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Model Y Is A Game Changer With Autonomous

|About: Tesla, Inc. (TSLA)
Summary

Model Y fits Robotaxi regarding experiences and costs.

Rough cash flow calculation.

Tesla (TSLA) held its Autonomy day on 4/22. During the event, Tesla provided details on its plans on autonomous driving. I am not an expert to justify if Tesla's autonomous driving will be as good as what they described; but based on the performance on current Navigate on Autopilot system, the people who experienced the autonomous driving, and the information regarding the capacity of HW3, I believe there is a high possibility that Tesla will be able to achieve what they introduced. The most interesting part of the event was the Robotaxi idea that you or Tesla will be able to rent the cars (Model S and Model 3, based on Elon) to others, like what Uber does right now - just without a driver. The Robotaxi will cost around $0.18 per mile with the rent rate of $2 or $3 per mile per what I heard from the event. I immediately connect Robotaxi with the newly introduced Model Y, and I believe when Model Y is ready on the market, it will turn the table of current auto industry.

The size of Model Y, from current information of multiple sources, is estimated as 4,830 mm in length, 1,643 mm in height and 1,933mm in Width. Based on people who test drove it (or test ride it), the SUV has larger interior space compared with Model 3. It is really important when you ride on a vehicle. Ample room means better experiences during the ride that your body does not need to feel tight and stressful. The riding experience is very important for people who calls a taxi - most of them just want to relax during the ride.

Regarding the cost, it comes from two dimensions: from the Model Y owners and from Tesla. For Model Y owners, their cost will be formed as the fixed cost of full settlement SUV, and the variable cost of power bills and SUV maintenance fees. The maintenance of an Electric Vehicle (EV) is usually significantly lower than Internal Combustion Engine (ICE) vehicle, as most people know. So for Tesla buyers, the variable cost will be the power, which is estimated as $0.18 per mile. The cost is significant lower than ICE SUV of 0.73 per mile, which based on newsroom.aaa.com. On top of the lower cost, it is autonomous! That means you need little effort (like tap your phone) to earn money from your Tesla EV. Model Y is a balance between initial cost (compared with Model X or S) and riding experiences (compared with Model 3), and I believe more people will have motivations to buy Model Y when it is ready on the market.

For Tesla, Model Y cost is estimable. I estimate Model Y cost based on Model 3 cost as they share around 70% of parts per multiple sources. Current fixed cost for Model 3, including materials and labor and production, is roughly $28,000 per German engineers in 2018. Since Tesla has hardship to release its base model of Model 3, I believe the total cost to build Model 3 is around $34,000. Since the base model of Model Y is $39,000, I can reasonably assume the cost for Model Y is around $38,000. Recently, Tesla announced leasing program that after lease, the vehicles will not be sold but will be used for its Robotaxi. In this way, Tesla is able to generate cash flow to lower its cost of Robotaxi.

With information gathered, I will exam if Mr. Musk's expectation that Tesla's money will be extremely positive is correct. Based on Statista.com, around 30% of vehicle sales accomplished from leasing. I assume the leasing will generate average $12,500 cash flow (or lower $12,500 cost), and the average sales price for Model Y will be estimated as $43,700 (current long range price), the cash flow generated from selling one Model Y will be 43,700-(38,000*0.7+(38,000-12,500)*0.3)=$9,450. If a Model Y is under Robotaxi mode to travel 100,000 miles and Tesla charges $0.75 per miles, it will be able to generate cash of $75,000. Apparently, the Robotaxi will generate much more cash compare with selling a Model Y - about 7.5 times depend on how long Model Y travel autonomously with customers on it. The total cash flow generated from selling a Model Y will be estimated as $84,450 If Model Y can be sold the same number as Model 3 in 2018, which is 139,730, then the total cash flow will be estimated as $11,800 Million, or roughly $12 billion, in U.S. Please be noted that my estimation is very conservative: I did not assume higher Robotaxi miles, and I did not take the lease returned cars into consideration. In addition, I can almost guarantee that Model Y will out sell Model 3. Moreover, if we include Model 3 and Model S as Robotaxi, which will double the number, Tesla will probably be able to generate $24 billion cash per year.

As of now, no other vehicle producers have a big plan like Tesla, and this is the blue sea for Tesla. The only thing that trapped Tesla is itself - when Tesla can release Model Y and Robotaxi features, and how reliable Robotaxi it is. Since Mr. Musk is legendary that he has turned most ethereal to real, I believe this will come true in next 5 years. Future is near.

Please let me know your thoughts on this.

Disclosure: I am/we are long TSLA.

Additional disclosure: Very Small Position On TSLA (less than 50 shares)