Tesla is About to Explode | Massive New Announcement

this video we're going to talk about a

new Tesla gigafactory what it could

entail and we're going to start by

reminding you about how phenomenal

Tesla's valuation is today it's

potential share price in the future and

what we need to be able to see the share

price actually grow that way in the

future let's get started first the very

last video that I did on Tesla I talked

about how we want to see about 4.2

million Vehicles produced at Tesla in

2025. that would be all gigafactories at

full capacity Shanghai Fremont Berlin

and Austin the problem is if you're at

full capacity at all factories there's

something very very dangerous that could

happen to the valuation of Tesla its

growth could stop when a company stops

growing its PEG ratio it's future

valuation plummets don't worry so much

about what that means in the future but

think about this what would you pay more

money for right this is a very simple

example what would you pay more money

for would you pay more money for Proctor

and Gamble which let's say has one

dollar of earnings per share or would

you rather pay more money for Tesla at

one dollar per share well you can't

really answer that because you don't

have how much they're growing at right

okay well let's say that Procter Gamble

is growing revenues at four percent per

year not revenues this would be earnings

per share uh in that case earnings per

share next year would be one dollar and

four cents right so you have to give

some valuation to this growth that

Proctor and Gamble has now what if I

told you that Tesla was actually growing

at zero percent because they filled up

their factories and they're just every

single year doing 4.2 million Vehicles

that's it no growth well if the earnings

per share aren't going to grow then the

valuation that you can give to Tesla

would actually be lower than the

valuation that you can give to Procter

and Gamble so now let's say Procter

Gamble is selling for 10 times earnings

per share well then this would be a ten

dollar stock and their growth is four

percent if you divide these two you'd

get something called a PEG ratio of 2.5

so it's selling for a PEG ratio of 2.5

keep this number in mind and I'm just

making up these numbers to make a simple

point because it's really important to

understand this so you can understand

why this Tesla announcement coming up is

so critical okay well if Tesla's growing

at zero percent then its multiple would

be infinite right it's PEG ratio

multiple would be infinite but we know

Tesla's not growing at zero percent

let's say that Tesla is growing at

10 percent per year so their EPS is

growing at 10 percent and this company

is now selling for 10 times earnings

well in this case the company would be

selling for ten dollars and its PEG

ratio would actually be one and if this

is all the information that you had for

the two companies which company would

you prefer to invest in a company where

you have to pay one dollar for every one

percent of growth hence 1pe or would you

rather pay two dollars and fifty percent

or two dollars and fifty cents for every

one percent of growth of the company

well obviously this one here is cheaper

and the reason I make this example is

because a lot of folks in my last video

when we talk about the future evaluation

of Tesla they don't seem to understand

how important growth rates are for

companies and what I'd like to do is

just give you an example of the

following stocks so you could see what

you generally see from a price to

earnings growth multiple

so what you're going to do is you're

going to look right here at this column

that I am Bolding right now and at the

top you can see Tesla selling for about

0.59 whereas apple is selling for 2.7

times you've got Autodesk selling for

nearly two times trade desk at nearly

1.76 times in video One Embraer is only

0.41 cloudflare selling for six times

Etsy selling for 2.36 times obviously

the lower the better and when we look at

lower the better we get companies like

solar Edge AMD Nvidia Embraer and Tesla

