so many ev companies that like most people haven't heard of there's so many of them and listed on the stock exchange But the one that I kind of stopped on earlier today was one commonly known as Leap Motor Technology or Zhejiang Leap Motor Technology.

56:05But I'm just going to call it Leap Motor. And it's an EV manufacturer found in 2015. It's listed on the Hong Kong Stock Exchange. And it has a technology platform and a full EV chassis. So it's another EV. and if you just it looks a lot like a lot it looks to me like a byd but with a nicer color and the reason it's i paused on this one was that the revenue has grown at an astronomical rate year on year quarter and quarter so an awful lot of ev companies their um revenue as we discussed with tesla has stagnated or dropped or you know it just it's not the type of uh shape you're looking for in a growth investment but that's not the case i mean the company had 92 year-on-year revenue growth in 2024 and that follows a previous increase of 35 in 2023 so it's revenue growth accelerating so and it's then the business is also backed by stelantis which holds a 20 stake in the business and that's a good thing because whether you know stelantis or not um you definitely know other cars 100 uh fiat uh peugeot citroen opel voxel maserati uh ds jeep ram dodge chrysler even alfa romeo a favorite of mine so like like uh stelantis owns a lot of in fact 14 iconic automotive brands and is a 20 stake in these lads uh leap motors so i just thought i'd pitch to you that is one to look at and interestingly the return on equity has excuse me has improved uh year on year and it's gone from four years ago neg 66 percent to neg 40 percent three years ago to minus 25 percent two years ago to just uh last 12 months return on equity is just minus 4.9 percent and and what i'm saying is that the return on equity as a measure of capital efficiency is drastically and vastly improving year on year so it might be a big one i mean uh so i did ask what do you think of the cars and he was graceful and gracious he's the first person in ireland to uh test drive one um and without him saying it i suspect he wasn't super excited but uh he said there's probably things that could improve but his review is on youtube so if you're truly interested have a look in that but uh it could be one of the one of the brands that survive uh leap motor so uh has a good backer plenty of cash might just continue to grow hong kong stock exchange have a look i'm not recommending it by the way i didn't give it a whole lot of research but there that's all i know about it okay good stuff uh yeah luckily there's clearly a lot of innovation coming from china in this space and it's not really got to get into the US with the tariffs there but it's clearly taking over a bit in Europe and we've seen it with our eyes with BYD especially but a lot more coming this way so yeah okay that's everything Tesla I don't think I have anything else to add I have no pity remarks I'm getting tired our afternoon evening recordings I'm not sure if I'm built for it but we'll survive the optimist robot will be doing our podcast for five years It'll be a hello, Mike.

59:34Hello, Emmett. So what's on the board today? It will be, it'll be great podcast. Sure. Evan will tune in for that. Exactly. Okay. Just a reminder as well. We're going to have all the links for profit in the show notes. So wherever you're listening to this podcast, just scroll down and you can access that seven day free offer right now. And that's it. Emmett, thank you for joining me. Thank you everyone for listening. We'll talk to you next week.