How Google killed Tesla in 2025
By: Coder-By-Trade
Tags: Google, Autonomous Cars, Tesla, Investing, Waymo

Title is a click bait. It could be sooner than 2025.

As of December 2020, Tesla has a market cap of 600b+, at 1000x of its annual earning. I took a TSLA long position in the first half of 2019 for the first time when TSLA was trading at $188. I held the my long position through the crazy year of 2020. Now that TSLA has made into SPX and I’ve sold almost all of it and that’s it for me. I think Tesla is terribly overvalued at this point and the company won’t deliver the results that justify this valuation. The stock can still go up of course, but it will converge to reality eventually. In a few years time, we will find that it’s Google (Alphabet precisely) who killed Tesla.

Tesla makes really awesome cars that redefined cars. I agree 100% with Tesla fanboys saying Tesla is like the Apple of cars. Tesla cars have the best autopilot features in the market (and will stay the best for a year or 2 at least). It supports over-the-air updates that is not available in any other cars. This is an extremely important selling point to many buyers. Traditional automakers can make electric vehicles, but they aren’t going to get the over-the-air updates nor the autopilot system work. Without a system that is as smart as Tesla’s, these EV’s from traditional automakers just won’t appeal to the population that buy Teslas. That’s why they are doomed in this competition, in a world without Google’s Android Automotive (which is not the same thing as Android Auto).

The Volvo Polestar 2 (launched a few months earlier) is a seriously good looking, well made and technologically capable (thanks to Android Automotive) EV. I can see how Google’s Android Automotive is going to change the Tesla dominance in the EV market. Traditional Auto makers are now partnering with Google to make cars that are as smart as Android phones. A couple of auto makers are adopting Android Automotive at this point and in 2021 we will see more cars running natively on Android. Soon enough all new car will be able to applied over-the-air updates just like Tesla. Indeed Tesla in the current moment is like the iPhone in a world full of Nokias and Blackberries, but changes are coming fast with Android Automotive and the competition is gonna be real.

Many (including ARK’s analysts) argue that Tesla is going to have a RoboTaxi fleet and that’s gonna add another trillion to Tesla’s market cap (and therefore TSLA is still cheap at 600b). I think they are very very wrong on this one (and in fact they should add the extra trillion dollar market cap to GOOG). It’s really interesting to see how these analysts having all the facts checked and the main conclusions right yet still making the wrong investment decisions. Investment is so hard that you can get 99% right and still wrong. Yes autonomous driving is coming for real. Yes whoever first deploys RoboTaxi fleets in major metropolitan areas deserves a trillion dollar valuation. No it’s not Tesla. I am not a fan of Tesla naming its ADAS system as FSD (and I can’t fathom why it’s okay to do so). This is extremely misleading to the average consumers as well as professional analysts who reads Full Self Driving and believes it’s what it sounds like. No it’s not. Tesla’s FSD as of December 2020 is a L2 system and it will stay L2 for a very very long time. Being able to collect more driving data doesn’t automatically make it L4/L5. Machine learning at its current stage isn’t as magical as that. CV alone only gets to as good as it gets. The system has to have enough redundancy to make decisions that are correct at 99.9999% chance. Not a single player in the autonomous car race is avoiding using Lidar except Tesla, why do you think Tesla (without Lidar and HD map) can be among the first few to deliver a RoboTaxi fleet? Waymo is winning (Phase I of) this game when they removed the safety driver in Arizona in 2020 (which is a big milestone that many people underappreciated). One needs to realize that Waymo’s pilot program in Arizona is a scalable solution that once matured will be rolled out to many other areas.

Tesla is a great company that redefined cars like how Apple redefined phones. I think Tesla’s dominance in the EV market will gradually fade in the next 2 years due to the real competitions from traditional automakers partnering with Google on the technology side. And I do not expect to see Tesla’s ADAS having any market share in the RoboTaxi pie.

No later than 2025, Google will make the market come to the realization that Tesla’s valuation will never be justified.