that are selling really really low for

the amount of growth these companies

have and this is so critically important

for when it comes to valuing a company

so what's Tesla's valuation actually

well generally people expect that Tesla

will grow at about 50 percent per year

that is their earnings per share will

grow at 50 percent so if their p e ratio

is 50 it actually means you're just

paying one dollar per percent growth

right that's actually not that bad the

ratio is one not bad but when people see

this they get very confused by this 50

number and they say oh but Kevin

Tesla is overvalued because the S P 500

is only selling for a multiple of 18

times sure maybe they're selling for a

multiple of 18 times but the average

earnings of the S P 500 are expected to

only grow four to five percent even at

five percent you're paying a PEG ratio

of somewhere around 3.6 for the S P 500

that's because some companies are

expecting to have negative earnings next

year right so you're actually paying a

much richer valuation for the S P 500

than you are for Tesla but people don't

care about that they just want to look

at that number and say well well 18 is

smaller than 50 so it must be a better

deal it's stupid but not only is it

stupid it's really important to make

conservative estimates when you're doing

fundamental analysis and so what I'd

like to do is I like to assume that

Tesla is going to grow earnings at about

35 percent per year once we get to 2025

and you need to have continued hope that

that growth rate is going to continue to

stay at 35 percent right now it's

between 45 and 50 percent so I'm

obviously building in some kind of

slowdown because once you know the law

of large numbers once you start

producing millions of vehicles it's

harder to grow and grow and grow by 50

all the time well if you're selling for

30 or if you're you're growing at 35 and

you have a PEG ratio of 1.5 you'd have a

future p e ratio of about 52.5 really

reasonable PEG ratio of 1.5 growth at 35

and so when we look at my chart over

here when we look at the future

evaluation of Tesla and we use 50. well

of course this company should be selling

for nearly 600 per share in the future

which what's remarkable about that is

right now it's selling for about 150 per

share that represents about a 50 57

stock price growth year over year over

year until we get to 2025. it's a really

really good rate of return if that could

be realized in my opinion the only way

to sort of longer term analysis doesn't

get realized is if you end up having

growth falter at Tesla and this is why

in my last video I was a little bit

concerned because I said look we need

more gigafactory three announcements in

fact I said in March of this year Tesla

should copy and paste their Giga Berlin

and their Giga Texas model as soon as

possible once of course it's feasible to

do so but once you ramp up Austin and

Berlin and you've got that project

figured out you want to copy and paste

those models to keep the growth going

and guess what Tesla is potentially

about to announce with in the next one

to two weeks a plant in Mexico in

northeastern Mexico the next gigafactory

could be announced and what's

interesting is it might actually only be

about six to seven hours away from Tesla

Giga or the Tesla Giga Texas Austin now

what's really cool about that in my

opinion is as soon as you cross the

border your average hourly wage plummets

and this is not to say that you want to

take advantage of people who are working

for less it's that these areas don't

have a lot of companies that drive up

the competition for labor to help get

get people to a level where they can

earn more money Tesla coming in here

demanding more labor increases the

demand for labor in Texas and you can

see the average hourly earnings in Texas

actually grow go up if you Google the

average hourly earnings for a person in

Mexico and you consider the fact that

minimum wage in California is like 15.5

you consider that a Texas it's probably

what nine bucks or something Texas

minimum wage let's say uh oh it's 7 25.

