Scottish Mortgage Trust - Bright Future?

Tesla as a car company are quite flashy and impressive and will help people come around to the idea of electric cars. That can only be a good thing for the industry. However the people blazing a trail proving a concept are not always the ones who emerge the winners.

If I were buying TSLA shares I would not be doing it because they proved they could make an $88,000 car (before options, taxes, and the essential $8000 battery upgrade to get an extra 50 mile range) which has popular appeal in certain affluent and built-up West coast or East coast US cities. I would be looking at the "first mover advantage" in battery tech which they can use to supply other car companies or to supply non-car demand (trucks, buildings). In the old California gold rush it was the people selling picks and shovels and denim workwear that prospered more reliably than mine operators.

Newbinvestor suggests they are years ahead of the game and they have an excellent and easily available super charger network. Still, if you live in Birmingham and are taking the family North to Glasgow or South to Penzance, you're going to need to plan your journey around stopping at a service station and getting on one of the four supercharger points to recharge while you take a bathroom break. If one's not available, wait until it is, because you can't go to the toilet or someone else will get in the queue ahead of you and grab the charger for half an hour while they fuel their kids with burgers.

At the moment with only a few thousand Teslas in the UK, there are, relatively, a lot of charger points per person even if they are a pain to drive to and not all super-charger speed, some would say not to worry about the infrastructure as it will keep up. But if the roads had tens of thousands more Teslas bought with an expectation of a cheap supercharger every time you stop at a shop or service station, but you check the app and the next three service stations have bookings... really the fuelling network needs to keep up or people won't be spending their ££££ to buy the dream. It's far from a fait accomplis.

An expensive car with a 250mile range is fine in San Francisco where they are wealthy and love the environment or DC where they have 10,000 person per square mile population density to encourage lots of charging points. In a Texas county with 0.1 population per square mile and four 'tankfuls' needed to cross the state from one side to the other, it's not as viable. The UK will be somewhere between the two but will likely be more EV friendly than eg France or Spain with longer distances to drive and lower road density.

Being '5 years ahead of the game' as newbinvestor mentions is something that can bankrupt you while you wait for the game to catch up. There are many failed businesses who lament '... well, in some sense, I guess we were ahead of our time...". Tesla hopes to be far enough ahead to be the first name on everyone's lips while not so far ahead that people see them as just a 'nice idea' expensive concept car.

Cloud_dog is right that they have potential as an auto maker if they would improve their manufacturing. Getting on top of reliable production is something that could enhance earnings so that the price to earnings ratio wasn't so sky high. But in the meantime the investment value seems to be in the power space rather than the cars which showcase it.

From SMTs perspective, they have already made money on TSLA and have irons in other fires. Really it is just a case of continuing to get early exposure to blockbusting businesses and getting out at a prudent level before they become ex-growth, while avoiding too many failures. Seems like the holy grail which managers aspire to deliver but most don't make. With a concentrated portfolio, SMT share price could easily see a 50-75% drop in sterling terms during a global stock crash in which GBP appreciates and the share price moves to a discount against NAV.