Investing early into Tesla was probably one of the best financial decisions I have ever made back. I started investing in Tesla back in 2020 after the Covid-19 crash. Back then, I had a small risk appetite, only investing in index funds or well-paying dividend stock. I knew that if I wanted to financially retire early. My only way is to invest my money into an asset that has the highest potential risk-adjusted. I spend a solid 3 years learning and knowing more about the company before deciding to buy it. Tesla in my opinion is the best risk-adjusted asset that I am loading up! I started 2020 with $20,000 under my name, by the end of 2021 I had $100,000 and I aim to achieve early retirement by 35.
In this blog, I will elaborate on what goes around my checklist of what is required before I invest my money.
Challenges faced as an Early Tesla Investor
Back then, I invested more than $20,000 of my money saved into Tesla. It was the money I had earned from my national service. The people around me question my discussion saying” why do you invest in Tesla. Don’t you watch the news that it is a bad stock to own.” There were so many negative reviews about the company and I guess many early Tesla investor felt the same way. Most of these reviews came from the legacy automakers, who were too high on their success and comfortable with what they had. I knew that this EV Tesla is going to wipe them off their floor. I will discuss why I have such a high conviction for the stock and why I believe I will retire with Tesla stock.
Why do I have a High Conviction for the Stock?
I understand that there is a lot of skepticism toward Tesla stock. The stock is highly volatile and has fallen 3 times for more than 40% during the past 3 years. I have learned to appreciate the dips as a great buying opportunity and look long-term for my investment horizon. In all the dips, it made me a greater investor as I learn to become a better stock investor. A business person that looks up to Elon Musk’s leadership, and an investor that aims to make not just myself better, but for the entire humanity.
I was a studying for my diploma as a Clean Energy Engineer that focuses on building sustainable and renewable energy. To learn that, I had to study different kinds of electrical energy we have for our world to run on. I believe clean energy was the way the world should head into and that humanity would do what is right. I was wrong after learning the economics of how the world run. Well, to put it simply, at that time, there is no way certain clean energy would make it into the market.
What I learnt from my Diploma
Solar energy were costly to build and had an energy conversion efficiency of maximum 50%, on average 50%. Wind energy is most efficient but it is only viable to limited amount of country. Hydropower energy is not a great sustainable energy long term as it has devastating effect to the environment around it long term. And finally nuclear energy, even though it is the most cleanest and highest energy efficiency in the world, everyone is afraid of the danger it can cause.
Feeling lost with a diploma cert that i had, I knew I wanted to make change in this sector but I don’t know how I can help. I read up on what could be done to make great changes for humanity and I happen to learn about Tesla. Even though their solar energy efficiency or work wasn’t building fast, I knew they had the same vision i had. To accelerate the world transition to sustainable energy.
The company believe that solving the vehicle carbon emission problem would be an important step to lowering carbon emission. By making all vehicle driven to be electric, it reduces carbon emission by great fold. The bad publicity for Tesla for the whole period before 2020 to destroy the company. It didn’t work because the company is able to prove the nay sayers wrong. That was when I knew i had to invest into this stock! At the end of 2021, Tesla valuation is worth all of the vehicle business.
How I view the World
I learn 1 major point when i was studying in my Internship. That the world doesn’t run on self-rightiousness, it run by the dollar. If we are not able to make clean energy cheaper and efficient. We will never be able to make energy produce in the world sustainable.
Why Tesla is able to beat all the rest of the legacy automaker? Well it is because of how the business operates. Unlike other electric vehicle company, Tesla has no machinery for automotive. This means the company is able to focus solely on building Electric vehicle. Apart from that, the company doesn’t invest in marketing, by making the product better than the rest, there is no need to market themselves. By only investing into their mission, Tesla is able to grow their company exponentially greater than other manufacturer.
The Car Model
Tesla vehicles have an average of just 17-18 pieces in their powertrain, compared to 200 in a standard ICE. Even if we are incredibly charitable and take this highly conservative estimate for the number of components within an internal-combustion powertrain, Tesla is still functioning with less than 10% of the parts that ordinary cars have. At the most optimistic estimate, it is barely 1% of the pieces. By greatly reducing number of parts required for a car, it lowers the cost of manufacturing and increases the speed of production.
Elon Musk said in his last Q1 2022 report that he would be surprised if the company does not produce 50% year-over-year growth. I agree.With how fast the company is growing, Tesla is facing a high demand problem and low supply issue. In 2022, Tesla open 2 new Gigafactory which are Giga Berlin and Giga Austin. The purpose of expanding 2 new factory is to diversify the risk of having open a company in one sole region and to increase production to the next level.
This two factory are going to kill it!
Back in 2020 and 2021, the main Giga factory that produces Electric vehicle were coming from Giga Shanghai. Giga Shanghai is currently producing 600,000 vehicles per year. With upcoming improvements, Tesla could soon push production to over 1 million units per year and possibly 2 million units with a rumored second factory in Shanghai.
