You know that this whole game is about profits, right? If "of course" TSLA's margins are higher, "of course" their market cap will be higher.
And yes, investors are aware that this is a function of market segment. It's also a function of vertical integration, manufacturing prowess, unions, and retirees.
> debt because they run huge financing departments
Debt isn't the right metric to focus on, but the fundamental point is that if legacy auto perfectly executes a pivot, they get to keep their cash flows, while if TSLA keeps up the status quo, they expand their cash flows.
There will be a lot of stranded assets and failures to pivot in the legacy auto sector. Investors know it and the market caps got carpet bombed to reflect it. TSLA's didn't.
> Base rate fallacy, extrapolated into infinity
> Tesla, since they are still a rounding error
Do you not see the connection? Not only can we extrapolate, we can extrapolate far more precisely than usual because we already know the size and shape of the market they are expanding into. Usually these models take the form "TSLA grows 50% yoy until they top out at 1/3 of non-China auto sales" or something, and these are the models that back the current valuations. Optimistic? Sure, but not nearly as optimistic as "base rate fallacy, extrapolated to infinity." Lol.
You know that this whole game is about profits, right? If "of course" TSLA's margins are higher, "of course" their market cap will be higher.
And yes, investors are aware that this is a function of market segment. It's also a function of vertical integration, manufacturing prowess, unions, and retirees.
> debt because they run huge financing departments
Debt isn't the right metric to focus on, but the fundamental point is that if legacy auto perfectly executes a pivot, they get to keep their cash flows, while if TSLA keeps up the status quo, they expand their cash flows.
There will be a lot of stranded assets and failures to pivot in the legacy auto sector. Investors know it and the market caps got carpet bombed to reflect it. TSLA's didn't.
> Base rate fallacy, extrapolated into infinity
> Tesla, since they are still a rounding error
Do you not see the connection? Not only can we extrapolate, we can extrapolate far more precisely than usual because we already know the size and shape of the market they are expanding into. Usually these models take the form "TSLA grows 50% yoy until they top out at 1/3 of non-China auto sales" or something, and these are the models that back the current valuations. Optimistic? Sure, but not nearly as optimistic as "base rate fallacy, extrapolated to infinity." Lol.