okay either way in America you're

looking at seven bucks to 15 right

Mexico manufacturing industry sitting

around three dollars and fifty cents

that's crazy so you actually have

substantially cheaper labor in Mexico

which is wonderful for Tesla because

you're lowering the cost of

manufacturing Vehicles a lot I mean

think about it if you're paying 15.50

for a worker in California and you could

be paying 350 for a worker in Mexico

you're paying 4.4 times as much for a

human being in California or twice as

much for a human in Texas now the good

news for workers and taxes because I

never want anybody to think oh my gosh

that's like slave labor taking advantage

of people well first of all the cost of

living is lower in Mexico but second of

all if Tesla goes to Mexico they'll

actually again create more demand for

labor and you can see that 350 go up to

four so they're actually benefiting the

area globalization is great because

globalization leads to disinflation

globally but it actually raises the

standard of of living globally so

globalization is a wonderful wonderful

thing and the fact that we have trade

agreements with Mexico and Canada

enables us potentially to take advantage

of that 7 500 EV tax credit for vehicles

assembled or manufactured in Mexico or

in Canada or in the United States which

is really really good because now Tesla

could basically manufacture vehicles for

a lower cost while still earning that

tax credit that's absolutely huge now

we're expecting this specific City to be

uh in uh we're expecting land for Tesla

has already been purchased around Santa

Katarina we expect this to be in a

corridor of other vehicle manufacturers

including GM Kia and Hyundai they're

already there and Elon Musk has a goal

of producing 20 million vehicles per

year or about 20 percent of global

output by 2030. but we're never going to

get there if we stop at 4.2 million

Vehicles because we haven't manufactured

new gigafactories so this is actually

the perfect thing for Tesla to be doing

there's a rumor also that that we might

see Tesla manufacture or announce cargo

vans in this area because in Mexico a

lot of vehicles are cargo vans that are

manufactured now cargo vans are really

fascinating because maybe you build a

factory in Mexico that doesn't have a

battery line and you manufacture the

batteries at Austin and you just ship

the batteries over it's not too far it's

seven hours away and then you build

maybe cargo vans and you announce a

completely new vertical for Tesla see

one of the big problems for well let me

explain this there are two types of

cargo vans so there's a cargo van that

is sort of like your your contractor's

vehicle right Germany uses these types

of vehicles and Europe uses these types

of vehicles substantially more than

pickup trucks because unfortunately the

weather in Europe is a lot more wet and

so they like having enclosed Vehicles

now you can have a pickup truck with

sort of a bed lid but you will see as

many cargo trucks in Europe as you see

pickup trucks in America everybody has

cargo trucks and they're pretty neat

because you could have shelves in the

back I used to own a cargo truck for my

construction company I love cargo trucks

and in my opinion they're actually not

that expensive to manufacture because

you don't have as many bells and

whistles you're just kind of a shell in

the back but not only can you have a

cargo truck that potentially is a Tesla

that can now compete with Mercedes which

if you think about it or or even Ford

like the Ford Transit which if you think

about it they could probably compete

substantially better than Mercedes

because you have massive import costs

and tariffs that actually make the

Mercedes van substantially more

expensive here in America than they

would be if they were just manufactured

here in America and not by a German

company now I do believe that Germany

manufactures a lot of their Sprinter

vans uh in in either Georgia I think

they send them over manufacture and they

assemble them in Georgia and some of it

in Mexico they do that to try to lower

those impacts of the tariffs but we

don't have free trade agreements with

Germany so if Tesla can do this now

you've got a real competitor to the Ford

Transit and you're kind of squeezing

Mercedes these out of the way remember

if you've ever been to Europe you might

look around and go why is every taxi and

cop car a Mercedes or a beamer that's

like insanely expensive no it's actually

not it's not that expensive because

they're importing within Europe and they

don't actually have all the crazy taxes

now the second type of vehicle that you

could do with a cargo configuration is

you throw benches in the back this is

your No Frills passenger van and then of

course you could have various different

sizes like this is the Mercedes mattress

on the right it's a little smaller but

passenger vehicles are something where

in my opinion Tesla has really failed

right now see I have a Tesla Model X and

I have the seven seat configuration

because I thought well I would like to

have seven seeds so that way if I go

with two children my in-laws and uh and

myself and my wife you know that's six

and maybe we have one more person like a

nanny we're full the problem is I can't

actually use the vehicle with the

configuration I just described because

when you put up the two seats in the

