Tesla Autonomous Driving Case Study: DCF Vs Probability Based Valuation

Check out our latest research on the ramp up of Tesla's Autopilot Driving Unit based on which this analysis was written.

Ashwath Damodaran, is an iconic professor of valuations at NYU Stern & has trained a generation of corporate finance specialists by generously making hisspreadsheets & methods available online to non-NYU students long before the days of the MOOC & the Khan Academy. He recently wrote two posts on Tesla’s valuation: The first post in Sep 2013 had a valuation of $67 in Sep 2013 & the second post updated the model in Mar 2014 to give an estimate of 2014. Both these models rely on a single Discounted Cash Flow Valuation (DCF) method which projects revenue, profit & cash flows into the future & discounts them back to the present.

In a high growth company like Tesla, the most important assumption in any DCF model makes is around the potential growth in ...

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Tesla Starts Ramping Up Autopilot Driving Unit

To understand the impact of Autonomous Cars on Car Insurance, please see this analysis

Elon Musk sent out the following Tweet on Sep 19 2013

Engineers interested in working on autonomous driving, pls email autopilot@teslamotors.com. Team will report directly to me.

That tweet began an intense speculation on Tesla’s plans, autonomous vehicle technology & timelines. In his last comments on June 5th 2014, Musk stated that there will be significant progress on autonomous driving within the year.

Based on our research & analysis, we are able to see patterns of increased ramping up of Tesla’s autopilot, advanced driver assistance systems (ADAS) & autonomous teams. The below timeline charts the ramp up of key personnel after Musk’s tweet.

The above table shows key hiring from across industry majors such as BMW (Darren Licardo), Hyundai (Andrew Gray) & Volvo (Stefan Solyom) for managerial & leadership positions. The engineering background of all these ...

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Autonomous Robotic Driverless Cars will Dramatically Lower Insurance Costs

Autonomous robotic driverless cars, of the type Google is pioneering, are supposed to deliver many benefits such as higher utilization of cars with fewer total vehicles, better safety, and lower commuting. A major additional benefit to consumers’ pocket book will be the dramatically lower car insurance costs.
Car Insurance in most developed countries is based on driver demographics and past driving history. For example, an adult with lots of driving experience will get dramatically lower insurance costs than a teenager who is just starting out. Similarly, there are other factors that influence insurance costs, such as DUI convictions, marital status, the type of car you drive, the state in which you live, etc.

When you have autonomous robotic driverless cars, these driver-based insurance pricing criteria will go away, and all consumers will get the benefit of the safest demographic. For instance, a teenager who has a DUI and whose current ...

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GM Recalls: Charts & Numbers

This is a collection of articles & charts on the GM Recall Crisis that is updated on a regular basis.

GM is in the headlines is in the headlines almost every day for its recalls.  Recall data is critical to understand the safety profile of cars & ultimately the insurance costs for those cars. The Insurance Institute for Highway Safety regularly monitors the safety of cars & using recall data.  uAutoInsurance analyzed data for recalls from the NHTSA to share the history of GM’s recalls & give context to consumers.

GM Highest in Recalls Among Peers

2014 could become the worst year for GM in Recalls

Top 10 Most Recalled GM Cars

Top 10 Issues Causing Recalls for GM

Top 10 GM Recalls

Data Analysis Background:

  • The data was from the National Highway & Transportation Safety Administration (NHTSA) safety recall database. 
  • The data was primarily analyzed based on the recall campaign. A recall campaign ...

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Tesla’s Battery Fire Reduction Patents Can Be Used To Make Safer Cars

Check out our latest research on the ramp up of Tesla's Autopilot Driving Unit

We have identified about 25 patents within Tesla’s patent pool , that could reduce the risk of battery fires & hazards. These patents could in turn be used by other manufacturers to make safer cars. Here is a chart & example patents in each of the categories.

Any fire related accident from the battery of an electric vehicle immediately gets the headlines. Therefore, Tesla being one of the earliest innovators of electric vehicles & batteries knows the risks of it more than any other manufacturer. The Auto Industry may already have their own viewpoint on how to develop their electric vehicles but its these corner safety cases that could really help the manufacturers leverage the work done by Tesla & keep cars safer.

Beyond the headlines safer cars would not just reduce accidents but also reduce the overall insurance ...

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Tesla Motors Patents Analysis

Check out our latest research on the ramp up of Tesla's Autopilot Driving Unit

The automotive industry shook a little yesterday with Tesla announcing that they are making their patents available to its competitors. We analyzed about 249 of Tesla’s patents & here is what we found overall. (Update. We also did a follow up analysis on  Tesla's patents to reduce battery fires which makes cars safer, lowers insurance costs & reduces the total cost of ownership of electric cars)

The categorization of these patents is an estimate based on analyzing Tesla's patent keywords, reading the abstract and sometimes even diving into the patent to categorize it. Our research & analysis includes patents & lawsuits so our automotive & patent research experience helped us dive into this much faster.

We have categorized about 184 patents & the battery & charging systems seem to have the most amount of patents at 104 & 28 respectively ...

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The Cost of Having a Justin Bieber In Your Family

Until Jan 23rd 2014, most families would have hoped that their children would become the next Justin Bieber. However, after yesterday’s arrest for drunk driving & DUI charges, families would now think twice about that wish. Apart from the potential negative role model that Bieber could be for children, families need to specifically coach children on the economic consequences of a Bieber like action i.e. getting a DUI could do to a family’s finances.

Our team released a very relevant report on the financial impact of a DUI on a teenager’s insurance. The cost of “pulling a Bieber” & getting a DUI could increase your family’s insurance costs by more than $1500/year! To put that in context, those costs could be more than 50% of a parent’s insurance costs. Over the course of the next 10 years, that cost could add much more than $15 ...

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83.5% rise in insurance costs from 1989 to 2010 in Kansas

Average insurance costs in Kansas have traditionally been lower than the countrywide average. However, a December 2013 study by the Consumer Federation of America found that the gap is closing. In 1989, Kansas was ranked that 6th cheapest state in terms of auto insurance expenditure. However, it had fallen to 11th cheapest by 2010. Kansas’ auto insurance expenditure which stood at $340.76 in 1989 had gone up to $625.17 in 2010, a rise of 83.5%. In the same period, the countrywide average went up 43.3 percent from $551.95 to $791.22.

Even though average auto insurance expenditure in Kansas is lower than the countrywide average, a rise of 83.5 percent has reduced the difference substantially. Kansas is one of 38 states where average expenditure grew by more than the countrywide average. Moreover, a growth rate of 83.5 percent was tenth highest ...

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