A story of secrets, insanity and numbers. For every great story there has to be one or more real secrets. And because the crowd does not see them — the sane are insane until the truth prevails.

Truth, Josh & Tesla

Why the bull vs bear case, legit case vs fraud case, innovation case vs no innovation case changes based on the above?

Why would Tesla story change based on Valuation? Hasn’t the narrative been overvalued from the IPO in 2010?

Why the SEC should be the ultimate deciding market boss? — even if Elon was removed from company? Could the tribe execute w/o his physical presence?

Why should be sustainable profit the decisive moment while there is always a strategic trade-off between growth and profit — given the entity can allocate capital towards the growth and execute.

What if there was only ONE metric that is worth watching instead of listing 100’s of confirmation biases either on bull or bear side?

The metric: Autonomous Service Ready (ASR) Net Revenue

The net revenue that is available for the L5 Autonomy service provider across the whole fleet (already accounting for system constrains).

System constrains:

Fleet Availability: 80% vehicles available.

Gross Revenue per mile = $0.35 (source: https://ark-invest.com/research/self-driving-cars).

Cost per Mile = $0.10 (electricity, insurance, repair, cleanup, etc.).

Yearly Utilisation = 80% *(30 miles/hour, 20 hours/day, 365 days/year).

L5 Provider vs Hardware owner Revenue ratio: 25% : 75%.

The total net revenue available per year for Tesla from L5 Autonomy is in blue below. It shows the capacity ready when the L5 system is switched on.

Q1 2019 as example, just to get the idea:

Quarterly Deliveries: 100k new vehicles into the system.

Cumulative Deliveries: 470k (HW1 is excluded).

Not shown — Miles available: 65.8 billion.

Not shown — Total (Gross) Revenue: $13.2 billion.

Net Revenue per Year available for Tesla: $3.3 billion.

All this capacity is ready today and waiting for the new hardware chip, software update(s) and regulatory approval(s).

The ASR yearly capacity grows from $3.3 billion at Q1/2019 to $6 billion by Q4/2019 and to $10+ billion by EOY 2020.

You can play with the system constrains, less vehicles, write offs after certain time, lower or higher revenue per mile, net revenue % fee, and so on. However should be enough as a baseline.

If the Autonomous Service Ready (ASR) Net Revenue is the only number to watch, then the only question would be: Can Tesla make it to Autonomy L5 with current Hardware (HW3) and software strategy based on vision & without LIDAR?

Maybe the second one — does Tesla even has to be the first one with L5 — or just the first one at scale?

If the above was true, then this is scary for multiple players in the ring, current auto and future technology companies as you cannot do L5 Autonomy with non-electric vehicles (safety + cost competitiveness):

USA Q4/2018

NORWAY Q1/2019

STILL NORWAY

NETHERLANDS Q1/2019

CHINA Q1/2019

It’s interesting to hear both bull & bear cases in Realvision’s “Tesla: Savior or Fraud?”

I really hope Raoul or Grant would do a sequel and bring Josh Wolfe, Jim Chanos, Stan Druckermiller or Kirill Sokolov.

Epic battles require epic thinkers. There are strong original non consensus short arguments — however those are not mainstream. A great short argument is always beneficial to longs and vice versa.

The ultimate Battle Royale of 2019 will be again $TSLA vs $TSLAQ, and it won’t be televised. Just yet..

And let’s not forget — we want combustion engines off the streets, no matter which companies actually do it.

Thanks for reading and please do not clap or share thus these secrets only stays between you and me and nobody else will ever know.. ;-)

You can always tweet me your thoughts.