back of the model X you have no trunk

space anymore you've you're down to like

a foot you can't even put a six pack of

B okay maybe you could put a six pack of

beer but you can't put a cooler of beer

back there you'd have to have that on

somebody's lap not that that is exactly

what's happened to me before but it's

frustrating so I asked Laura and I go

hey you should get model X she's like no

I want a mommy van and she has a mommy

van she's got a Toyota Sienna and the

reason for it totally makes sense when

we put seven people in the car we could

still put all of our luggage in the back

and go to the airport can't do that with

any Tesla however if Tesla came out with

a passenger van and assembled these in

Mexico boom completely New Vertical

would be a brilliant brilliant brilliant

uh move for Tesla and in my opinion I I

mean I I'd be buying one instantly

probably even before the Cyber truck

don't get me wrong cyber truck is dope I

really want the Cyber truck but in terms

of like the functionality that I need

especially for more children in the

future we need a cargo van like a

passenger van right anyway I want you to

know a little bit more background so

NAFTA the North American Free Trade

Agreement which was created in 1994 was

actually replaced by now the usmca which

is the U.S Mexico Canada agreement which

is basically an upgrade it's like more

transparency uh more like fixes

loopholes increases IP protections but

the under the usmca Mexico just had a

dispute resolution Victory between the

three countries where Mexico wanted to

be able to round up that if they produce

75 percent of a vehicle in Mexico that

it would actually be rounded up to 100

Regional content for when they ship it

to the United States and that's

important for other metrics that they

try to hit Mexico Canada would benefit

from that but so would a company like

Tesla if Tesla has a manufacturing plan

in Mexico well Mexico won that dispute

resolution panel and so now Mexico and

Canada can actually round up that if a

vehicle is produced with 75 Parts it

could be deemed a hundred percent

regionally free trade produced this is a

huge game changer and Mexico is already

the sixth largest manufacturer of heavy

duty vehicles for the cargo world and

they're the largest tractor expense or

exporter in the world so if we go Tesla

cargo vehicle Mexico could be the

perfect spot for that but of course they

could also have another assembly line

for let's say a three or a y or even the

Cyber truck because labor is less

expensive so either way you slice it

whether you're going to make Cargo Vans

at Tesla Mexico or you're going to just

make more of the same Vehicles the idea

that Tesla is producing or going to

create a new gigafactory is exactly what

we need to keep the growth story going

for Tesla to keep the valuation up for

Tesla at some point in the future the

future price to earnings ratio for Tesla

will rotate down this is the law of

large numbers and sometimes people call

it the s-curve the s-curve very very

simple when you first start building you

produce very very little Vehicles right

you start building you produce a little

Vehicles then you gramp exponentially

and then it slows down think of this

like a growth rate maybe over here

you're growing at fifty percent fifty

percent fifty percent over here you're

only growing at you know thirty percent

or maybe you're growing honestly is

probably more your baby growing at 200

but your actual output is super low

right well at some point that's probably

a better way to look at it at some point

in the future that growth is going to go

to 10 or 5 and this is where the

multiple for Tesla will collapse but if

Tesla gets to 20 million Vehicles before

they get to this level boy oh boy you

could have a phenomenally higher stock

price before you even start downgrading

the future multiple especially if Tesla

in 10 years actually starts a new S

curve called the Tesla robot right and

then you're building an s-curve on top

of an S curve so what we're seeing with

this gigafactory announcement for Mexico

in my opinion absolutely brilliant this

is what Tesla needs to do I've been

talking about this all year long about

copy and pasting more gigafactories and

it's finally here I'm very very excited

about that we should get the official

announced ultimate within the next

couple of weeks here and uh yeah keep in

mind as well that Mexico employs about 1

million people in the automotive

industry there are third largest trade

partner they're the sixth largest

passenger vehicle manufacturer in the

world producing 3.7 million passenger

vehicles annually they're the fifth

largest producer of components Auto

Parts worldwide

largest export market for U.S auto parts

fourth largest exporter of heavy duty

vehicles and this is great

out of this production 64 of their

vehicles or SUVs minivans and Pickups

the remaining 36 percent were heavy duty

Vehicles established Brands here are

stalantis BMW Audi GM Honda Kia Mazda

Nissan Volkswagen Toyota pretty sure

Mercedes is somewhere over there as well

but I don't see that here on the trade

agreement website anyway this is very

exciting uh I think this is perfect this

is just what Tesla needs and uh hey you

know what

you know how people say be fearful when

people are greedy and be greedy when

people are fearful

everybody's fearful right now

so what are you