LOOK AT THE SIZE COMPARISON! With Giga Austin and Berlin operational. It’s no question that the upcoming production will be awesome! I believe that Tesla will create over 1.7million vehicle this year compared to it’s nearly 1million vehicle manufactured in 2021.
As mention that Tesla doesn’t invest in marketing. The company has a huge brand loyalty. Names such as the Tesla Motor Club or Tesla Owner SG. By having brand loyalty to market for the company, Tesla itself is able to focus their business on improving their manufacturing and improving the business overall.
It’s no surprise that the first mover advantage plays an important role in a who gets the majority of the pie. Tesla currently holds more than 70% of the EV market share because it is able to produce more and faster than all other legacy automaker. This is an important matrix because it gives consumer a better first impression.
When consumer are thinking of buying an EV, the car that comes to mind is Tesla because they will see and know that Tesla is the most popular EV brand in the market. A great example to look at is during a Super Bowl commercial held in February. While many companies such as BMW, Ford, GM and Volswagen are spending their money producing great ads on the Super Bowl commercial. Tesla did not spend any money on advertising and still rank number 1 for their Google searches for EV.
If you don’t know who Elon Musk is, I think you might be living under a rock. He created multiple companies, each of them has an aim of disrupting the sector. Companies such as Tesla (Car business), Solar City (Renewable energy), The Boring Company (Road), SpaceX (Space exploration) and Neuralink (Neuro Science). His style of leading company has made him well loved by his employee and people who wishes for the best for the world.
Elon Musk is a weird billionaire among the rest because he doesn’t spend like the rest. Even though he is the richest man of the world. He choose to use all of his wealth to invest into humanity. Here is why I think he is a unique billionaire
- He own no properties, instead he choose to stay in his friend’s home
- Use his own wealth to buy Twitter, owning 100% of the company so that he can ensure the social media to be a fair platform
- Dislike how other billionaire act with their money
- Still works over 80 to 100 hours a week. Most billionaire choose to relax and enjoy.
- Happy to makes mistake and wants employee to make it to learn
I believe people like Elon Musk is important role for Tesla as the company needs a number of drive to succeed in all their project. Currently, Tesla is looking to bring Robo-taxi to the market, Tesla Bot to come up with a production and ramping up the company faster. Tesla has a bright future ahead, with Elon musk visionary, i believe the company is able to go above and beyond what normal means.
Growing Demand for EV
To make the most amount of money in investing. There is a saying that companies that are in the early stages of the S curve is when you will make the most amount of money. We saw this curve playing out in 2020 when Tesla was able to finally produce positive net income. I believe that using this S- curve as reference, we will see that Tesla will be growing faster and faster that other car manufacturing company wouldn’t be able to compete or stay in the game.
Growing Demand for Sustainable Energy
Whether you like it or not. The millennium generation and the one before want changes to protect Mother Earth. Companies that have shown bad practises are heavily penalized. Renewable energy use increased 3% in 2020 as demand for all other fuels declined. The primary driver was an almost 7% growth in electricity generation from renewable sources. Long-term contracts, priority access to the grid, and continuous installation of new plants underpinned renewables growth despite lower electricity demand, supply chain challenges, and construction delays in many parts of the world. Accordingly, the share of renewables in global electricity generation jumped to 29% in 2020, up from 27% in 2019.
Speed of Innovation
In 3 hours, form idea to inception, Tesla Model 3 vehicles started to be sold with a 250 kWh battery pack. Later, it would be made public that this was the case and this greatly boosted Tesla’s stock price. This was all from an idea that someone at Tesla has and a small group of people being given the freedom to test the idea out and make it happen. There are multiple video regarding the speed of innovation that company has. I really like the video above from one of Tesla insider on why the company is able to innovate that quickly.
Robo- Taxi, Tesla Insurance, Cyber Truck, and Tesla Bot
For most people stock valuation, the price of Tesla stock would already increase 50% year over year based on solely vehicle production. I believe that Tesla would definitely be able to do much more. Where some company such as Apple only focuses on phone, tablet and computer. Tesla wants to do more than the vehicle business. They want to dominate the entire market for each genre. There is a saying that ” Tesla is not just a car company” holds true. The company is innovate so fast it aims totackle multiple real world solution.
My Roller Coaster Ride with Tesla
As a Tesla stock investor, I am constantly amazed by what they are doing to the world and I truly love the idea that the money I am putting it into is helping the world accelerate to sustainable energy. Even with the craziest in the stock market for the stock, I view the company in a 5 to 10 year horizon and know that this invest is the best risk-adjusted. Making the world transit into sustainable energy is tough but I believe with Tesla, the company is able to fulfill its mission.