A QUICK OVERVIEW OF VOLKSWAGEN'S AUTOMOTIVE BUSINESS
This business sold 5.58 million vehicles in 2020
It used Property Plant & Equipment of €62.8 billion to do so
- which translates to €11,254 per vehicle or $13,350
The equivalent number for Tesla in 2020 was about $25,500
VW Automotive had Inventories of €39.1 billion, which translates to about €7,000 per vehicle sold or $8,300
The equivalent number for Tesla in 2020 was about $8,200 per vehicle sold
Note that Tesla is more vertically integrated and has a higher cost and price for its vehicles
There are two other notable entries on the VW Automotive Balance Sheet :
The first is €44.2 billion of Unfunded Pension Obligations
- which represents Pension Expenses that have been charged to the Income Statement but not separated into a Cash reserve for future payment
This basically means that VW have reduced their tax payments by recognizing and charging these expenses to their Income Statement, but they have used the Cash for other purposes
This is generally not considered to be a good practice
The second is €67.8 billion of Intangible Assets
VW has a habit of capitalising a variety of Cash costs instead of expensing them
This allows them to show higher profits
They capitalized €7.5 billion in 2020
The total amount capitalized at the end of 2020 was €98.3 billion
€30.3 billion of this €98.3 billion has been amortized or expensed over time
- leaving a net balance of approximately €68 billion
The Automotive business has Shareholders Equity of €96.7 billion
- and 70% of this Equity is represented by these Intangible Assets
VW is very aggressive in capitalizing these costs
For comparison :
- many automakers do not capitalize Development Costs but instead expense them as incurred
- Tesla does not capitalize Development Costs
- Tesla's Intangible Assets including Goodwill are only $0.52 billion
Note that historically VW Investors have discounted the Book Value of VW's Shareholders Equity in the marketplace
According to VW's 2020 report, its Equity Market Capitalization has generally been discounted to about 64%~77% of Book Equity
The difference was €45.4 billion
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3. Visualizing a Successful Outcome, they would have held a Competitive Duopoly with all the Advantages which that can be expected to bring
This combination of factors is leading to a broad-based failure of the Japanese Automobile Industry
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What can we learn from this ?
Now consider an alternative scenario where the Japanese Government had instead been inspired to get out ahead of BEV Supply Chain issues during the last two decades, and successfully solve for all of raw material and technology needs of BEVs
According to Colorado Public Radio, the state is considering a "Vehicle Exchange Colorado” program to give participants an instant $6,000 point of sale rebate on a new electric or plug-in hybrid vehicle cleantechnica.com/2023/05/31/col…
Or a $4,000 rebate for a used electric or plug-in hybrid vehicle
"It’s a really exciting new program,” said Carrie Atiyeh, senior program manager at the Colorado Energy Office
"This is something that is going to be new for the state"
To qualify, drivers would need to trade in a conventional car with an internal combustion engine that burns either gasoline or diesel
The vehicle needs to be a model year 2011 or older, or have failed a state vehicle emissions test
How can Apple AAPL shareholders expect to maintain the High P/E of a Growth company in a world where the Company's business has clearly become mature ?
Here is Apple's Press Release on their latest Quarterly Results
"The Company posted quarterly revenue of $94.8 billion, down -3% year over year, and quarterly earnings per diluted share of $1.52, unchanged year over year"
“We generated strong operating cash flow of $28.6 billion while returning over $23 billion… twitter.com/i/web/status/1…
“Given our confidence in Apple’s future and the value we see in our stock, our Board has authorized an additional $90 billion for share repurchases"
"We are also raising our quarterly dividend for the eleventh year in a row"
PepsiCo will enter at least one of its Tesla Semis in the Run On Less trucking industry event running for three weeks starting September 11, the company confirmed on Wednesday insideevs.com/news/665498/fi…
The event showcases advances in freight efficiency, and will provide the first independent performance data for Tesla's all-electric Class 8 semi-truck, according to Automotive News
"We're really excited to participate in the run and allow the industry to have access to the insights and the learnings that we are getting from experiencing these vehicles"